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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
 FORM 10-Q
______________________________________________________________________________________

    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2021
or
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______
Commission File Number: 001-15811
_________________________________________
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________
Virginia 54-1959284
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4521 Highwoods Parkway, Glen Allen, Virginia 23060-6148
(Address of principal executive offices) (Zip Code)
(804) 747-0136
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of exchange on which registered
Common Stock, no par value MKL New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer   Non-accelerated filer  
Smaller reporting company Emerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  x
Number of shares of the registrant's common stock outstanding at July 27, 2021: 13,724,847


Markel Corporation
Form 10-Q
Index
 
    Page Number
Item 1.
3
4
5
7
8
Item 2.
Item 3.
Item 4.
Item 1.
Item 2.
Item 6.
2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

June 30,
2021
December 31,
2020
(dollars in thousands) (unaudited)
ASSETS
Investments, at estimated fair value:
Fixed maturity securities, available-for-sale (amortized cost of $10,667,968 in 2021 and $9,655,261 in 2020)
$ 11,439,655  $ 10,681,734 
Equity securities (cost of $2,771,057 in 2021 and $2,732,998 in 2020)
8,205,708  6,994,110 
Short-term investments, available-for-sale (estimated fair value approximates cost) 3,263,073  2,034,099 
Total Investments 22,908,436  19,709,943 
Cash and cash equivalents 3,679,433  4,341,736 
Restricted cash and cash equivalents 672,385  874,913 
Receivables 2,627,218  1,930,211 
Reinsurance recoverables 6,484,269  5,989,337 
Deferred policy acquisition costs 766,736  630,794 
Prepaid reinsurance premiums 1,708,240  1,451,858 
Goodwill 2,606,138  2,604,624 
Intangible assets 1,696,748  1,782,718 
Other assets 2,491,910  2,393,920 
Total Assets $ 45,641,513  $ 41,710,054 
LIABILITIES AND EQUITY
Unpaid losses and loss adjustment expenses $ 16,999,816  $ 16,222,376 
Life and annuity benefits 975,499  1,069,986 
Unearned premiums 5,261,649  4,433,245 
Payables to insurance and reinsurance companies 671,820  493,470 
Senior long-term debt and other debt (estimated fair value of $4,868,000 in 2021 and $4,367,000 in 2020)
4,160,175  3,484,023 
Other liabilities 3,346,104  2,946,631 
Total Liabilities 31,415,063  28,649,731 
Redeemable noncontrolling interests 228,401  245,642 
Commitments and contingencies
Shareholders' equity:
Preferred stock 591,891  591,891 
Common stock 3,451,968  3,428,340 
Retained earnings 9,503,889  8,195,182 
Accumulated other comprehensive income 427,223  584,376 
Total Shareholders' Equity 13,974,971  12,799,789 
Noncontrolling interests 23,078  14,892 
Total Equity 13,998,049  12,814,681 
Total Liabilities and Equity $ 45,641,513  $ 41,710,054 

