Markel Corporation’s operating revenues from its insurance-linked securities (ILS) businesses were up by 74% in the fourth-quarter of 2019, while the full-year saw ILS operating revenues hit $225.6 million, thanks to the contribution from Nephila Capital.
Having acquired Nephila Capital in the fourth quarter of 2018, Markel Corporation had not yet reported a full-year of revenue contributions from the largest manager of catastrophe and weather insurance and reinsurance linked assets in the market.
Now, the first full-year of revenues are in and it’s clear the contribution that Nephila Capital makes to the Markel bottom-line is going to be significant.
For the fourth-quarter of 2019, Markel has reported that operating revenues of its ILS businesses reached just over $67 million, which is more than 74% up on Q4 2018’s almost $38.6 million.
For the full-year 2019, Markel’s ILS operating revenues came out at $225.6 million, significantly higher than 2018’s just over $91.5 million.
It is the contribution from Nephila Capital over the year that has boosted the numbers so significantly, as revenues from Markel’s in run-off retrocessional reinsurance investment manager Markel CATCo continue to be dented due to losses and the winding-up of that business.
Markel explained, “The contribution of revenues from Nephila was partially offset by lower revenues from Markel CATCo Investment Management, Ltd. (Markel CATCo) due to lower assets under management during 2019 compared to 2018 and a reduction in management fees charged on sidepocket shares.”
Markel’s new retrocessional reinsurance investment manager Lodgepine Capital Management has not yet begun to contribute, having only begun its operations at the end of the year.
Expenses associated with the ILS business remained high in the year, driven largely by costs related to the Markel CATCo running off and a full-year of expenses from Nephila.
But it is the revenue contributions that show where this strategy could lead Markel in time, as the costs slow from the CATCo side and Nephila’s contribution likely keeps building.
Add in future revenues from Lodgepine Capital Management as well, plus synergies between its ILS and program businesses and it will be interesting to see how these figures compare in another year’s time.
More detail may be available once Markel’s 10Q is available, which had not been published at the time of writing.