MKL - Markel Corp

[Myth465]

Taking a tiny position help them to track the business better. Remember from one of the interviews but I might be wrong.

[WarrenWatsa]

Taking a tiny position help them to track the business better. Remember from one of the interviews but I might be wrong.

 

If true:

1. There are other value investors who do the same.

2. In this case, one could argue the little tiny positions add up, though.

3. Personally, if true, I see it as an excuse for laziness.

 

-MKL shareholder

 

edit: added to it this morning below $440

[bookie71]

No, it's a good way to get the yearly and quarterly info without the hassle.  And what's wrong with being lazy, as my Dad used to say, "Work smarter, not harder."

[obtuse_investor]

On the Markel breakfast :

 

http://www.dailyfinance.com/2012/05/08/meet-hipster-berkshire-the-markel-annual-breakfast/

 

Steve Markel thinks the business is worth 1.5-2 times book value.

 

That is the norm for Markel's valuation. See pre-finaincial-crisis P/B values for Markel.

 

http://ycharts.com/companies/MKL/price_to_book_value#series=type:company,id:MKL,calc:price_to_book_value&zoom=10&startDate=&endDate=&format=real&recessions=true

[DCG]

2. In this case, one could argue the little tiny positions add up, though.

 

yeah, but why not just by an index fund?

[obtuse_investor]

Taking a tiny position help them to track the business better. Remember from one of the interviews but I might be wrong.

 

If true:

1. There are other value investors who do the same.

2. In this case, one could argue the little tiny positions add up, though.

3. Personally, if true, I see it as an excuse for laziness.

 

-MKL shareholder

 

edit: added to it this morning below $440

 

I came across Gayner saying that in the interview too. He said that it helps him pay more attention to a company when he holds a few units. I agree that it is somewhat lazy, but he knows his own psyche and is doing this to keep himself honest.

 

Also, a position of 200K is a tiny one for Markel. As private investors we tend to get sticker shock when looking at those amounts. To provide perspective, if you were managing a $100,000 of your own money, this would be akin to you buying a stock for $9 just so you can track it. Small price to pay, wouldn't you think?

 

- Long term Markel shareholder

[rmitz]

Taking a tiny position help them to track the business better. Remember from one of the interviews but I might be wrong.

 

If true:

1. There are other value investors who do the same.

2. In this case, one could argue the little tiny positions add up, though.

3. Personally, if true, I see it as an excuse for laziness.

 

-MKL shareholder

 

edit: added to it this morning below $440

 

I came across Gayner saying that in the interview too. He said that it helps him pay more attention to a company when he holds a few units. I agree that it is somewhat lazy, but he knows his own psyche and is doing this to keep himself honest.

 

Also, a position of 200K is a tiny one for Markel. As private investors we tend to get sticker shock when looking at those amounts. To provide perspective, if you were managing a $100,000 of your own money, this would be akin to you buying a stock for $9 just so you can track it. Small price to pay, wouldn't you think?

 

- Long term Markel shareholder

 

That reflects a certain lack of discipline you would expect from a professional investor, don't you think?

[obtuse_investor]

 

I came across Gayner saying that in the interview too. He said that it helps him pay more attention to a company when he holds a few units. I agree that it is somewhat lazy, but he knows his own psyche and is doing this to keep himself honest.

 

Also, a position of 200K is a tiny one for Markel. As private investors we tend to get sticker shock when looking at those amounts. To provide perspective, if you were managing a $100,000 of your own money, this would be akin to you buying a stock for $9 just so you can track it. Small price to pay, wouldn't you think?

 

- Long term Markel shareholder

 

That reflects a certain lack of discipline you would expect from a professional investor, don't you think?

 

I'd agree with you there.

 

But, I can also relate because I suffer from the same attention deficit problem. I cannot by buying $9 worth of stocks just to have them on my watchlist.

 

I simply use a watchlist and monitor it manually.

[jeffmori7]

Markel keeps adding business through Markel Ventures :

 

http://finance.yahoo.com/news/markel-ventures-announces-ellicott-dredge-211600954.html

 

From memory, it's the first time they buy (outside of insurance) in Europe , or am I wrong?

[twacowfca]

Markel keeps adding business through Markel Ventures :

 

http://finance.yahoo.com/news/markel-ventures-announces-ellicott-dredge-211600954.html

 

From memory, it's the first time they buy (outside of insurance) in Europe , or am I wrong?