See accompanying notes to consolidated financial statements.
3

MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Quarter Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums $ 1,568,037  $ 1,360,174  $ 3,065,732  $ 2,690,883 
Net investment income 96,261  95,615  192,831  183,858 
Net investment gains (losses) 674,753  911,243  1,201,624  (770,198)
Products revenues 592,601  423,581  921,433  775,742 
Services and other revenues 569,120  341,402  1,019,346  587,396 
Total Operating Revenues 3,500,772  3,132,015  6,400,966  3,467,681 
OPERATING EXPENSES
Losses and loss adjustment expenses 814,955  713,216  1,694,873  1,789,564 
Underwriting, acquisition and insurance expenses 548,364  489,362  1,075,107  984,525 
Products expenses 502,202  364,483  798,728  678,554 
Services and other expenses 516,251  284,940  928,348  502,496 
Amortization of intangible assets 39,729  37,754  79,282  75,612 
Total Operating Expenses 2,421,501  1,889,755  4,576,338  4,030,751 
Operating Income (Loss) 1,079,271  1,242,260  1,824,628  (563,070)
Interest expense (46,568) (45,427) (88,957) (90,457)
Net foreign exchange gains (losses) (12,257) (21,460) 12,827  56,841 
Income (Loss) Before Income Taxes 1,020,446  1,175,373  1,748,498  (596,686)
Income tax (expense) benefit (217,112) (243,702) (365,483) 126,981 
Net Income (Loss) 803,334  931,671  1,383,015  (469,705)
Net income attributable to noncontrolling interests (11,224) (9,903) (17,211) (14,290)
Net Income (Loss) to Shareholders 792,110  921,768  1,365,804  (483,995)
Preferred stock dividends (18,000) —  (18,000) — 
Net Income (Loss) to Common Shareholders $ 774,110  $ 921,768  $ 1,347,804  $ (483,995)
OTHER COMPREHENSIVE INCOME (LOSS)
Change in net unrealized gains on available-for-sale investments, net of taxes:
Net holding gains (losses) arising during the period $ 55,935  $ 172,661  $ (158,441) $ 237,038 
Reclassification adjustments for net gains included in net income (loss) (3,943) (1,385) (4,031) (198)
Change in net unrealized gains on available-for-sale investments, net of taxes 51,992  171,276  (162,472) 236,840 
Change in foreign currency translation adjustments, net of taxes 4,915  (1,405) 4,107  (14,139)
Change in net actuarial pension loss, net of taxes 654  884  1,246  884 
Total Other Comprehensive Income (Loss) 57,561  170,755  (157,119) 223,585 
Comprehensive Income (Loss) 860,895  1,102,426  1,225,896  (246,120)
Comprehensive income attributable to noncontrolling interests (11,241) (10,033) (17,245) (14,296)
Comprehensive Income (Loss) to Shareholders $ 849,654  $ 1,092,393  $ 1,208,651  $ (260,416)
NET INCOME (LOSS) PER COMMON SHARE
Basic $ 57.12  $ 65.81  $ 99.19  $ (34.83)
Diluted $ 57.02  $ 65.75  $ 99.03  $ (34.83)
See accompanying notes to consolidated financial statements.
4

MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

Quarter Ended June 30, 2021 Preferred
 Stock
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Total
Shareholders'
Equity
Noncontrolling
Interests
Total Equity Redeemable
Noncontrolling
Interests
(dollars in thousands)
March 31, 2021 $ 591,891  $ 3,447,614  $ 8,754,760  $ 369,679  $ 13,163,944  $ 21,220  $ 13,185,164  $ 234,654 
Net income 792,110    792,110  727  792,837  10,497 
Other comprehensive income   57,544  57,544    57,544  17 
Comprehensive Income 849,654  727  850,381  10,514 
Repurchase of common stock     (38,803)   (38,803)   (38,803)  
Preferred stock dividends     (18,000)   (18,000)   (18,000)  
Restricted stock units expensed   4,442      4,442    4,442   
Adjustment of redeemable noncontrolling interests     13,717    13,717    13,717  (13,717)
Other   (88) 105    17  1,131  1,148  (3,050)
June 30, 2021 $ 591,891  $ 3,451,968  $ 9,503,889  $ 427,223  $ 13,974,971  $ 23,078  $ 13,998,049  $ 228,401 

Six Months Ended June 30, 2021 Preferred
 Stock
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Total
Shareholders'
Equity
Noncontrolling
Interests
Total Equity Redeemable
Noncontrolling
Interests
(dollars in thousands)
December 31, 2020 $ 591,891  $ 3,428,340  $ 8,195,182  $ 584,376  $ 12,799,789  $ 14,892  $ 12,814,681  $ 245,642 
Net income 1,365,804    1,365,804  7,402  1,373,206  9,809 
Other comprehensive income (loss)   (157,153) (157,153)   (157,153) 34 
Comprehensive Income 1,208,651  7,402  1,216,053  9,843 
Repurchase of common stock     (60,826)   (60,826)   (60,826)  
Preferred stock dividends     (18,000)   (18,000)   (18,000)  
Restricted stock units expensed   23,602      23,602    23,602   
Adjustment of redeemable noncontrolling interests     21,623    21,623    21,623  (21,623)
Purchase of noncontrolling interest   (531)     (531)   (531) (147)
Other   557  106    663  784  1,447  (5,314)
June 30, 2021 $ 591,891  $ 3,451,968  $ 9,503,889  $ 427,223  $ 13,974,971  $ 23,078  $ 13,998,049  $ 228,401 

