Lucienne sells MKL 801.86: MKL currently sells on the market at $823.75, which is an approximate 48% premium to book value.

Markel's valuation is significantly above other well managed insurance holding companies. Most of these have large unrealized gains in an overheated market. Markel's book value is 56% long on stocks with no hedging. Markel's book value consists of 22% goodwill and intangibles. However, its inefficient capital structure will continue to drag on returns and market valuations over time.


Shauna:
Alleghany's inefficient capital structure has contributed to its lower returns on book value relative to competitors, increased its inflation risk, and is one of the primary reasons I believe its market value is lower.

Maple:
Berkley (NYSE: WRB ) sell for 20, 30, or even 60 percent premiums to their book values.

Elayne:
Alleghany traditionally trades on the exchange near its book value, while other insurance holding companies such as Markel or W.R.

Merna:
However, with interest rates near zero, two or three billion in preferred shares would be the ideal issuance.

Deana:
I see no risk and a whole lot of upside if Alleghany would issue, say, one billion dollars worth of preferred shares in today's market, and another one billion in debt.

Polly:
The thing about preferred shares is that when times get tough, the company could temporarily stop paying the dividends; thus, a preferred issuance would be far less risky than a debt issuance.

Sheena:
If Alleghany would simply issue preferred shares right now, it could lock in a permanently low interest rate in exchange for capital it would never have to return.

Dione:
My opinion is that Alleghany is overly exposed to inflation risk because of its low debt.

Tonette:
For this reason, insurance companies should use debt more often.

Fallon:
Since insurance companies are leveraged operations, inflation and rising interest rates are a bigger concern to them than most other businesses outside of their industry.

Markel Corp. (NYSE:MKL)
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