Morningstar | Markel Announces Loss Reserve Inquiry
Narrow-moat Markel announced that U.S. and Bermudan authorities have launched an inquiry into loss reserves at CATCo, its subsidiary that deals in catastrophe bonds and reinsurance. Markel acquired CATCo in 2015, and the inquiry relates to loss reserves in late 2017 and early 2018. Management provided no color on the exact nature of the issue beyond this, but stated that it is confined to CATCo and that the company has hired outside counsel to investigate. We would note that historically we believe Markel as a whole has been conservative in setting loss reserves, as evidenced by the sizable favorable reserve development the company reports most years. But given that CATCo is a relatively recent acquisition, its culture in this respect may be unique. We will maintain our $845 fair value estimate at this time but would reiterate our high uncertainty rating.Markel is a financial holding company. The company's business operations are: Underwriting, which comprised of risk-bearing insurance and reinsurance operations; Investing, which is primarily related to underwriting operations; Markel Ventures, Inc., includes controlling interests in a portfolio of businesses that operate outside of the specialty insurance marketplace; Insurance-linked securities, which include investment fund managers that provide investment products, including insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives; and Program services, which serves as a fronting platform that provides access to property and casualty insurance market.
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