See accompanying notes to consolidated financial statements.
5

MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (continued)
(Unaudited)
Quarter Ended June 30, 2020 Preferred
Stock
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Total
Shareholders'
Equity
Noncontrolling
Interests
Total Equity Redeemable
Noncontrolling
Interests
(dollars in thousands)
March 31, 2020 $ —  $ 3,419,528  $ 6,039,474  $ 261,726  $ 9,720,728  $ 11,602  $ 9,732,330  $ 155,417 
Net income 921,768  —  921,768  3,293  925,061  6,610 
Other comprehensive income —  170,625  170,625  —  170,625  130 
Comprehensive Income 1,092,393  3,293  1,095,686  6,740 
Issuance of preferred stock 591,891  —  —  —  591,891  —  591,891  — 
Repurchase of common stock —  —  (78) —  (78) —  (78) — 
Restricted stock units expensed —  3,615  —  —  3,615  —  3,615  — 
Acquisition of Lansing —  —  —  —  —  —  —  43,566 
Adjustment of redeemable noncontrolling interests —  —  (13,073) —  (13,073) —  (13,073) 13,073 
Purchase of noncontrolling interest —  (1,298) —  —  (1,298) —  (1,298) (1,777)
Other —  —  375  —  375  800  1,175  (2,366)
June 30, 2020 $ 591,891  $ 3,421,845  $ 6,948,466  $ 432,351  $ 11,394,553  $ 15,695  $ 11,410,248  $ 214,653 

Six Months Ended June 30, 2020 Preferred
 Stock
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Total
Shareholders'
Equity
Noncontrolling
Interests
Total Equity Redeemable
Noncontrolling
Interests
(dollars in thousands)
December 31, 2019 $ —  $ 3,404,919  $ 7,457,176  $ 208,772  $ 11,070,867  $ 7,549  $ 11,078,416  $ 177,562 
Cumulative effect of adoption of ASU No. 2016-13, net of taxes (3,827) —  (3,827) —  (3,827) — 
January 1, 2020 —  3,404,919  7,453,349  208,772  11,067,040  7,549  11,074,589  177,562 
Net income (loss) (483,995) —  (483,995) 6,594  (477,401) 7,696 
Other comprehensive income —  223,579  223,579  —  223,579 
Comprehensive Income (Loss) (260,416) 6,594  (253,822) 7,702 
Issuance of preferred stock 591,891  —  —  —  591,891  —  591,891  — 
Repurchase of common stock —  —  (23,943) —  (23,943) —  (23,943) — 
Restricted stock units expensed —  22,984  —  —  22,984  —  22,984  — 
Acquisition of Lansing —  —  —  —  —  —  —  43,566 
Adjustment of redeemable noncontrolling interests —  —  2,940  —  2,940  —  2,940  (2,940)
Purchase of noncontrolling interest —  (6,131) —  —  (6,131) —  (6,131) (7,029)
Other —  73  115  —  188  1,552  1,740  (4,208)
June 30, 2020 $ 591,891  $ 3,421,845  $ 6,948,466  $ 432,351  $ 11,394,553  $ 15,695  $ 11,410,248  $ 214,653 

See accompanying notes to consolidated financial statements.
6

MARKEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Six Months Ended June 30,
2021 2020
(dollars in thousands)
OPERATING ACTIVITIES
Net income (loss) $ 1,383,015  $ (469,705)
Adjustments to reconcile net income (loss) to net cash provided by operating activities (569,843) 958,446 
Net Cash Provided By Operating Activities 813,172  488,741 
INVESTING ACTIVITIES
Proceeds from sales of fixed maturity securities and equity securities 138,414  1,426,776 
Proceeds from maturities, calls and prepayments of fixed maturity securities 271,450  359,062 
Cost of fixed maturity securities and equity securities purchased (1,410,308) (448,997)
Net change in short-term investments (1,227,644) 268,343 
Additions to property and equipment (55,738) (50,668)
Acquisitions, net of cash acquired   (547,847)
Other 46,487  46,987 
Net Cash Provided (Used) By Investing Activities (2,237,339) 1,053,656 
FINANCING ACTIVITIES
Additions to senior long-term debt and other debt 893,575  162,935 
Repayment of senior long-term debt and other debt (217,348) (92,304)
Repurchases of common stock (60,826) (23,943)
Issuance of preferred stock, net   591,891 
Dividends paid on preferred stock (18,000) — 
Other (33,120) (31,049)
Net Cash Provided By Financing Activities 564,281  607,530 
Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents (4,945) (22,908)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents (864,831) 2,127,019 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 5,216,649  3,500,353 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD $ 4,351,818  $ 5,627,372 

