Markel (NYSE:MKL) is often compared to an earlier-stage Berkshire Hathaway because it's an insurance company that also makes stock market investments and acquires businesses. And like Berkshire, Markel isn't known for its rapid price swings.
However, the stock is soaring after the company reported its fourth-quarter earnings. As of 10:10 a.m. ET, Markel's stock was up by nearly 7% for the day to a new all-time high, surpassing the $2,000 share price for the first time ever.
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Strong results
To be sure, Markel's earnings results were strong. The company beat expectations on the top and bottom lines. Net investment income increased by 25%, and revenue from the insurance and Markel Ventures businesses both grew. Overall, Markel's operating income increased by 27%.
However, there were two other major news items that are driving the stock higher.
A proactive look to the future
Along with its earnings report, Markel issued an update to shareholders in which it announced it will be conducting a review of its business. The goal will be to find ways to maximize the value of the insurance business, optimize capital allocation, and simplify the structure.
Essentially, management doesn't think the growth in the stock's price accurately reflects the current intrinsic value of the business. And it wants to find ways to unlock that value.
Markel also announced a $2 billion stock buyback program -- presumably to take advantage of the perceived discount to intrinsic value in the meantime. The company plans to focus its capital on the buyback plan during the review period, and for context, a $2 billion buyback represents about 8% of Markel's outstanding shares.
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Matt Frankel has positions in Berkshire Hathaway and Markel Group. The Motley Fool has positions in and recommends Berkshire Hathaway and Markel Group. The Motley Fool has a disclosure policy.
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