Morningstar Analyst Note Brett Horn, CFA, Senior Equity Analyst, 2 Nov 2023

Markel's third-quarter results were a little disappointing, specifically in regard to underwriting. On the
investment side, results were mixed with a weaker equity market partially offset by higher interest
rates. Overall, though, we remain comfortable with our $1,310 fair value estimate for the no-moat
company and see shares as mildly overvalued.

Net written premiums increased 1% year over year, with 4% growth in primary lines offset by a 26%
decline in reinsurance. Given that the industry is currently seeing solid pricing increases, these figures
suggest Markel is retreating a bit.

This more cautious stance might be justified given relatively weak underwriting results. The reported
combined ratio came in 99.1%, compared with 93.4% last year. Favorable reserve development declined
280 basis points year over year, but catastrophe losses declined 140 basis points, which suggests a
significant deterioration in underlying underwriting profitability. This deterioration in underwriting
results and the weak absolute level puts Markel at odds with what we've seen from peers. As we move
deeper into the hard market, we've generally seen underwriting margins at peers stabilize at attractive
levels. In our view, the fact that the company appears to be unable to exploit favorable market
conditions reflects poorly on its underwriting discipline.