马克尔集团年度会议要点：管理层看好国际保险业务

2024A2025E2026E90.5790.00100.0091.2591.71105.2914,994.315,640.516,430.37%7%7% 2027E113.00114.357% Andrew Andersen * | Equity Analyst+1 (212) 284-8105 | aandersen@jefferies.comSuneet Kamath, CFA * | Equity Analyst(212) 778-8602 | skamath@jefferies.comCharlie Rodgers * | Equity Associate+1 (212) 284-8105 | crodgers@jefferies.com The Long View: Markel GroupInvestment Thesis / Where We DifferCompany efforts to focus the insurance operations into a mainly specialtyinsurer and reduce property volatility are taking shape. Improved consistencyof results to mid-90s CR creates a case for modest near-term multipleexpansion back toward LT history. However, we await more progress onresults and the announced business review. We see Op ROE expanding to 8%,though this doesn't account for equity investment gains and potential cash/short-term reallocations, which could drive another 300bps of ROE. Improvedresults, slight premium leverage extension and substantial fixed income NIIgrowth (MSD% YoY in '25E) are expected to drive upward EPS revisions.Base Case,$1930, +4%•Pricing moderates over next year•Loss trends stable•Mid-single digit NPW growth•Flattish underlying margin expansion•Mid single digit Op ROE•BVPS ex AOCI:$1,447.38/Target multiple:1.3x /Price Target: $1,930Sustainability MattersTop Material Issue(s): 1) Physical effects of climate change.As an underwriter, MKL is exposed toweather events that are increasing in severity and frequency as a result of climate change. These eventspresent risks and market opportunities.2) Access & affordability.As an underwriter, MKL must avoiddiscriminatory practices in its pricing and offering.3) Data security.MKL handles sensitive personalidentifiable information (PII) and, therefore, is exposed to cybersecurity risk as a custodian of such data.Company Target(s):N/AQuestion(s) for Management:1) How are you balancing revenue growth and risk exposure (eithercatastrophe risk or non-catastrophe risk)? 2) How do you ensure that your underwriting and pricing inpersonal lines are not discriminatory?Please see important disclosure information on pages 5 - 11 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Upside Scenario,$2380, +28%•Pricing momentum continues over next year•Loss trends moderating•Mid-single digit NPW growth•Moderate underlying margin expansion•High-single digit Op ROE•BVPS ex AOCI:$1,664.50/Target multiple:1.4x /Price Target: $2,380 Downside Scenario,$1476, -21%•Pricing declines faster than anticipated•Loss trends deteriorate•Low-single digit NPW growth•Weak underlying margin expansion•Low-to-mid single digit Op ROE•BVPS ex AOCI:$1,259.20/Target multiple:1.2x /Price Target: $1,473Catalysts•Monthly surplus lines stamping office data•Schedule P reserve data•Quarterly reports 2 International Insurance Panel:Simon Wilson (CEO, MKL Insurance); Frederik Wulff (MD, MKLInsurance SE); Jo Browning (MKL People); Nick Line (CUO, MKL Int'l); Andrew McMellin (President,MKL Int'l):The company was bullish on international insurance over the next five years (2030) withexpectations of doubling the premium base to $5bn from $2.5bn currently. Since 2019, internationalhas grown at a 15% CAGR. Not limited to London/Lloyd's, MKL international operations includedomestic business, located out of Germany, with $500mn of GPW for continental Europe.Management notes it has less than 1% of share of the market in Europe, providing significantgrowth opportunity. The specialty insurance operations in continental Europe focus on smallbusiness, which is generally more profitable and insulated from broader market competition. Totalinternational operates at a low-to-mid 80s CR and is relatively modest compared to peers. Londonmarket share is 2%, with management seeing opportunity to grow to 4% share.We find the low-to-mid-80s CR target to be ambitious considering 1) a softening market oninternational lines, 2) meaningful growth expectations in this softening market, and 3) the company's94% average CR since 2019 (77%/87%/94% for 2024/2023/2022). It is unclear how much of thisimprovement in CR has been driven by favorable mix shift to short-tail lines given a hardening marketor how much has been driven by reserve releases. Nonetheless, the international business (1/3 oftotal insurance) has outperformed the U.S. and stronger growth could improve overall segmentmargins.As a historical comparison for the international growth guide we would note that the company doesnot generally give out formal guidance. However, MKL's 10/5/1 plan in 2020 ($10bn of premium,$1bn of underwriting income, in five years), ultimately did not yield the expected results in termsof profitability.International operations span 25 offices across 13 territories. Expansion mostly began after theGFC and after the company completed the fixing and refinement of its international acquisitionsthat occurred in the late 90s. This particular panel was limited to international insurance