RICHMOND, Va.,
Feb. 1, 2023 /CNW/ --
Markel Corporation (NYSE: MKL) today reported its financial results
for the year ended December 31,
2022.
"Our 2022 results reflect the strength and balance of our
three-engine architecture of insurance, investments, and Markel
Ventures. Each engine delivered strong operating performance this
year, generating an impressive $2.7
billion of operating cash flows," said Thomas S. Gayner, Chief Executive Officer.
"Our insurance engine alone produced over $8 billion in revenues with the underwriting,
ILS, and program services platforms each contributing positively to
the bottom line. Our underwriting operations delivered a combined
ratio in the low 90s, as a result of excellent premium growth as
well as expense discipline, while navigating current economic
realities and an evolving insurance market," Gayner continued.
"Markel Ventures produced another record-setting year for revenues,
operating income, and EBITDA as our businesses adapt to an
ever-changing economic landscape.
"Our investment income is starting to benefit from higher
interest rates, which we expect to continue as we purchase higher
yielding securities. Declines in the fair value of our equity and
bond portfolios during the year represent unrealized losses that
weighed heavily on our comprehensive income and book value in 2022,
however, our focus, as always, is on long-term investment
performance. We understand that periodic market volatility is to be
expected and believe the long-term view is a better reflection of
the quality of our portfolio," Gayner remarked.
"I would like to thank team members across the whole company,
our customers, and business partners for contributing to a
remarkable year, and of course, our shareholders for giving us the
opportunity to build your company into one of the world's great
companies."
These tables present summary financial data for 2022 and 2021.
Generally accepted accounting principles (GAAP) require that we
include unrealized gains and losses on equity securities in net
income. Given the magnitude of our equity portfolio, we believe
that this approach creates volatility in revenues and net income
that can obscure the operating performance of our businesses and
does not align with our long-term investment philosophy. As of
December 31, 2022, the fair value of our equity portfolio
included cumulative unrealized gains of $4.6
billion.
|
Years Ended December
31,
|
(in thousands,
except per share amounts)
|
2022
|
|
2021
|
Earned
premiums
|
$
7,587,792
|
|
$
6,503,029
|
Markel Ventures
operating revenues
|
$
4,757,527
|
|
$
3,643,827
|
Net investment
income
|
$
446,755
|
|
$
367,417
|
Net investment gains
(losses)
|
$
(1,595,733)
|
|
$
1,978,534
|
Comprehensive income
(loss) to shareholders
|
$
(1,308,817)
|
|
$
2,078,244
|
Diluted net income
(loss) per common share
|
$
(23.57)
|
|
$
176.51
|
Combined
ratio
|
92
%
|
|
90 %
|
|
|
|
|
(in thousands,
except per share amounts)
|
December 31,
2022
|
|
December 31,
2021
|
Book value per common
share
|
$
929.27
|
|
$
1,036.20
|
Common shares
outstanding
|
13,423
|
|
13,632
|
Highlights of our 2022 results include:
- Earned premiums grew 17% in 2022, reflecting continued growth
in premium volume from new business, strong policy retention
levels, more favorable rates and expanded product offerings.
- The higher combined ratio in 2022 compared to 2021 was
primarily attributable to the impact of less favorable development
on prior years loss reserves, partially offset by a lower expense
ratio and lower catastrophe losses.
- Operating revenues and operating income from Markel Ventures
increased 31% and 19%, respectively, in 2022, reflecting
contributions from recent acquisitions and notable organic
growth.
- The growth in net investment income in 2022 was primarily due
to the impact of rising interest rates during the year on our
short-term investments and cash equivalents, as well as higher
average holdings of fixed maturity securities.
- Net investment losses in 2022 reflected a decrease in the fair
value of our equity portfolio resulting from unfavorable market
value movements. Substantially all of our net investment losses in
2022 were unrealized.
- Comprehensive loss to shareholders in 2022 resulted from net
investment losses and unrealized losses on our fixed maturity
portfolio, which more than offset operating income from our
insurance and Markel Ventures operations. We typically hold our
fixed maturity investments to maturity and generally would expect
these losses to reverse.
- Operating cash flows totaled $2.7
billion in 2022, up 19% over 2021, reflecting strong cash
inflows from our underwriting operations given the growth in
premium volume in recent periods.
We believe our financial performance is most meaningfully
measured over longer periods of time, which tends to mitigate the
effects of short-term volatility and also aligns with the
longer-term perspective we apply to operating our businesses. We
generally use five-year periods to measure our performance. Over
the five-year period ended December 31, 2022, the compound
annual growth in book value per common share was 6%. Over the
five-year period ended December 31, 2022, our share price
increased at a compound annual rate of 3%.
While these measures, considered independently of other factors,
fall below our internal targets, we remain confident in the strong
operating performance of our businesses. In addition, we give
consideration to the following information in assessing our
compound annual growth in book value per common share:
- Amortization expense - As we grow through acquisitions, our
intangible assets grow. GAAP requires that we amortize a portion of
these acquired intangible assets, which is a non-cash charge to net
income. Amortization of acquired intangible assets for the
five-year period ended December 31,
2022 totaled $763.2
million.
