By Andrew Bary

Markel Group is the best known of the so-called mini Berkshire Hathaways that combine insurance, stock investments, and wholly owned businesses.

Like Berkshire, Markel has attracted a dedicated shareholder base in the 40 years since it went public. The stock is up 225-fold to $1,800 from $8 at its 1986 initial public offering -- but still behind the 300-fold gain in Berkshire over that span.

The company's CEO, Tom Gayner, 64, is a longtime fan of Berkshire and told an audience in Omaha, Neb., before the Berkshire annual meeting recently that Markel has "studied the playbook."

The stock is worth buying now, closing at $1,800 a share on Thursday.

Markel trades for about 1.2 times its March 31 book value of $1,450 per share -- below its average of close to 1.4 times in the past few years -- and for 13 times projected 2026 operating earnings.

The stock also trades way below Markel's own estimate of its intrinsic value of about $2,900 a share. If the stock rises slightly, Markel's market cap would be sufficient for the company's potential inclusion in the S&P 500 index.

The company has improving insurance operations, a sizable equity portfolio of $12 billion that gives it more bang from stock market gains than most insurance peers, some appealing noninsurance businesses, and a low valuation relative to specialty insurance peers like W.R. Berkley, RLI, and Kinsale Capital Group.

Markel has attracted an activist investor, Jana Partners, which took a Markel holding in late 2024 that is now under 1%. It sent a letter to the Markel board in late April after the company's first-quarter earnings missed expectations and urged the company to sell the noninsurance units and buy back $2 billion of stock, or just under 10% of the current market value of $22.5 billion.

"The stock has been as cheap as it has been in the past 10 to 15 years" on a price-to-book basis, says Charlie Frischer, who runs a Seattle family office and owns the shares. Frischer thinks the activist presence will pressure management to become more shareholder-friendly.

That already seems to be happening. Gayner said on the company's earnings conference call in late April that Markel would be accelerating its stock-repurchase program and that buybacks now are Markel's best form of capital allocation. He said the company would repurchase 10% of its stock in under five years.

The other bullish development for Markel is that its core insurance operations are improving under the leadership of Simon Wilson, who took full control of the insurance business in 2025 after heading its successful international operations.

The company's underwriting profit margin rose three percentage points in the first quarter, with the company showing a combined ratio of 93% versus 96% year ago. A combined ratio is expenses and losses as a percentage of insurance premiums -- a lower figure is better.

Like Berkshire and Fairfax Financial Holdings, a Canadian insurer that follows the Berkshire model, Markel is out of favor with investors. All three stocks are behind the S&P 500 over the past year.

The recent underperformance at Markel reflects its exposure to the property-and-casualty insurance market, where pricing is weakening after years of strength. It's also an asset-rich defensive stock in a market favoring technology and growth. If its insurance business weakens again, that could hit Markel's stock price.

Markel didn't help itself with a disappointing first-quarter profit report in late April that reflected weakness at the noninsurance businesses -- a grab bag of about two dozen companies.

Markel, following the Berkshire model, took profits from its insurance operations and built a portfolio of unrelated businesses starting 20 years ago. The portfolio, which was known as Markel Ventures until last year, includes Lansing, a building-products distributor; Brahmin, a maker of high-end handbags; and Eagle, a Virginia home builder.

This portfolio produced about $850 million of operating profits before taxes in 2025 and could be worth close to $10 billion, or nearly half of Markel's market value. The company does have $4 billion of debt.

In its recent letter to the Markel board, Jana lauded the "dramatic improvement in insurance operations" but argued that what the Markel calls its "unique flywheel" of insurance and Ventures hasn't worked for shareholders. Jana wrote that "the current structure produces sub-peer shareholder returns, creates no unique value, and warrants a discounted multiple."

Markel is largely a specialty insurer, taking on such risks as professional liability, marine, valuable coastal homes, and even classic cars. These areas are seeing some pricing pressure but not as much as property insurance, where Markel has less exposure than some peers.

Well-run specialty insurers like Berkley and RLI trade for 2.5 times book value, double Markel's valuation. Jana calls the noninsurance businesses a "poison pill" that limits potential strategic interest in Markel that could include overseas insurers eager for a U.S. presence.

Gayner tells Barron's that the board will evaluate the Jana letter, but he didn't sound enthusiastic about it. "Our diversified and resilient business model and long-term orientation have served our shareholders well for a long period of time and will continue to do so."

Investor and Berkshire board member Chris Davis, whose firm, Davis Advisors, has been a Markel investor since its IPO, doesn't like the Jana breakup idea. He told CNBC that it's "one of the stupidest suggestions in the past 20 years."

The Jana presence is a warning to Berkshire that if it doesn't perform over the next decade, it also could be targeted by activists after Warren Buffett's death.

Markel lacks Berkshire-quality businesses, but it has an improving insurance story, a strong balance sheet, and a market value that is just 2% of Berkshire's. It smaller size gives it better growth prospects.

Write to Andrew Bary at andrew.bary@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 08, 2026 08:17 ET (12:17 GMT)

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