See accompanying notes to consolidated financial statements.
7

MARKEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Markel Corporation is a diverse financial holding company serving a variety of niche markets. Markel Corporation's principal business markets and underwrites specialty insurance products. Through its wholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures), Markel Corporation also owns interests in various businesses that operate outside of the specialty insurance marketplace. See note 2 for details regarding reportable segments.

a) Basis of Presentation. The consolidated balance sheet as of June 30, 2021 and the related consolidated statements of income (loss) and comprehensive income (loss) and changes in equity for the quarters and six months ended June 30, 2021 and 2020, and the consolidated statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. Such adjustments consist only of normal, recurring items. Interim results are not necessarily indicative of results of operations for the entire year. The consolidated balance sheet as of December 31, 2020 was derived from Markel Corporation's audited annual consolidated financial statements.

The accompanying consolidated financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and include the accounts of Markel Corporation and its consolidated subsidiaries, as well as any variable interest entities (VIEs) that meet the requirements for consolidation (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The Company consolidates the results of its Markel Ventures subsidiaries on a one-month lag, with the exception of significant transactions or events that occur during the intervening period. Certain prior period amounts have been reclassified to conform to the current period presentation.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements.

The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes. Readers are urged to review the Company's 2020 Annual Report on Form 10-K for a more complete description of the Company's business and accounting policies, as well as a description of the risks and uncertainties associated with the COVID-19 pandemic on the Company's businesses and results of operations, financial condition and cash flows, including in note 20 of the notes to consolidated financial statements included under Item 8 Financial Statements and Supplementary Data. There were no material changes in the Company's assessment of the risks and uncertainties associated with the COVID-19 pandemic during the six months ended June 30, 2021.

b) Recent Accounting Pronouncements

Accounting Standards Adopted in 2021

The Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, effective January 1, 2021. Adoption of this standard did not have a material impact on the Company's financial position, results of operations or cash flows.

8

Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The FASB subsequently issued several ASUs as amendments to ASU No. 2018-12. The standard requires insurance entities with long duration contracts to: (1) review and, if there is a change, update the assumptions used to measure expected cash flows at least annually; (2) update the discount rate assumption at each reporting date; (3) measure all market risk benefits associated with deposit (or account balance) contracts at fair value; and (4) disclose liability rollforwards and information about significant inputs, judgments, assumptions and methods used to measure the liability, including changes thereto and the effect of those changes on measurement. ASU No. 2018-12 becomes effective for the Company during the first quarter of 2023. The standard will, among other things, impact the discount rate used in estimating reserves for the Company's life and annuity reinsurance portfolio, which is in runoff. Currently, the discount rate assumption is locked-in for the life of the contracts, unless there is a loss recognition event. The Company is currently evaluating ASU No. 2018-12 to determine the impact that adopting this standard will have on its consolidated financial statements.

2. Segment Reporting Disclosures

The chief operating decision maker reviews the Company's ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance. In determining how to allocate resources and assess the performance of its underwriting results, management considers many factors, including the nature of the insurance product sold, the type of account written and the type of customer served. The Insurance segment includes all direct business and facultative placements written within the Company's underwriting operations. The Reinsurance segment includes all treaty reinsurance written within the Company's underwriting operations. All investing activities related to the Company's insurance operations are included in the Investing segment.

The chief operating decision maker reviews and assesses Markel Ventures' performance in the aggregate, as a single operating segment. The Markel Ventures segment primarily consists of controlling interests in a diverse portfolio of businesses that operate in various industries.

The Company's other operations primarily consist of the results of the Company's insurance-linked securities operations and program services business. Other operations also include results for lines of business discontinued prior to, or in conjunction with, acquisitions, including development on asbestos and environmental loss reserves and results attributable to the run-off of life and annuity reinsurance business, which are monitored separately from the Company's ongoing underwriting operations. For purposes of segment reporting, none of these other operations are considered to be reportable segments.

Segment profit for each of the Company's underwriting segments is measured by underwriting profit. The property and casualty insurance industry commonly defines underwriting profit as earned premiums net of losses and loss adjustment expenses and underwriting, acquisition and insurance expenses. Underwriting profit does not replace operating income or net income computed in accordance with U.S. GAAP as a measure of profitability. Underwriting profit or loss provides a basis for management to evaluate the Company's underwriting performance. Segment profit for the Company's underwriting segments may also include other revenues and expenses that are attributable to the Company's underwriting operations that are not captured in underwriting profit. Segment profit for the Investing segment is measured by net investment income and net investment gains. Segment profit for the Markel Ventures segment is measured by operating income.