- Unrealized gains and losses on fixed maturity securities -
Since we generally hold our bonds to maturity and invest in high
credit quality, investment grade securities, unrealized gains and
losses from our bond portfolio are generally expected to reverse as
the securities mature. The fair value of our bond portfolio
included cumulative pre-tax unrealized losses of $949.1 million as of December 31, 2022 compared to cumulative pre-tax
unrealized gains of $389.5 million as
of December 31, 2017.
- Value of our businesses - Book value does not include changes
in the fair value of our acquired businesses or equity method
investments, other than decreases arising from an impairment.
Acquired businesses include our Markel Ventures, insurance-linked
securities (ILS) and program services businesses.
Insurance Results
Our Insurance engine includes our underwriting, insurance-linked
securities, program services and other fronting operations. The
following table presents the components of our Insurance engine
gross premium volume and operating revenues.
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
% Change
|
Gross premium
volume:
|
|
|
|
|
|
Underwriting
|
$
9,847,538
|
|
$
8,485,929
|
|
16 %
|
Program services and
other fronting (1)
|
3,354,144
|
|
2,952,753
|
|
14 %
|
Insurance
operations
|
$
13,201,682
|
|
$
11,438,682
|
|
15 %
|
|
|
|
|
|
|
Operating
revenues:
|
|
|
|
|
|
Insurance
segment
|
$
6,528,263
|
|
$
5,465,284
|
|
19 %
|
Reinsurance
segment
|
1,063,347
|
|
1,042,048
|
|
2 %
|
Insurance-linked
securities, program services and other insurance
|
493,746
|
|
342,142
|
|
44 %
|
Insurance
operations
|
$
8,085,356
|
|
$
6,849,474
|
|
18 %
|
|
|
(1)
|
Substantially all gross
premiums from our program services business and other fronting
arrangements were ceded to third parties for the years ended
December 31, 2022 and 2021.
|
Underwriting Results
The following table presents summary data for our consolidated
underwriting operations, which are comprised predominantly of our
Insurance and Reinsurance segments. Our consolidated underwriting
results also include results from discontinued lines of business
and the retained portion of our program services operations.
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
% Change
|
Gross premium
volume
|
$
9,843,555
|
|
$
8,480,494
|
|
16 %
|
Net written
premiums
|
$
8,203,390
|
|
$
7,119,731
|
|
15 %
|
Earned
premiums
|
$
7,587,792
|
|
$
6,503,029
|
|
17 %
|
Underwriting
profit
|
$
626,620
|
|
$
628,085
|
|
— %
|
|
|
|
|
|
|
Underwriting Ratios
(1)
|
|
|
|
|
Point Change
|
Loss ratio
|
|
|
|
|
|
Current accident year
loss ratio
|
60.8
%
|
|
62.4 %
|
|
(1.6)
|
Prior accident years
loss ratio
|
(2.2)
%
|
|
(7.4) %
|
|
5.2
|
Loss ratio
|
58.6
%
|
|
55.1 %
|
|
3.5
|
Expense
ratio
|
33.2
%
|
|
35.3 %
|
|
(2.1)
|
Combined
ratio
|
91.7
%
|
|
90.3 %
|
|
1.4
|
|
|
|
|
|
|
Current accident year
loss ratio catastrophe impact (2)
|
0.6
%
|
|
3.0 %
|
|
(2.4)
|
Current accident year
loss ratio Russia-Ukraine conflict impact (2)
|
0.5
%
|
|
— %
|
|
0.5
|
Prior accident years
loss ratio COVID-19 impact (2)
|
(0.1)
%
|
|
0.2 %
|
|
(0.3)
|
|
|
|
|
|
|
Current accident year
loss ratio, excluding catastrophes and Russia-Ukraine conflict
(3)
|
59.7
%
|
|
59.4 %
|
|
0.3
|
Combined ratio,
excluding current year catastrophes, Russia-Ukraine conflict and
COVID-19 (3)
|
90.7
%
|
|
87.1 %
|
|
3.6
|
|
|
(1)
|
Amounts may not
reconcile due to rounding.
|
(2)
|
The point impact of
catastrophes, the Russia-Ukraine conflict and COVID-19 is
calculated as the associated net losses and loss adjustment
expenses divided by total earned premiums.
|
(3)
|
See Supplemental
Financial Information for additional information regarding these
non-GAAP financial measures.
|
Premiums
The increase in gross premium volume in our underwriting
operations in 2022 was driven by growth within our Insurance
segment across all product lines. Net retention of gross premium
volume for our underwriting operations was 83% in 2022 compared to
84% in 2021. The decrease in net retention in 2022 was driven by
lower retention within our Insurance segment, partially offset by
higher retention within our Reinsurance segment. The increase in
earned premiums in our underwriting operations in 2022 was
primarily attributable to higher gross premium volume.