 

Buying in Europe appears to be incidental, not intentional. 

 

Tom Gaynor had an informative answer to a question from David Winters at the 2011 AGM about their acquisition of Elllicott Dredge.  Ellicott Dredge is a family business that has been around forever.  They dredge their own moat.  They dominate a niche for a special type of dredge, and have no specialized competition that knows that market as well as they do.  Whenever a company infrequently needs that type of dredge, they go to Ellicott.

 

I suspect that their recent acquisition is a similar business that dominates a similar niche in Europe.

[Ross812]

Here are the private companies owned through Markel Ventures:

 

http://www.markelcorp.com/Markel%20Companies/Pages/MarkelVentures.aspx

 

Ellicott Dredges seems to be a great acquisition of a high moat business. I would like to see them buy a stone quary as well. Another high moat business that is typically privatley owned.

[Liberty]

Another sub making an acquisition:

 

http://phx.corporate-ir.net/phoenix.zhtml?c=104364&p=irol-newsArticle&ID=1712877&highlight=

 

RICHMOND, Va., July 9, 2012 /PRNewswire/ -- Markel Ventures, Inc. announced today that its subsidiary AMF Bakery Systems has completed the acquisition of Tromp Bakery Equipment B.V. and affiliated entities ("Tromp"), a global supplier of baking equipment based in Gorinchem, The Netherlands.  Tromp designs and manufactures sheeting lines for pizza, pastry, pie and bread bakers worldwide.  Terms of the transaction were not disclosed.

 

"We are excited to join forces with Tromp," stated Ken Newsome, president of AMF.  "This strategic addition enables us to leverage our position as a global leader in high-speed bread and bun bakery systems and expand our offering into the growing specialty bakery sector."

 

Bas Tromp, the company's founder, will continue as president.  Mr. Tromp stated, "As I thought about the future of my company, I wanted to find a partner with similar values who would continue to build on our previous accomplishments.  AMF, with its affiliation with Markel, is very unique, and I think this organization will best serve our customers and the people who helped build this company." 

[twacowfca]

Another sub making an acquisition:

 

http://phx.corporate-ir.net/phoenix.zhtml?c=104364&p=irol-newsArticle&ID=1712877&highlight=

 

RICHMOND, Va., July 9, 2012 /PRNewswire/ -- Markel Ventures, Inc. announced today that its subsidiary AMF Bakery Systems has completed the acquisition of Tromp Bakery Equipment B.V. and affiliated entities ("Tromp"), a global supplier of baking equipment based in Gorinchem, The Netherlands.  Tromp designs and manufactures sheeting lines for pizza, pastry, pie and bread bakers worldwide.  Terms of the transaction were not disclosed.

 

"We are excited to join forces with Tromp," stated Ken Newsome, president of AMF.  "This strategic addition enables us to leverage our position as a global leader in high-speed bread and bun bakery systems and expand our offering into the growing specialty bakery sector."

 

Bas Tromp, the company's founder, will continue as president.  Mr. Tromp stated, "As I thought about the future of my company, I wanted to find a partner with similar values who would continue to build on our previous accomplishments.  AMF, with its affiliation with Markel, is very unique, and I think this organization will best serve our customers and the people who helped build this company." 

 

 

Three observations:

 

1) Some of their best opportunities now may be in Europe.

 

2) Markel seems to be getting a reputation like that long enjoyed by BRK as a preferred acquirer of family owned businesses that will maintain the family ownership values.

 

3) Markel Ventures track record was spotty initially with some of their acquisitions doing well and some not.  Now, with their successful ventures making related acquisitions in other businesses they understand, Markel's batting average for success should go through the roof.  :)

 

[Liberty]

Markel Announces Planned Acquisition of Essentia Insurance Company

RICHMOND, Va., Oct. 17, 2012 /PRNewswire/ -- Markel Corporation (NYSE: MKL) announced today that it has entered into a definitive agreement to acquire Essentia Insurance Company from OneBeacon Insurance Group LLC.

 

Completion of the transaction is subject to customary closing conditions, including regulatory approval of the change of control of Essentia, and is expected to occur in January 2013. Terms of the transaction were not disclosed.

