Markel Corporation (NYSE:MKL) was busy with profits and acquisitions in the last fiscal year. The most notable buys from Markel in 2012 were, Thompson Insurance Enterprises, Essentia Insurance Company. Additionally, Tom Gayner’s insurance company announced that it was buying Alterra Capital Holdings Ltd (NASDAQ:ALTE). On the investment side, Markel returned 20 percent on its equity holdings and 5 percent on fixed income portfolio, which overall generated a return of 9 percent for 2012. Markel has averaged a 10 percent return on its investment portfolio over the last twenty years versus an 8 percent return for S&P 500 index over the same period.

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The shareholder letter says that the investment team does not try to predict global macro headwinds and their implications  to judge which investment would be suitable. The value firm’s focus is always on the company operations and the, balance sheet, debt load, management and valuation. Markel Corporation (NYSE:MKL) reinvests profits in a tax efficient manner which helps to maximize returns. The letter talks about the deep philosophy of choosing good companies and is worth reading for that reason, it is embedded below so have a look.

In the annual shareholder letter, Markel’s top management which includes Tom Gayner as CIO, calls 2012 phenomenal for the company and one that will act as a foundation for even better return going further. The firm is very proud of its acquisition of Alterra Capital Holdings Ltd (NASDAQ:ALTE) and gives itself props for choosing such a well managed insurance company with excellent underwriting operations. Tom Gayner believes also there is not much to fix at Alterra Capital Holdings Ltd (NASDAQ:ALTE), which is not mostly the case with other  acquisitions of Markel.

Markel Corporation (NYSE:MKL) is still integrating FirstComp which it bought in 2010. Markel has seen significant growth in its insurance business not only with just the acquisitions but also through gross premiums, which increased 10 percent y-o-y.

Markel Ventures operations saw a 53 percent increase in revenues, compared to 2011 while EBITDA grew by 62 percent. In 2012, Markel Ventures added Havco, Reading, Tromp and Idreco. Havco is a wood floors manufacturer, while Reading and Tromp are bakery suppliers. Idreco is a Dutch dredge manufacturer.

Letter to Shareholders_2013 Tom Gayner’s Markel by ValueWalk.com