Combined Ratio
In 2022, underwriting results included $46.2 million of net losses and loss
adjustment expenses attributed to Hurricane Ian, which included a
$23.8 million reduction from our
initial estimate recorded for the quarter ended September 30, 2022 based on reported claims
activity and updated output from our catastrophe models. In 2022,
underwriting results also included $35.7
million of net losses and loss adjustment expenses
attributed to the military conflict between Russia and Ukraine that began following Russia's invasion of Ukraine in February
2022. Our estimate for ultimate net losses attributed to the
Russia-Ukraine conflict is consistent with our
initial estimate recorded for the quarter ended March 31, 2022. In 2021, underwriting results
included $195.0 million of net losses
and loss adjustment expenses attributed to Winter Storm Uri, the floods in Europe and Hurricane Ida (2021 Catastrophes)
as well as $15.7 million of net
losses and loss adjustment expenses resulting from an increase in
our net estimate of ultimate losses and loss adjustment expenses
attributed to COVID-19. Excluding these losses from the respective
periods, the increase in our consolidated combined ratio in 2022
compared to 2021 was driven by the impact of less favorable
development on prior accident years loss reserves within our
Insurance segment in 2022 compared to 2021, partially offset by a
lower expense ratio within our Insurance segment.
Insurance Segment
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
% Change
|
Gross premium
volume
|
$
8,606,700
|
|
$
7,239,676
|
|
19 %
|
Net written
premiums
|
$
7,040,176
|
|
$
5,998,890
|
|
17 %
|
Earned
premiums
|
$
6,528,263
|
|
$
5,465,284
|
|
19 %
|
Underwriting
profit
|
$
549,871
|
|
$
696,413
|
|
(21) %
|
|
|
|
|
|
|
Underwriting Ratios
(1)
|
|
|
|
|
Point Change
|
Loss ratio
|
|
|
|
|
|
Current accident year
loss ratio
|
60.3
%
|
|
60.6 %
|
|
(0.3)
|
Prior accident years
loss ratio
|
(2.2)
%
|
|
(9.3) %
|
|
7.1
|
Loss ratio
|
58.1
%
|
|
51.3 %
|
|
6.8
|
Expense
ratio
|
33.5
%
|
|
35.9 %
|
|
(2.4)
|
Combined
ratio
|
91.6
%
|
|
87.3 %
|
|
4.3
|
|
|
|
|
|
|
Current accident year
loss ratio catastrophe impact (2)
|
0.7
%
|
|
1.7 %
|
|
(1.0)
|
Current accident year
loss ratio Russia-Ukraine conflict impact (2)
|
0.4
%
|
|
— %
|
|
0.4
|
Prior accident years
loss ratio COVID-19 impact (2)
|
0.0
%
|
|
(0.1) %
|
|
0.1
|
|
|
|
|
|
|
Current accident year
loss ratio, excluding catastrophes and Russia-Ukraine conflict
(3)
|
59.2
%
|
|
58.9 %
|
|
0.3
|
Combined ratio,
excluding current year catastrophes, Russia-Ukraine conflict and
COVID-19 (3)
|
90.6
%
|
|
85.6 %
|
|
5.0
|
|
|
(1)
|
Amounts may not
reconcile due to rounding.
|
(2)
|
The point impact of
catastrophes, the Russia-Ukraine conflict and COVID-19 is
calculated as the associated net losses and loss adjustment
expenses divided by total earned premiums.
|
(3)
|
See Supplemental
Financial Information for additional information regarding these
non-GAAP financial measures.
|
Premiums
The increase in gross premium volume in our Insurance segment in
2022 was driven by new business volume, strong policy retention
levels, more favorable rates and expanded product offerings,
resulting in growth across all of our product lines, most notably
in our general liability and professional liability product lines.
Net retention of gross premium volume was 82% in 2022 compared to
83% in 2021. The decrease in net retention for the year ended
December 31, 2022 was primarily due
to higher cession rates on our professional liability and personal
lines product lines in 2022 compared to 2021, partially offset by
the impact of higher retention rates on new programs business. The
increase in earned premiums in 2022 was primarily due to higher
gross premium volume.
Combined Ratio
The Insurance segment's current accident year losses and loss
adjustment expenses in 2022 included $46.2 million and $23.0 million of net losses and loss adjustment
expenses attributed to Hurricane Ian and the Russia-Ukraine conflict, respectively. Current
accident year losses in 2021 included $94.7
million of net losses and loss adjustment expenses
attributed to the 2021 Catastrophes. Excluding these losses from
the respective periods, the current accident year loss ratio in
2022 was consistent with 2021. Despite achieving higher premium
rates on our professional liability and general liability product
lines, we generally kept our estimates of ultimate loss ratios on
these product lines for the 2022 accident year consistent with the
2021 accident year due to the unfavorable claims trend within these
product lines on prior accident years during 2022 arising from
current and anticipated levels of economic and social
inflation.
The Insurance segment's 2022 combined ratio included
$142.9 million of favorable
development on prior accident years loss reserves compared to
$506.3 million in 2021. The decrease
in favorable development was primarily due to adverse development
on our general liability and professional liability product lines
in 2022 compared to favorable development in 2021.