For management reporting purposes, the Company allocates assets to its underwriting operations and to its Investing and Markel Ventures segments and certain of its other operations, including its insurance-linked securities and program services operations. Underwriting assets include assets attributed to the Company's Insurance and Reinsurance segments, discontinued underwriting lines of business, as well as assets that are not specifically allocated to the Company's other operations. Generally, the Company manages its underwriting assets in the aggregate and therefore does not allocate assets to individual underwriting segments.

9

a) The following tables summarize the Company's segment disclosures.

Quarter Ended June 30, 2021
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 1,821,374  $ 279,444  $   $   $ 783,195  $ 2,884,013 
Net written premiums 1,494,443  257,355      (347) 1,751,451 
Earned premiums 1,303,562  264,982      (507) 1,568,037 
Losses and loss adjustment expenses:
Current accident year (783,306) (166,853)       (950,159)
Prior accident years 154,526  (21,741)     2,419  135,204 
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs (264,823) (67,986)       (332,809)
Other operating expenses (204,622) (13,414)     2,481  (215,555)
Underwriting profit (loss) 205,337  (5,012)     4,393  204,718 
Net investment income     96,259  2    96,261 
Net investment gains     674,753      674,753 
Products revenues       592,601    592,601 
Services and other revenues       482,903  86,217  569,120 
Products expenses       (502,202)   (502,202)
Services and other expenses   109    (450,781) (65,579) (516,251)
Amortization of intangible assets (3)
      (13,858) (25,871) (39,729)
Segment profit (loss) $ 205,337  $ (4,903) $ 771,012  $ 108,665  $ (840) $ 1,079,271 
Interest expense (46,568)
Net foreign exchange losses (12,257)
Income before income taxes $ 1,020,446 
U.S. GAAP combined ratio (4)
84  % 102  %
NM (5)
87  %
(1)    Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $15.8 million for the quarter ended June 30, 2021.
(2)    Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment. Amortization of intangible assets attributable to the Company's underwriting segments was $10.4 million for the quarter ended June 30, 2021, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)    Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)    The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums.
(5)    NM - Ratio is not meaningful


10

Quarter Ended June 30, 2020
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 1,553,436  $ 223,277  $ —  $ —  $ 596,479  $ 2,373,192 
Net written premiums 1,267,976  188,830  —  —  (411) 1,456,395 
Earned premiums 1,120,151  240,555  —  —  (532) 1,360,174 
Losses and loss adjustment expenses:
Current accident year (730,201) (147,163) —  —  —  (877,364)
Prior accident years 151,205  12,280  —  —  663  164,148 
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs (238,784) (63,411) —  —  —  (302,195)
Other operating expenses (167,298) (17,506) —  —  (2,363) (187,167)
Underwriting profit (loss) 135,073  24,755  —  —  (2,232) 157,596 
Net investment income —  —  95,561  54  —  95,615 
Net investment gains —  —  911,243  —  —  911,243 
Products revenues —  —  —  423,581  —  423,581 
Services and other revenues —  —  —  254,504  86,898  341,402 
Products expenses —  —  —  (364,483) —  (364,483)
Services and other expenses —  —  —  (222,656) (62,284) (284,940)
Amortization of intangible assets (3)
—  —  —  (11,596) (26,158) (37,754)
Segment profit (loss) $ 135,073  $ 24,755  $ 1,006,804  $ 79,404  $ (3,776) $ 1,242,260 
Interest expense (45,427)
Net foreign exchange losses (21,460)
Income before income taxes $ 1,175,373 
U.S. GAAP combined ratio (4)
88  % 90  %
NM (5)
88  %
(1)    Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $14.3 million for the quarter ended June 30, 2020.
(2)     Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment. Amortization of intangible assets attributable to the Company's underwriting segments was $10.7 million for the quarter ended June 30, 2020, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)     Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)     The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums.
(5)    NM - Ratio is not meaningful