 

Essentia Insurance Company will continue to underwrite insurance exclusively for Hagerty Insurance Agency and Hagerty Classic Marine Insurance Agency throughout the United States. Hagerty is the leading insurance provider for classic vehicles in the world and host to the largest network of classic car owners.  Hagerty offers insurance for classic cars, vintage boats, motorcycles and related automotive collectibles.  Hagerty remains a privately-owned, family business.

 

The transition is intended to be seamless for existing Hagerty customers and agents.  Both groups will continue to enjoy the same specialized products, service offerings and claim handling.  Insurance agents will continue to work with Hagerty as they traditionally have.

 

"Our new relationship with Markel is a natural fit because we are both exclusively focused on specialty and niche insurance markets and are dedicated to providing the best protection to all types of collector vehicles," said McKeel Hagerty, CEO of Hagerty Insurance.  "This new relationship will allow us to continue to grow and develop new efficiencies to benefit our clients."

 

Mike Crowley, Markel's President & Co-Chief Operating Officer, added, "We are looking forward to this new partnership.  Hagerty is built on first-class service and enthusiasm for new ideas and products.  We are pleased to become their partner. Together, we are confident we can continue their innovative approach to servicing collectors of classic cars and boats."

[jay21]

Has anyone dug into the Ventures businesses?  I believe Gaynor has said they are not capital intensive with high EBITDA margins.  This would be great for a company as small as MKL because they do not need to lay out capital to fund growth.  Compare this with BRK who has so much capital that they need capital intensive business to soak it all up.

 

Also, does anyone have any insight on the potential for float growth?

[masseyrock]

Based on my understanding, low capital intensity and high EBITDA margins aren't requirements but attractive incremental returns on invested capital and a minimum 10% cash-on-cash return from the acquisition price are.  I don't think MKL avoids laying out additional capital to fund an affiliate's growth opportunities.  They would embrace it if the returns are higher than other capital outlay opportunities - witness the acquisitions that AMF Bakery, for example, has done over the last year or so (not sure if they were funded with additional MKL capital or internal funds).

 

I do struggle to see the 'compounding machine' opportunities of HAVCO or Weldship - they have attractive market share, play an important role in their value-chains but the capital intensity, scalability and cyclicality of the businesses don't seem to fit with how MKL approaches their publicly-traded stock portfolio.  For Weldship, I love the Praxair/AirProduct business model but to be the distributor, there doesn't seem to be that much leverage on your invested capital.

 

Maybe the share gains, pricing power, margins, all lead to a long tailwind of share gains and margin expansion.

 

Bottom line, I don't see where they have their 'See's Candies' compounding machine yet (not that they are exclusively looking for that).

 

On float, growth depends on the underwriting opportunities.  Float has decelerated over the last seven years - 5yr CAGR is down to low-sd, IIRC.  If/when the market hardens, MKL's investments in THOMCO, Essentia, FirstComp, etc. should lead to very strong premium, float, investment portfolio and book value growth.

[dcollon]

Markel to Acquire Alterra for Approximately $31 Per Share in Stock and Cash

Wednesday, December 19, 2012 01:00:00 PM (GMT)

 

 

RICHMOND, Va., Dec. 19, 2012 /PRNewswire/ -- Markel Corporation ("Markel") (NYSE: MKL) and Alterra Capital Holdings Limited ("Alterra") (NASDAQ: ALTE; BSX: ALTE.BH) announced today that their respective boards of directors have each unanimously approved a definitive merger agreement. Under the terms of the agreement, the aggregate consideration for Alterra is approximately $3.13 billion, based on a closing price of $486.05 for Markel common stock on December 18, 2012.

 

At closing, each Alterra common share will be converted into the right to receive 0.04315 Markel common shares (with cash paid for fractional shares) plus a cash payment of $10. Following the merger, Markel's existing shareholders will own approximately 69% of the combined company on a fully diluted basis, with Alterra's shareholders owning approximately 31%. Completion of the transaction is contingent upon customary closing conditions, including shareholder and regulatory approvals, and it is expected to close in the first half of 2013.

 

Upon closing, two directors designated by Alterra's current board will be added to the board of directors of Markel.