Adverse development on our general liability and professional
liability product lines was primarily attributable to unfavorable
claim settlements and increased claim frequency and severity on a
number of products, including contractors and excess and umbrella
within general liability and directors and officers, errors and
omissions and employment practices liability within professional
liability. Development on prior years loss reserves within our
general liability and professional liability product lines in 2022
was impacted by broader market conditions, including the effects of
economic and social inflation, and was most pronounced on the 2016
to 2019 accident years, which was before we began achieving
significant rate increases for these product lines. The impacts of
social inflation were most significant on our large, risk-managed
excess professional liability accounts, corresponding with a
notable rise in the number of class action lawsuits on these years
and the recent unfavorable legal environment. The development of
this claims trend was disrupted by state and federal court closures
following the onset of the COVID-19 pandemic in 2020, which has
delayed court proceedings for claims on the impacted product
lines.
These factors have created more uncertainty around the ultimate
losses that will be incurred to settle claims on these longer-tail
product lines, and as a result, we are approaching reductions to
prior year loss reserves on more recent accident years cautiously.
Consistent with our reserving philosophy, we are responding quickly
to increase loss reserves following any indication of increased
claims frequency or severity in excess of our previous
expectations, whereas in instances where claims trends are more
favorable than we previously anticipated, we are often waiting to
reduce loss reserves and will evaluate our experience over
additional periods of time.
In 2022, favorable development was most significant on our
workers' compensation, programs, property and credit and surety
product lines. In 2021, favorable development was most significant
on our general liability, property, workers' compensation,
professional liability and marine and energy product lines.
The decrease in the Insurance segment's expense ratio in 2022
was primarily due to the favorable impact of higher earned premiums
in 2022 while maintaining consistent levels of general expenses
with 2021, as we continue to focus on scaling our insurance
operations.
Reinsurance Segment
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
% Change
|
Gross premium
volume
|
$
1,229,851
|
|
$
1,246,143
|
|
(1) %
|
Net written
premiums
|
$
1,167,312
|
|
$
1,126,167
|
|
4 %
|
Earned
premiums
|
$
1,063,347
|
|
$
1,042,048
|
|
2 %
|
Underwriting profit
(loss)
|
$
83,859
|
|
$
(55,238)
|
|
NM
(1)
|
|
|
|
|
|
|
Underwriting Ratios
(2)
|
|
|
|
|
Point Change
|
Loss ratio
|
|
|
|
|
|
Current accident year
loss ratio
|
63.6
%
|
|
72.0 %
|
|
(8.4)
|
Prior accident years
loss ratio
|
(2.4)
%
|
|
1.9 %
|
|
(4.3)
|
Loss ratio
|
61.2
%
|
|
73.9 %
|
|
(12.7)
|
Expense
ratio
|
30.9
%
|
|
31.4 %
|
|
(0.5)
|
Combined
ratio
|
92.1
%
|
|
105.3 %
|
|
(13.2)
|
|
|
|
|
|
|
Current accident year
loss ratio catastrophe impact (3) (4)
|
— %
|
|
9.6 %
|
|
(9.6)
|
Current accident year
loss ratio Russia-Ukraine conflict impact (3)
|
1.2
%
|
|
— %
|
|
1.2
|
Prior accident years
loss ratio COVID-19 impact (3)
|
(0.3)
%
|
|
2.1 %
|
|
(2.4)
|
|
|
|
|
|
|
Current accident year
loss ratio, excluding catastrophes and Russia-Ukraine conflict
(5)
|
62.4
%
|
|
62.3 %
|
|
0.1
|
Combined ratio,
excluding current year catastrophes, Russia-Ukraine conflict and
COVID-19 (5)
|
91.2
%
|
|
93.6 %
|
|
(2.4)
|
|
|
(1)
|
NM - Ratio is not
meaningful
|
(2)
|
Amounts may not
reconcile due to rounding.
|
(3)
|
The point impact of
catastrophes, the Russia-Ukraine conflict and COVID-19 is
calculated as the associated net losses and loss adjustment
expenses divided by total earned premiums.
|
(4)
|
The point impact of
catastrophes does not include the favorable impact of assumed
reinstatement premiums associated with the 2021 Catastrophes of
$21.7 million for the year ended December 31, 2021. Reinstatement
premiums were not significant for the year ended December 31,
2022.
|
(5)
|
See Supplemental
Financial Information for additional information regarding these
non-GAAP financial measures.
|
Premiums
The modest decrease in gross premium volume in our Reinsurance
segment in 2022 was primarily attributable to non-renewals within
our property product lines and the non-renewal of a large treaty
within our workers' compensation product line, largely offset by
the impact of new business, primarily within our general liability
and professional liability product lines, and more favorable
premium adjustments within our credit and surety product lines. We
discontinued writing property retrocessional reinsurance in 2022
and property reinsurance in 2021, which resulted in a $123.3 million reduction in gross premium volume
in 2022 compared to 2021. Significant variability in gross premium
volume can be expected in our Reinsurance segment due to
individually significant contracts and multi-year contracts.
Net retention of gross premium volume was 95% in 2022 compared
to 90% in 2021. The increase in net retention was driven by changes
in mix of business. We have experienced growth in highly retained
product lines during the year, while the non-renewed property
business had a lower retention rate than the rest of the
segment.
The increase in earned premiums in 2022 was primarily
attributable to growth in gross premium volume within our
professional liability and general liability product lines in
recent periods, partially offset by the impact of lower gross
premiums within our property product lines.