11

Six Months Ended June 30, 2021
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 3,459,701  $ 811,962  $   $   $ 1,417,202  $ 5,688,865 
Net written premiums 2,881,873  751,440      (792) 3,632,521 
Earned premiums 2,547,589  519,069      (926) 3,065,732 
Losses and loss adjustment expenses:
Current accident year (1,581,553) (339,354)       (1,920,907)
Prior accident years 273,590  (50,396)     2,840  226,034 
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs (525,422) (129,974)       (655,396)
Other operating expenses (391,919) (27,575)     (217) (419,711)
Underwriting profit (loss) 322,285  (28,230)     1,697  295,752 
Net investment income     192,826  5    192,831 
Net investment gains     1,201,624      1,201,624 
Products revenues       921,433    921,433 
Services and other revenues       860,670  158,676  1,019,346 
Products expenses       (798,728)   (798,728)
Services and other expenses   109    (795,689) (132,768) (928,348)
Amortization of intangible assets (3)
      (27,563) (51,719) (79,282)
Segment profit (loss) $ 322,285  $ (28,121) $ 1,394,450  $ 160,128  $ (24,114) $ 1,824,628 
Interest expense (88,957)
Net foreign exchange gains 12,827 
Income before income taxes $ 1,748,498 
U.S. GAAP combined ratio (4)
87  % 105  %
NM (5)
90  %
(1)    Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $31.8 million for the six months ended June 30, 2021.
(2)    Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment. Amortization of intangible assets attributable to the Company's underwriting segments was $20.8 million for the six months ended June 30, 2021, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)    Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)    The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums.
(5)    NM - Ratio is not meaningful

12

Six Months Ended June 30, 2020
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 2,968,147  $ 736,463  $ —  $ —  $ 991,406  $ 4,696,016 
Net written premiums 2,463,713  641,579  —  —  (2,419) 3,102,873 
Earned premiums 2,227,002  466,515  —  —  (2,634) 2,690,883 
Losses and loss adjustment expenses:
Current accident year (1,736,836) (320,893) —  —  —  (2,057,729)
Prior accident years 267,337  (1,632) —  —  2,460  268,165 
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs (478,204) (119,802) —  —  —  (598,006)
Other operating expenses (350,600) (33,392) —  —  (2,527) (386,519)
Underwriting loss (71,301) (9,204) —  —  (2,701) (83,206)
Net investment income —  —  183,620  238  —  183,858 
Net investment losses —  —  (770,198) —  —  (770,198)
Products revenues —  —  —  775,742  —  775,742 
Services and other revenues —  —  —  413,380  174,016  587,396 
Products expenses —  —  —  (678,554) —  (678,554)
Services and other expenses —  —  —  (366,208) (136,288) (502,496)
Amortization of intangible assets (3)
—  —  —  (23,437) (52,175) (75,612)
Segment profit (loss) $ (71,301) $ (9,204) $ (586,578) $ 121,161  $ (17,148) $ (563,070)
Interest expense (90,457)
Net foreign exchange gains 56,841 
Loss before income taxes $ (596,686)
U.S. GAAP combined ratio (4)
103  % 102  %
NM (5)
103  %
(1)    Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $28.1 million for the six months ended June 30, 2020.
(2)     Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment. Amortization of intangible assets attributable to the Company's underwriting segments was $21.1 million for the six months ended June 30, 2020, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)     Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)     The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums.
(5)    NM - Ratio is not meaningful

b) The following table reconciles segment assets to the Company's consolidated balance sheets.

(dollars in thousands) June 30, 2021 December 31, 2020
Segment assets:
Investing $ 27,208,704  $ 24,781,946 
Underwriting 8,049,139  7,228,297 
Markel Ventures 3,793,058  3,636,060 
Total segment assets 39,050,901  35,646,303 
Other operations 6,590,612  6,063,751 
Total assets $ 45,641,513  $ 41,710,054 

13

3. Investments

a) The following tables summarize the Company's available-for-sale investments. Commercial and residential mortgage-backed securities include securities issued by U.S. government-sponsored enterprises and U.S. government agencies. The net unrealized holding gains in the tables below are presented before taxes and any reserve deficiency adjustments for life and annuity benefit reserves. See note 8.

