Markel is setting its own path in a noisy market

In a market full of macro and geopolitics, too many stocks feel hostage to headlines. You wait and hope. Markel looks different. The company has laid out a plan with specific actions that management can control. A board‑led strategic review to simplify the group. A large buyback that is already in motion. A preferred share redemption with a fixed date in June 2025. Add clear progress in underwriting and steady investment income and you get a series of near‑term checks that do not depend on the economy. We think the market has not priced this shift.

We are initiating with Buy and a clear target

We initiate Markel with a Buy and a PT of $2,384. This implies 26.6% upside from $1,883. Our PT uses a 21.0x P/E on FY26E EPS of $113.50. We choose P/E because the earnings mix is becoming cleaner and less volatile, helped by underwriting discipline, a smaller swing in reinsurance, and a strong investment book. The catalyst path is visible. The strategic review has a 6 to 12 month window. The $2bn buyback is active. The $600m preferred redemption lands by June 2025. These actions should narrow the conglomerate discount and move Markel toward a specialty insurer premium.

What the market is missing about Markel

The market still anchors on the old Markel. A complex group with a conglomerate discount and lumpy results. We think this is changing fast. Underwriting is improving with the ex‑cat combined ratio already in the low 90s. Reinsurance has been streamlined after selling renewal rights. Markel Ventures keeps compounding cash flow and lowers earnings volatility. Capital returns are no longer a promise. They are happening. Put together, this increases earnings visibility and lowers the distribution of outcomes. That warrants a higher multiple in our view.

How we value the shares

We anchor on earnings power that investors can verify quarter by quarter. A P/E framework fits a company that is compressing volatility while returning significant capital. We apply 21.0x to FY26E EPS of $113.50 for a PT of $2,384. Why 21.0x. As catalysts land, Markel looks closer to peers like Chubb, W R Berkley and Arch, where specialty mix and capital agility earn premium multiples. If execution falls short, we see a re‑compression to about 16.5x which is roughly flat to today. If delivery is stronger and the review drives deeper simplification, a path to 25.0x is possible which is about 51% upside. The distribution is skewed to the upside because the timeline is defined and verification is frequent.

Our forecast in plain numbers

We model FY25E EPS of $103.50 and FY26E of $113.50. The bridge is simple to follow. We forecast a consolidated combined ratio of 94.0 in FY25E and 92.5 in FY26E as earned rate stays ahead of loss cost trend and reinsurance volatility remains lower. The ex‑cat combined ratio trends to 90 to 91 by FY26E. We model expense ratio compression from 35.8 to 35.0 in FY25E and 34.8 in FY26E driven by process fixes and scale.

Gross premium volume is the key top‑line driver. Markel printed $15.5bn in 2024, up 10.7% y/y. We forecast about $17.1bn in FY25E and about $18.9bn in FY26E which is a 10.6% CAGR. This supports higher earned premium and fronting fees.

Investment income is a second engine. We model $980m in FY25E and $1.02bn in FY26E as the fixed income book rolls into higher coupons and float grows with underwriting and reserves. For net investment gains we use $1.35bn in FY25E and $1.45bn in FY26E. This assumes equity marks normalise rather than repeat 2022. Gains are variable by nature, so we size them near long‑run ranges and let capital returns drive per share capture.

Markel Ventures adds stability and cash. EBITDA rose to $628.5m in 2023. We model steady compounding from that base to the high $800s by FY26E. We assume most growth comes from execution and bolt‑ons funded with internal cash. We do not need a separation to make our numbers.

Share count falls through buybacks. We model diluted shares at 12.9m in FY25E and 12.3m in FY26E. The June 2025 preferred redemption adds about $2.5 to $3.0 to EPS. Repurchases add another $2.5 to $3.0 in FY25E and about $4.0 to $4.5 in FY26E depending on pace and price.

Catalysts you can mark on a calendar

The strategic review is live with an expected 6 to 12 month window. Any move that simplifies reporting, clarifies capital allocation or separates assets should compress the discount. The $2bn buyback continues to reduce the share count. The $600m preferred redemption is set for June 2025 and lifts run‑rate EPS on day one. Quarterly prints should confirm ex‑cat ratios in the low 90s, expense ratio steps lower and steady gross premium volume growth at a double‑digit clip. Investment income should hold near the new base as reinvestment yields stay above the legacy book. None of this is theoretical. Each item has a date or a run rate that investors can track.

KPI checks that will prove or disprove our view

Watch the ex‑cat combined ratio. Sustained prints at 90 to 91 into FY26E would validate underwriting discipline and lower earnings variance. Track the expense ratio from 35.8 today to about 35.0 in FY25E and 34.8 in FY26E. Follow gross premium volume each quarter toward $17.1bn in FY25E and $18.9bn in FY26E. Monitor net retention. It dropped to 79 in 2024 as Markel used more reinsurance to protect capital. We see 78 in FY25E then 80 in FY26E as mix shifts to higher margin primary lines. Check reserve development. We expect neutral to modestly favourable at 0.5 to 1.0 of opening net reserves which supports margin and grows float. Verify investment income near $1.0bn with taxable equivalent total return trending toward the mid to high 7s by FY26E. Finally, keep an eye on share count. Prints around 12.9m in FY25E and 12.3m in FY26E would confirm the buyback cadence.

Why we think P/E beats sum of the parts here

A sum of the parts can look tempting for a group with insurance, Ventures and investments. We choose P/E because earnings quality is improving and capital returns let per share value compound faster. The review could unlock optionality, but we do not need a break‑up to get paid. A clean P/E also lines up with how peers trade. As Markel tilts toward specialty insurance economics with steadier investment income, we think the market will compare it more directly with Chubb, W R Berkley and Arch rather than stick it with a conglomerate label.

Where this can go wrong

Catalyst investing carries path risk. A bad cat season could drain capital and slow buybacks. Management could pursue an acquisition that crowds out repurchases. Regulators or rating agencies could prefer higher capital buffers. Underwriting gains could stall if competition heats up, loss cost inflation runs faster or reserves turn adverse rather than favourable. Equity marks could reverse and investment income could lag if rates fall quickly. The strategic review could drag, become contentious or deliver only cosmetic changes. Shareholder activism can distract and add cost. Tariffs or trade barriers could pressure some Ventures units and trim cash flow. The market may also have priced part of the buyback and redemption already, muting the reaction. If catalysts underdeliver, a move back to about 16.5x P/E is possible which leaves the shares near flat from here. We size that as our bear case for risk control.

Why we still think the skew is attractive

We can verify progress every quarter. Ex‑cat ratios. Expense ratio steps. Gross premium volume prints. Investment income. Share count. A formal outcome from the review within 12 months. Each item reduces debate and supports the re‑rate. We also see reserves and float growth as quiet tailwinds that support investment income even if rates ease a little. On simple probabilities we assign 70 to delivery and 30 to flat execution. That yields an expected return near the high teens over 6 to 12 months with clear check points and a defined exit if the path stalls.

Bottom line

Markel is moving from a narrative discount to a catalyst story with dates and numbers. Underwriting is improving. Ventures keeps compounding. The balance sheet is being used. A review is underway to simplify and sharpen the message. We initiate Buy with a PT of $2,384 based on 21.0x FY26E EPS of $113.50. If the company delivers the actions it has set in motion, a re‑rate toward specialty insurer peers is the logical outcome. If it stumbles, the downside looks contained. In a market full of noise, this is a case where company actions can do the heavy lifting.