Combined Ratio
The Reinsurance segment's current accident year losses and loss
adjustment expenses in 2022 included $12.7
million of net losses and loss adjustment expenses
attributed to the Russia-Ukraine conflict. Current accident year losses
in 2021 included $100.3 million of
net losses and loss adjustment expenses attributed to the 2021
Catastrophes. Excluding these losses from the respective periods,
the current accident year loss ratio in 2022 was consistent with
2021. The benefit of higher premium rates on our general liability
and professional liability product lines and more favorable premium
adjustments in 2022 compared to 2021 was offset by the unfavorable
impact of changes in the mix of business within the segment and the
benefit in 2021 of $21.7 million of
favorable assumed reinstatement premiums on catastrophes. The
change in mix of business had an unfavorable impact as the
non-renewed property business had a lower attritional loss ratio
than the rest of the segment.
The Reinsurance segment's 2022 combined ratio included
$26.1 million of favorable
development on prior accident years loss reserves, which was
primarily attributable to favorable development within our property
product lines related to natural catastrophes and our credit and
surety product lines. Favorable development on prior years loss
reserves in 2022 was partially offset by additional exposures
recognized on prior accident years related to net favorable premium
adjustments on our general liability, credit and surety and
professional liability product lines. In 2021, the combined ratio
included $19.9 million of adverse
development on prior accident years loss reserves, which was
primarily attributable to net adverse development on natural
catastrophes and COVID-19 within our property product lines, as
well as additional exposures recognized on prior accident years
related to net favorable premium adjustments on our professional
liability product lines.
Insurance-linked Securities, Program Services and Other
Insurance
The following table presents the components of operating
revenues and operating expenses attributable to our
insurance-linked securities, program services and other insurance
operations, which are not included in a reportable segment.
Underwriting results attributable to these operations include
results from discontinued lines of business, which are reported
separate from our Insurance and Reinsurance segments, and the
retained portion of our program services operations.
|
Years Ended December
31,
|
|
2022
|
|
2021
|
(dollars in
thousands)
|
Operating
revenues
|
|
Operating
expenses
|
|
Net
|
|
Operating
revenues
|
|
Operating
expenses
|
|
Net
|
Services and
other:
|
|
|
|
|
|
|
|
|
|
|
|
Insurance-linked
securities
|
$
109,020
|
|
$
125,316
|
|
$
(16,296)
|
|
$
202,019
|
|
$
186,510
|
|
$
15,509
|
Insurance-linked
securities - disposition gains
|
225,828
|
|
—
|
|
225,828
|
|
—
|
|
—
|
|
—
|
Program services and
other fronting
|
149,993
|
|
27,613
|
|
122,380
|
|
125,716
|
|
20,132
|
|
105,584
|
Life and
annuity
|
1,040
|
|
10,723
|
|
(9,683)
|
|
1,515
|
|
16,667
|
|
(15,152)
|
Markel CATCo
buy-out
|
—
|
|
101,904
|
|
(101,904)
|
|
—
|
|
—
|
|
—
|
Markel CATCo
Re
|
—
|
|
(89,862)
|
|
89,862
|
|
—
|
|
—
|
|
—
|
Other
|
11,683
|
|
19,431
|
|
(7,748)
|
|
17,195
|
|
30,534
|
|
(13,339)
|
|
497,564
|
|
195,125
|
|
302,439
|
|
346,445
|
|
253,843
|
|
92,602
|
Underwriting
|
(3,818)
|
|
3,292
|
|
(7,110)
|
|
(4,303)
|
|
8,787
|
|
(13,090)
|
|
493,746
|
|
198,417
|
|
295,329
|
|
342,142
|
|
262,630
|
|
79,512
|
Amortization of
intangible assets
|
|
|
61,202
|
|
(61,202)
|
|
|
|
61,789
|
|
(61,789)
|
Impairment of
goodwill
|
|
|
80,000
|
|
(80,000)
|
|
|
|
—
|
|
—
|
|
$
493,746
|
|
$
339,619
|
|
$
154,127
|
|
$
342,142
|
|
$
324,419
|
|
$
17,723
|
Insurance-Linked Securities
The decrease in operating revenues and operating expenses in our
Nephila insurance-linked securities operations in 2022 was
primarily due to the disposition of our Velocity and Volante
managing general agent operations during the year. Operating losses
in 2022 were driven by costs incurred by Volante in connection with
its launch of a Lloyd's syndicate prior to disposition.
Since our acquisition of Nephila in 2018, we experienced
significant growth in the Velocity and Volante managing general
agent operations. In 2022, we realized the significant value
created since 2018 through the sale of Velocity and Volante. We
sold the majority of our controlling interest in Velocity in
February 2022 for total cash
consideration of $181.3 million,
which resulted in a gain of $107.3 million. We sold our controlling
interest in Volante in October 2022
for total consideration of $181.9 million, of which $155.6 million was cash. This transaction
resulted in a gain of $118.5 million.
