Markel reports increased Markel CATCo investment management fees

by Artemis on May 5, 2017

Financial services and insurance group Markel Corporation said that investment management fees generated by its reinsurance and retrocession linked investment manager, Markel CATCo Investment Management, rose by 30% in the first quarter of 2017.

Markel acquired reinsurance investments and fund manager CATCo in December 2015 and has since cited an acquisition cost of $205.7 million, but then reported that its revenues in 2016 amounted to an impressive $56.5 million.

It looks like 2017 is off to an even stronger start, with Markel reporting that Markel CATCo investment management fees earned from its investment funds amounted to $9.4 million for the first quarter of 2017, up 30% on Q1 2016’s $7.2 million of fee income.

That’s quite a leap in income earned from the activities of the retrocessional specialist ILS fund manager, but with Markel CATCo having grown its assets under management considerably over recent months, reaching $4.3 billion of total assets, it’s no surprise that the fee income generated from managing the investments in reinsurance risk have jumped with them.

Markel CATCo grew its assets under management by around a billion dollars over the course of 2016, which was not so far from a 30% increase, so the investment management fee increase is aligned with the increasing scale of its operations.

Fee income will likely rise in future quarters of the year, so the increase in Q1 is a good start which could point to Markel’s revenues from CATCo increasing again.

Given the acquisition cost and the revenues reported in 2016, plus this fee income earned in the first-quarter of 2017, the price of Markel CATCo looks very reasonable. At the same time the impressive growth seen in 2016 must have been assisted by the new ownership by Markel.

So it looks like the embedding of CATCo within Markel has been advantageous for both sides and while the major catastrophes remain absent the revenues are likely to become increasingly attractive too.

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