Have you ever thought about who insures the manicurist or an antique motorcycle? Specialty insurer Markel Corporation takes on the risks other insurers won't touch, from amusement parks to thoroughbred horses and summer camps. Coverage is also available for one-time events, such as golf tournaments and auto races. Markel's commercial excess and surplus products include a wide range of liabilities (professional, pollution) while its specialty admitted segment covers businesses ranging from martial arts schools to dude ranches. Markel International provides specialty insurance internationally from its base in the UK. The company distributes its products through independent agents and brokers.
While the company is a diverse financial holding company, more than 75% of its revenues are generated through its specialty insurance (excess and surplus, specialty admitted, and international) products and service to niche markets. Excess insurance kicks in when a company's regular insurance fizzles out. For example, a regular policy might pay up to $100,000 on claims, but the excess policy could then pay any amounts over $100,000 and up to $1 million. Surplus insurance is coverage that no regular insurance company can offer and typically comes with a higher level of risk and higher-priced premiums.
The company has been working to grow its specialty admitted business segment, which serves clients that engage in highly specialized activities requiring niche insurance coverage typically not offered by standard insurers. In 2010 Markel added workers' compensation to its roster of US speicalty insurance offerings when it acquired Aspen Holdings, which does business as FirstComp Insurance, for some $135 million (plus stock option value). FirstComp now operates as a separate business unit.
In early 2012 Markel added another US specialty unit when it acquired Kennesaw, Georgia-based Thompson Insurance Enterprises (THOMCO) for an undisclosed amount. The new business unit, which operates independently under the specialty admitted division, offers industry specific insurance programs for fields including medical transportation, senior and childcare facility services, and fitness center operations. Other underwriting entities in the specialty admitted segment include Markel Insurance and Markel American Insurance.
Higher premium volume (primarily in its excess and surplus segment) and improved results by its previously struggling international business have helped to increase Markel's underwriting profits. Rather than sit on its hands while its investment portfolio tanked during 2008, Markel chose to sell off portions of its investments and took substantial write-downs that year.
By 2010 the company's investment arm, Markel Ventures, had stabilized enough to resume investing in a slew of new non-insurance businesses. A buying spree ensued, and by late 2011 its acquisitions included a food-processing equipment manufacturer; manufactured housing communities; a behavioral health management firm; a dredge systems maker; a medical and executive health program manager; a supplier of continuous baking systems; and a majority interest in WI Holdings, known as Weldship, and its Texas Trailer division. In 2012 Markel Ventures acquired a majority interest in privately held Havco WP LLC and Havco Wood Products, a leading maker of laminated oak and composite wood flooring for truck trailers, intermodal containers, and truck bodies.
In fiscal 2011 Markel's underwriting results were impacted by higher losses related to the Japanese earthquake and tsunami, tornadoes in the US, floods in Thailand, and other natural catastrophes that occurred at a higher-than-expected frequency during the year. The company continued to grow, however, by making strategic acquisitions in its insurance and non-insurance operations. Its revenues grew to $2.6 billion, an increase of about 18% from 2010, while its net income dropped by almost 45% to $148 million.
Markel's strategy for growth is to leverage its expertise and specialized market knowledge of niche markets to differentiate its business from competitors. Financially, the company's aim is to generate consistent underwriting and operating profits and produce superior returns on its investments to increase its value.
Cousins and co-vice chairmen Anthony Markel and Steven Markel own about 5% of the company. – less
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