Following the sales of our Velocity and Volante managing general
agent operations, our Nephila ILS operations are solely comprised
of our fund management operations. Since acquiring Nephila in 2018,
investment performance in the broader ILS market has been adversely
impacted by consecutive years of elevated catastrophe losses, most
recently with Hurricane Ian in 2022. These events, as well as
recent volatility in the capital markets, have impacted investor
decisions around allocation of capital to ILS, which in turn has
impacted our capital raises and redemptions within the funds we
manage. Additionally, increases in the cost of capital during 2022
further impacted the estimated fair value of our fund management
operations, and ultimately resulted in an $80.0 million partial impairment of goodwill in
2022. Nephila's net assets under management were $7.2 billion as of December 31, 2022.
Program Services and Other Fronting
The increase in operating revenues in our program services and
other fronting operations in 2022 was primarily due to higher gross
earned premium, on which our fees are based, in 2022 compared to
2021, driven by the expansion of existing programs and growth from
new programs, as well as the growth of our other fronting
arrangements. Gross written premiums in our program services
operations were $2.8 billion and
$2.7 billion for the years ended
December 31, 2022 and 2021, respectively. Gross written
premiums from our other fronting operations, which consist of
business written by our underwriting platform on behalf of our ILS
operations, were $553.9 million and
$223.5 million for the years ended
December 31, 2022 and 2021, respectively.
Markel CATCo Buy-Out
In March 2022, we completed a
buy-out transaction with Markel CATCo Re Ltd. (Markel CATCo Re) and Markel CATCo Reinsurance
Fund Ltd. (the Markel CATCo Funds) that provided for an accelerated
return of all remaining capital to investors in the Markel CATCo
Funds and resulted in the consolidation of Markel CATCo Re upon completion of the
transaction. In order to complete the transaction, we made
$101.9 million in payments, net of
insurance proceeds, to or for the benefit of investors that were
recognized as an expense during the first quarter of 2022. In 2022,
results attributable to Markel CATCo
Re were primarily related to favorable loss reserve
development on the run-off of the reinsurance contracts, all of
which were attributable to the Markel CATCo Funds remaining
noncontrolling interests in Markel CATCo
Re.
Investing Results
We measure our investment performance by analyzing net
investment income earned on our investment portfolio, as well as
through net investment gains, which includes unrealized gains on
our equity portfolio, and the change in net unrealized gains on
available-for-sale investments. Our performance measures also
include investment yield and taxable equivalent total investment
return. Other income or losses within our investing operations
primarily relate to equity method investments in our investing
segment, which are managed separately from the rest of our
investment portfolio. The following table summarizes our
consolidated investment performance, which consists predominantly
of the results of our Investing segment.
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
Change
|
Net investment
income
|
$
446,755
|
|
$
367,417
|
|
22 %
|
Net investment gains
(losses)
|
$
(1,595,733)
|
|
$
1,978,534
|
|
$
(3,574,267)
|
Change in net
unrealized gains (losses) on available-for-sale investments
(1)
|
$
(1,407,316)
|
|
$
(450,096)
|
|
$
(957,220)
|
Other
|
$
(17,661)
|
|
$
7,184
|
|
$
(24,845)
|
Investment yield
(2) (3)
|
2.2
%
|
|
2.0 %
|
|
0.2
|
Taxable equivalent
total investment return (3)
|
(9.5)
%
|
|
8.8 %
|
|
(18.3)
|
|
|
(1)
|
The change in net
unrealized gains (losses) on available-for-sale investments
included a benefit related to an adjustment to our life and annuity
benefit reserves of $56.6 million and $63.0 million for the years
ended December 31, 2022 and 2021, respectively.
|
(2)
|
Investment yield
reflects net investment income as a percentage of monthly average
invested assets at amortized cost.
|
(3)
|
See Supplemental
Financial Information for a reconciliation of investment yield to
taxable equivalent total investment return.
|
The increase in net investment income in 2022 was primarily
attributable to higher interest income on short-term investments
and cash equivalents due to higher short-term interest rates in
2022 compared to 2021. Additionally, interest income on our fixed
maturity securities increased in 2022, primarily attributable to
higher average holdings of fixed maturity securities, partially
offset by a lower yield during 2022 compared to 2021.
Net investment losses in 2022 were primarily attributable to
decreases in the fair value of our equity portfolio driven by
unfavorable market value movements in 2022. Net investment gains in
2021 were primarily attributable to increases in the fair value of
our equity portfolio driven by favorable market value movements in
2021.
The change in net unrealized gains (losses) on
available-for-sale investments in 2022 and 2021 was attributable to
decreases in the fair value of our fixed maturity investment
portfolio as a result of increases in interest rates during 2022
and 2021.
Markel Ventures Results
Our Markel Ventures segment includes a diverse portfolio of
businesses from different industries that offer various types of
products and services to businesses and consumers. We consolidate
the results of our Markel Ventures subsidiaries on a one-month lag.