  June 30, 2021
(dollars in thousands) Amortized
Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Estimated
Fair
Value
Fixed maturity securities:
U.S. Treasury securities $ 1,400,765  $ 5,063  $ (4,613) $ 1,401,215 
U.S. government-sponsored enterprises 725,412  38,428  (3,075) 760,765 
Obligations of states, municipalities and political subdivisions 3,862,463  321,796  (3,565) 4,180,694 
Foreign governments 1,423,017  194,614  (2,270) 1,615,361 
Commercial mortgage-backed securities 1,736,946  107,924  (1,778) 1,843,092 
Residential mortgage-backed securities 776,119  43,117  (94) 819,142 
Asset-backed securities 3,505  99    3,604 
Corporate bonds 739,741  77,578  (1,537) 815,782 
Total fixed maturity securities 10,667,968  788,619  (16,932) 11,439,655 
Short-term investments 3,257,655  5,551  (133) 3,263,073 
Investments, available-for-sale $ 13,925,623  $ 794,170  $ (17,065) $ 14,702,728 


  December 31, 2020
(dollars in thousands) Amortized
Cost
Gross
Unrealized
Holding
Gains
Gross
Unrealized
Holding
Losses
Estimated
Fair
Value
Fixed maturity securities:
U.S. Treasury securities $ 580,716  $ 9,091  $ (507) $ 589,300 
U.S. government-sponsored enterprises 500,053  51,593  (92) 551,554 
Obligations of states, municipalities and political subdivisions 3,903,292  386,784  (235) 4,289,841 
Foreign governments 1,352,616  275,450  (57) 1,628,009 
Commercial mortgage-backed securities 1,736,257  149,359  (34) 1,885,582 
Residential mortgage-backed securities 811,732  58,742  (29) 870,445 
Asset-backed securities 5,812  154  —  5,966 
Corporate bonds 764,783  96,257  (3) 861,037 
Total fixed maturity securities 9,655,261  1,027,430  (957) 10,681,734 
Short-term investments 2,030,460  3,645  (6) 2,034,099 
Investments, available-for-sale $ 11,685,721  $ 1,031,075  $ (963) $ 12,715,833 

14

b) The following tables summarize gross unrealized investment losses on available-for-sale investments by the length of time that securities have continuously been in an unrealized loss position.

June 30, 2021
Less than 12 months 12 months or longer Total
(dollars in thousands) Estimated
Fair
Value
Gross
Unrealized
Holding Losses
Estimated
Fair
Value
Gross
Unrealized
Holding Losses
Estimated
Fair
Value
Gross
Unrealized
Holding Losses
Fixed maturity securities:
U.S. Treasury securities $ 1,014,543  $ (4,613) $   $   $ 1,014,543  $ (4,613)
U.S. government-sponsored enterprises 176,254  (3,075)     176,254  (3,075)
Obligations of states, municipalities and political subdivisions 230,831  (3,560) 2,892  (5) 233,723  (3,565)
Foreign governments 146,779  (2,270)     146,779  (2,270)
Commercial mortgage-backed securities 84,621  (1,778)     84,621  (1,778)
Residential mortgage-backed securities 8,582  (91) 130  (3) 8,712  (94)
Corporate bonds 77,424  (1,537)     77,424  (1,537)
Total fixed maturity securities 1,739,034  (16,924) 3,022  (8) 1,742,056  (16,932)
Short-term investments 3,095,980  (133)     3,095,980  (133)
Total $ 4,835,014  $ (17,057) $ 3,022  $ (8) $ 4,838,036  $ (17,065)

At June 30, 2021, the Company held 139 available-for-sale securities with a total estimated fair value of $4.8 billion and gross unrealized losses of $17.1 million. Of these 139 securities, three securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $3.0 million and gross unrealized losses of $8 thousand. The Company does not intend to sell or believe it will be required to sell these available-for-sale securities before recovery of their amortized cost.

December 31, 2020
Less than 12 months 12 months or longer Total
(dollars in thousands) Estimated
Fair
Value
Gross
Unrealized
Holding  Losses
Estimated
Fair
Value
Gross
Unrealized
Holding  Losses
Estimated
Fair
Value
Gross
Unrealized
Holding  Losses
Fixed maturity securities:
U.S. Treasury securities $ 66,220  $ (507) $ —  $ —  $ 66,220  $ (507)
U.S. government-sponsored enterprises 14,878  (92) —  —  14,878  (92)
Obligations of states, municipalities and political subdivisions 28,037  (223) 2,960  (12) 30,997  (235)
Foreign governments 20,790  (57) —  —  20,790  (57)
Commercial mortgage-backed securities 13,178  (26) 2,526  (8) 15,704  (34)
Residential mortgage-backed securities 3,345  (29) —  —  3,345  (29)
Corporate bonds 92  (3) —  —  92  (3)
Total fixed maturity securities 146,540  (937) 5,486  (20) 152,026  (957)
Short-term investments 349,978  (6) —  —  349,978  (6)
Total $ 496,518  $ (943) $ 5,486  $ (20) $ 502,004  $ (963)

At December 31, 2020, the Company held 36 available-for-sale securities with a total estimated fair value of $502.0 million and gross unrealized losses of $963 thousand. Of these 36 securities, six securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $5.5 million and gross unrealized losses of $20 thousand.

