Markel CATCo investment fee income rises again for Markel Corp.

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Investment management fees generated by the collateralized reinsurance and retrocession linked investment activities of specialist manager Markel CATCo Investment Management have again risen, adding an increasing contribution for Markel Corporation.

In its second-quarter 2017 results, financial services and insurance group Markel Corporation said that investment management fees earned thanks to Markel CATCo’s ILS and reinsurance fund management activities had risen to $9.3 million for Q2 2017, up significantly from $7.4 million in the prior year quarter.

That’s a 26% increase year-on-year for the quarter, which continues the growth in income earned from Markel CATCo reported for Q1 of the year.

For the first six months of the year investment management fees earned by Markel from CATCo reached $18.6 million, up from $14.5 million for H1 of 2016, a 28% increase year-on-year.

The increase in reinsurance and retrocession linked assets under management at Markel CATCo continues to ensure Markel Corp. benefits from an increasing amount of income from the unit.

Markel CATCo had increased its assets under management by around a billion dollars over the course of 2016, which was almost a 30% increase, so the growth in investment management fee income has been closely aligned with the increased scale of its operations.

Considering the decline witnessed in reinsurance and retrocession returns over the last few years, the level of investment income generated by Markel CATCo makes the purchase price paid by Markel for the ILS asset manager look very good value.

Markel acquired reinsurance investments and fund manager CATCo in December 2015 citing an acquisition cost of $205.7 million, but then reported that the units total revenues in 2016 amounted to an impressive $56.5 million.

The acquisition of CATCo continues to look like a very good deal for Markel Corporation and it will be interesting to see how that continues and how much the pair can leverage the relationship.

Markel announced the acquisition of fronting specialist State National yesterday, which means that in future the Corporation will benefit from fee income earned by that firms work alongside third-party capital providers including Nephila Capital, expanding the benefits that Markel will reap from ongoing ILS and alternative capital market growth.

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