The following table summarizes the results from our Markel Ventures
segment.
|
Years Ended December 31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
Change
|
Operating
revenues
|
$
4,757,527
|
|
$
3,643,827
|
|
31 %
|
Operating income
(1)
|
$
325,238
|
|
$
272,552
|
|
19 %
|
EBITDA
(1)
|
$
506,336
|
|
$
402,700
|
|
26 %
|
Net income to
shareholders
|
$
192,601
|
|
$
174,407
|
|
10 %
|
|
|
(1)
|
See Supplemental
Financial Information for a reconciliation of Markel Ventures
operating income to Markel Ventures earnings before interest,
income taxes, depreciation and amortization (EBITDA).
|
The increase in operating revenues in 2022 was driven by the
contribution from Metromont, which was acquired in December 2021, as well as an increased
contribution from Buckner, which
was acquired in August 2021. The
combined contribution to the increase in operating revenues in 2022
attributable to these acquisitions was $604.6 million. Additionally, operating revenues
in 2022 increased as a result of the impact of increased demand and
higher prices at many of our other businesses, most notably at our
construction services businesses.
The benefit of increases in operating revenues to operating
income, EBITDA and net income to shareholders in 2022 was reduced
by increased costs of materials and labor across many of our
businesses, which reflected the impact of broader economic
conditions on our operations during the year. The higher cost of
materials was due in part to a shortage in the availability of
certain products, the higher cost of shipping and a prolonged
period of elevated inflation. We attempted to mitigate the impact
of these cost increases through a variety of actions, such as
increasing the prices of our products and services, pre-purchasing
materials, locking in prices in advance or utilizing alternative
sources of materials. Our businesses have had varying levels of
success with these efforts, and we have seen conditions stabilize
to varying degrees at many of our businesses. However, high labor
costs continue to impact our businesses and there can be a time lag
before the impacts of changes are reflected in our margins.
The increases in operating income, EBITDA and net income to
shareholders in 2022 were primarily due to the impact of higher
revenues and improved operating results at our construction
services businesses, transportation-related businesses and
consulting services businesses, as well as the contribution of
Metromont. These increases were partially offset by the impact of
lower operating margins at one of our consumer and building
products businesses in 2022 compared to 2021.
Income Taxes
The effective tax rate was 32% in 2022 compared to 22% in 2021.
The effective tax rate for 2022 differs from the effective tax rate
in 2021, and the statutory rate of 21%, due to the impact of
various immaterial items resulting in a net tax benefit that was
magnified due to the small pre-tax loss in 2022.
Financial Condition
Investments, cash and cash equivalents and restricted cash and
cash equivalents (invested assets) were $27.4 billion at December 31, 2022 compared
to $28.3 billion at December 31,
2021. The decrease was primarily attributable to a decline in the
fair value of our investment portfolio, driven by unfavorable
movements in the public equity markets and increases in interest
rates in 2022, partially offset by $2.7
billion in cash provided by operating activities. Net cash
provided by operating activities increased from $2.3 billion in 2021, primarily driven by higher
net premiums within our Insurance segment.
At December 31, 2022, our holding company held $3.7 billion of invested assets compared to
$5.3 billion of invested assets at
December 31, 2021. The decrease in holding company invested
assets was primarily due to capital contributions made to our
insurance subsidiaries, following declines in their investment
portfolio valuations, and a decline in the fair value of the
holding company investment portfolio, as well as the repayment of
unsecured senior notes in July
2022.
* * * * * * * *
Our previously announced conference call, which will
involve discussion of our quarterly and year-end financial results
and business developments and may include forward-looking
information, will be held Thursday, February
2, 2023, beginning at 9:30 a.m.
(Eastern Time). Investors, analysts and the general public
may listen to the call via live webcast at ir.markel.com. The call
may also be accessed by dialing (888) 660-9916 in the U.S., or
(646) 960-0452 internationally, and providing Conference ID:
4614568. Any person needing additional information can contact
Markel's Investor Relations Department at IR@markel.com. A replay
of the call also will be available on our website from
approximately one hour after the call until Monday, February 13, 2023.
Additionally, we will be discussing these financial results and
related business and investments updates at our shareholders
meeting on May 17, 2023 at the
University of Richmond Robins Center at
2:00 p.m. (Eastern Time). The event
is open to shareholders, employees, and friends of Markel, and more
information on the agenda and registration is available at
www.markelshareholdersmeeting.com.
Safe Harbor and Cautionary Statement
This release contains statements concerning or
incorporating our expectations, assumptions, plans, objectives,
future financial or operating performance and other statements that
are not historical facts. These statements are "forward-looking
statements" within the meaning of the Private Securities Litigation
Reform Act of 1995. Such statements may use words such as
"anticipate," "believe," "estimate," "expect," "intend," "predict,"
"project" and similar expressions as they relate to us or our
management.
There are risks and uncertainties that may cause actual results
to differ materially from predicted results in forward-looking
statements. Factors that may cause actual results to differ are
often presented with the forward-looking statements themselves.