 

Steven A. Markel, Vice Chairman of Markel, commented: "We are very pleased to have reached this agreement to acquire Alterra, an impressive company with proven worldwide underwriting operations in product lines that we believe are highly complementary to Markel's existing lines. In particular, the addition of Alterra's reinsurance and large account insurance portfolios will serve to diversify and strengthen Markel's current book of specialty insurance business. We look forward to welcoming Alterra's talented underwriting teams to Markel – with their help and the benefit of approximately $6 billion in combined shareholders' equity, we believe we will be well positioned to take advantage of a wide range of profitable opportunities."

 

W. Marston (Marty) Becker, President and Chief Executive Officer of Alterra, who is expected to leave the company following the close of the transaction, said: "The combination of Alterra with Markel will create an incredibly strong company in global specialty insurance and investments.  The demonstrated track record of underwriting discipline in niche market segments by both companies, along with Markel's proven asset management strengths, should benefit all stakeholders. I am confident that Alterra's shareholders, clients and other business partners will continue to be well served when Alterra's underwriting operations join forces with Markel's, and all should benefit from the superior financial strength, expanded capabilities and synergies created by the combined entity."

 

Strategic and financial attributes associated with the combination of Markel and Alterra:

 

The combination of Markel and Alterra is expected to create significant benefits for the shareholders of both companies, and to provide a robust foundation for strong financial performance going forward.

 

Enhanced size and scale: Following the close of the transaction, Markel is expected to write annual gross premiums of approximately $4.4 billion and to have approximately $6 billion in equity with capital flexibility to support future growth.

 

Strong and well diversified franchise: Complementary business profiles provide important diversification of risk, with Markel adding reinsurance and large-account insurance to its specialty insurance portfolio. Following the close of the transaction, Markel's business is expected to be approximately 50% short-tail, 50% long tail; 67% insurance and 33% reinsurance.

 

Common cultures of underwriting discipline: The merger brings together seasoned and accomplished underwriting teams with limited overlap in diverse specialty insurance and reinsurance lines.

 

Strong investment performance: Markel brings a long and successful track record of investment outperformance. This expertise can now be applied to the combined entity's investment portfolio of over $16 billion.

 

[jeffmori7]

Thanks for the news dcollon.

 

I don't know Alterra, does someone have any insight about this company?

 

It's a big transaction for Markel (its biggest ever?), and so far the market doesn't like it (down by more than 6% this morning).

 

 

[orion]

Investor Presentation: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MTY1NjA4fENoaWxkSUQ9LTF8VHlwZT0z&t=1

[Liberty]

Wow, that's huge. Reminds me of LUK + Jeff size wise (except Mr. Market doesn't seem to like it for MKL so far).

[fuluvu]

Some key points for the merger:

1. Purchase is at 1x book value of Alterra.

2. Total investment portfolio doubles from $8.2 b to 16.4 b

3. Current equity portion of MKL portfolio is 25%. Alterra's investment portfolio is all fixed-income. The equity portion of the combined portfolio will be 14%. If MKL increases the equity portion of the combined portfolio to 25%, about $2 billion can be used to purchase equities. Based on MKL's historical investment performance, the value will be created.

[fareastwarriors]

I would love for this thing to be sub 400 again. Hopefully some irrational players drop out.

[Parsad]

Wow, that's huge. Reminds me of LUK + Jeff size wise (except Mr. Market doesn't seem to like it for MKL so far).

 

Except Markel used overvalued stock in the deal, and both LUK & JEF were undervalued relatively the same.  Cheers! 

[jay21]

Quickly glanced at the presentation and will do some digging later.  I thought one slide showed that they don't really add value through investments (except that they invest in equities).  They could just as easily invest in the indexes.  I wish Gaynor would hire someone to be more aggressive with the equity portfolio for times like 2008-2009.

[berkshiremystery]

Thanks for the news dcollon.

 

I don't know Alterra, does someone have any insight about this company?

 

It's a big transaction for Markel (its biggest ever?), and so far the market doesn't like it (down by more than 6% this morning).

 

Alterra was formed in 2010 through the merger of Louis Moore Bacon’s Max Capital Group Ltd. and Harbor Point Ltd.

 

Max Capital Group Ltd was formerly known as Max Re Capital Ltd, and was founded by hedge fund manager Louis Moore Bacon. It was a similar good and small reinsurance company like Greenlight Re.

 

Hope this helps.