15

The Company completes a detailed analysis each quarter to assess whether the decline in the fair value of any investment below its cost basis is the result of a credit loss. All available-for-sale securities with unrealized losses are reviewed. The Company considers many factors in completing its quarterly review of securities with unrealized losses for credit-related impairment to determine whether a credit loss exists, including the extent to which fair value is below cost, the implied yield to maturity, rating downgrades of the security and whether or not the issuer has failed to make scheduled principal or interest payments. The Company also takes into consideration information about the financial condition of the issuer and industry factors that could negatively impact the capital markets.

If the decline in fair value of an available-for-sale security below its amortized cost is considered to be the result of a credit loss, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit loss, which is recorded as an allowance and recognized in net income. The allowance is limited to the difference between the fair value and the amortized cost of the security. Any remaining decline in fair value represents the non-credit portion of the impairment, which is recognized in other comprehensive income. The Company did not have an allowance for credit losses as of June 30, 2021 or December 31, 2020.

Quarterly, the Company also considers whether it intends to sell an available-for-sale security or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost. In these instances, a decline in fair value is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security.

c) The amortized cost and estimated fair value of fixed maturity securities at June 30, 2021 are shown below by contractual maturity.

(dollars in thousands) Amortized
Cost
Estimated
Fair Value
Due in one year or less $ 419,585  $ 425,283 
Due after one year through five years 2,849,923  2,972,522 
Due after five years through ten years 2,570,434  2,748,079 
Due after ten years 2,311,456  2,627,933 
8,151,398  8,773,817 
Commercial mortgage-backed securities 1,736,946  1,843,092 
Residential mortgage-backed securities 776,119  819,142 
Asset-backed securities 3,505  3,604 
Total fixed maturity securities $ 10,667,968  $ 11,439,655 

d) The following table presents the components of net investment income.

Quarter Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Interest:
Tax-exempt municipal bonds $ 14,102  $ 16,157  $ 29,338  $ 32,758 
Taxable municipal bonds 16,421  16,834  32,916  33,729 
Other taxable bonds 40,618  39,616  80,013  79,588 
Short-term investments, including overnight deposits 874  2,379  1,546  12,622 
Dividends on equity securities 19,798  18,020  45,183  46,634 
Income (loss) from equity method investments 9,018  5,647  12,943  (14,332)
Other (417) 46  (612) 803 
100,414  98,699  201,327  191,802 
Investment expenses (4,153) (3,084) (8,496) (7,944)
Net investment income $ 96,261  $ 95,615  $ 192,831  $ 183,858 

16

e) The following table presents the components of net investment gains (losses) and the change in net unrealized gains included in other comprehensive income (loss).

  Quarter Ended June 30, Six Months Ended June 30,
(dollars in thousands) 2021 2020 2021 2020
Fixed maturity securities:
Realized gains $ 4,792  $ 5,348  $ 4,875  $ 6,733 
Realized losses (81) (5,126) (81) (6,271)
Change in allowance for expected credit losses   1,537    (202)
Short-term investments:
Realized gains 278  1,002  308  1,100 
Realized losses (633) (184) (727) (356)
Cost-method investments:
Realized gains   —  4,722  11,167 
Other investment gains (losses) 46  (5,389) (1,286) (5,245)
Net realized investment gains (losses) 4,402  (2,812) 7,811  6,926 
Equity securities:
Change in fair value of securities sold during the period 1,345  82,523  3,971  (450,907)
Change in fair value of securities held at the end of the period 669,006  831,532  1,189,842  (326,217)
Total change in fair value 670,351  914,055  1,193,813  (777,124)
Net investment gains (losses) $ 674,753  $ 911,243  $ 1,201,624  $ (770,198)
Change in net unrealized gains on available-for-sale investments included in other comprehensive income (loss):
Fixed maturity securities $ 62,948  $ 236,521  $ (258,284) $ 335,088 
Short-term investments 1,095  3,128  1,779  (3,578)
Reserve deficiency adjustment for life and annuity benefit reserves (see note 8)
929