Nat-cats add 42 points to Markel International combined ratio

The increase in the combined ratio was primarily due to $67m, or 42 points, of underwriting losses related to the Australian floods, the New Zealand earthquake and the earthquake and subsequent tsunami in Japan.

The combined ratio was also adversely impacted by $13m of underwriting loss related to severe storm damage to the Gryphon floating production storage and offloading vessel in the North Sea.

The combined ratio in the first quarter of 2010 included $17m, or 12 points, of underwriting loss related to the Chilean earthquake.

Markel International reported gross written premium of $255.0m for Q1 2010 compared to $208.2m in Q1 2010.

It attributed the 22% primarily to an increase in premiums at Markel International’s Canadian operation, Elliott Special Risks, which having been acquired as a managing general agent now operates as a risk bearing insurance division. In addition, Markel International benefited from an improved pricing environment and organic growth at its marine and energy division.

Andy Davies, finance director at Markel International, commented: “Against a difficult underwriting background we are pleased with the premium growth we achieved in the first quarter of 2011. The significant losses reported by the insurance industry are having a positive impact on pricing and with our disciplined underwriting and strong capital position we are in an excellent position to capitalise on opportunities as they arise.

“The combined ratio for the quarter reflects the significant losses that impacted the insurance industry in the first quarter of 2011. These losses were within our risk appetite for market losses of this size and represent approximately 10 points of Markel International’s full year premium and approximately 2% of Markel’s capital. The underwriting loss was offset by another solid investment performance and as a consequence Markel reported a net profit and an increase in shareholders’ equity during the first quarter of 2011.”

Its parent company, Markel Corporation has reported that nat-cats contributed to a deterioration in its combined ratio to 112% from 101% in the first quarter of 2010.

The combined ratio for the first quarter of 2011 included $69m, or 15 points, of underwriting loss related to the Australian floods, the New Zealand earthquake and the earthquake and subsequent tsunami in Japan. In Q1 2010 the combined ratio was hit by $17m, or four points, of underwriting loss on the Chilean earthquakes.

It reported diluted net income per share of $0.85 for the quarter ended 31 March 2011 compared to $4.33 for the first quarter of 2010. Book value per common share outstanding increased 1% to $329.09 at March 31, 2011 from $326.36 at December 31, 2010.

Alan Kirshner, chairman and chief executive officer, commented: “Our first quarter results were adversely impacted by losses from the catastrophes in Australia, New Zealand and Japan, and our thoughts are with those that have been affected by these tragic events. Our financial strength provides a solid foundation for us to withstand these losses while continuing to build long-term value for our shareholders.”