Additional factors that could cause actual results to differ from
those predicted are set forth under "Business Overview," "Risk
Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Quantitative and
Qualitative Disclosures About Market Risk" in our 2021 Annual
Report on Form 10-K, or our most recent Quarterly Report on Form
10-Q, or are included in the items listed below:
- our expectations about future results of our underwriting,
investing, Markel Ventures and other operations are based on
current knowledge and assume no significant man-made or natural
catastrophes, no significant changes in products or personnel and
no adverse changes in market conditions;
- the effect of cyclical trends on our underwriting, investing,
Markel Ventures and other operations, including demand and pricing
in the insurance, reinsurance and other markets in which we
operate;
- actions by competitors, including the use of technology and
innovation to simplify the customer experience, increase
efficiencies, redesign products, alter models and effect other
potentially disruptive changes in the insurance industry, and the
effect of competition on market trends and pricing;
- our efforts to develop new products, expand in targeted markets
or improve business processes and workflows may not be successful
and may increase or create new risks (e.g., insufficient demand,
change to risk exposures, distribution channel conflicts, execution
risk, increased expenditures);
- the frequency and severity of man-made and natural catastrophes
(including earthquakes, wildfires and weather-related catastrophes)
may exceed expectations, are unpredictable and, in the case of
wildfires and weather-related catastrophes, may be exacerbated if,
as many forecast, changing conditions in the climate, oceans and
atmosphere result in increased hurricane, flood, drought or other
adverse weather-related activity;
- we offer insurance and reinsurance coverage against terrorist
acts in connection with some of our programs, and in other
instances we are legally required to offer terrorism insurance; in
both circumstances, we actively manage our exposure, but if there
is a covered terrorist attack, we could sustain material
losses;
- emerging claim and coverage issues, changing industry practices
and evolving legal, judicial, social and other environmental trends
or conditions, can increase the scope of coverage, the frequency
and severity of claims and the period over which claims may be
reported; these factors, as well as uncertainties in the loss
estimation process, can adversely impact the adequacy of our loss
reserves and our allowance for reinsurance recoverables;
- reinsurance reserves are subject to greater uncertainty than
insurance reserves, primarily because of reliance upon the original
underwriting decisions made by ceding companies and the longer
lapse of time from the occurrence of loss events to their reporting
to the reinsurer for ultimate resolution;
- inaccuracies (whether due to data error, human error or
otherwise) in the various modeling techniques and data analytics
(e.g., scenarios, predictive and stochastic modeling, and
forecasting) we use to analyze and estimate exposures, loss trends
and other risks associated with our insurance and insurance-linked
securities businesses could cause us to misprice our products or
fail to appropriately estimate the risks to which we are
exposed;
- changes in the assumptions and estimates used in establishing
reserves for our life and annuity reinsurance book (which is in
runoff), for example, changes in assumptions and estimates of
mortality, longevity, morbidity and interest rates, could result in
material changes in our estimated loss reserves for such
business;
- adverse developments in insurance coverage litigation or other
legal or administrative proceedings could result in material
increases in our estimates of loss reserves;
- initial estimates for catastrophe losses and other significant,
infrequent events (such as the COVID-19 pandemic and the
Russia-Ukraine conflict), are often based on limited
information, are dependent on broad assumptions about the nature
and extent of losses, coverage, liability and reinsurance, and
those losses may ultimately differ materially from our
expectations;
- changes in the availability, costs, quality and providers of
reinsurance coverage, which may impact our ability to write or
continue to write certain lines of business or to mitigate the
volatility of losses on our results of operations and financial
condition;
- the ability or willingness of reinsurers to pay balances due
may be adversely affected by industry and economic conditions,
deterioration in reinsurer credit quality and coverage disputes,
and collateral we hold, if any, may not be sufficient to cover a
reinsurer's obligation to us;
- after the commutation of ceded reinsurance contracts, any
subsequent adverse development in the re-assumed loss reserves will
result in a charge to earnings;
- regulatory actions can impede our ability to charge adequate
rates and efficiently allocate capital;
- general economic and market conditions and industry specific
conditions, including extended economic recessions or expansions;
prolonged periods of slow economic growth; inflation or deflation;
fluctuations in foreign currency exchange rates, commodity and
energy prices and interest rates; volatility in the credit and
capital markets; and other factors;
- economic conditions, actual or potential defaults in corporate
bonds, municipal bonds, mortgage-backed securities or sovereign
debt obligations, volatility in interest and foreign currency
exchange rates and changes in market value of concentrated
investments can have a significant impact on the fair value of our
fixed maturity securities and equity securities, as well as the
carrying value of our other assets and liabilities, and this impact
may be heightened by market volatility and our ability to mitigate
our sensitivity to these changing conditions;
- economic conditions may adversely affect our access to capital
and credit markets;
- the effects of government intervention, including material
changes in the monetary policies of central banks, to address
financial downturns (such as in response to the COVID-19 pandemic),
inflation and other economic and currency concerns;
- the impacts that political and civil unrest and regional
conflicts, such as the conflict between Russia and Ukraine, may have on our businesses and the
markets they serve or that any disruptions in regional or worldwide
economic conditions generally arising from these situations may
have on our businesses, industries or investments;
- the significant volatility, uncertainty and disruption caused
by health epidemics and pandemics, including the COVID-19 pandemic
and its variants, as well as governmental, legislative, judicial or
regulatory actions or developments in response thereto;
- changes in U.S. tax laws, regulations or interpretations, or in
the tax laws, regulations or interpretations of other jurisdictions
in which we operate, and adjustments we may make in our operations
or tax strategies in response to those changes;
- a failure or security breach of, or cyberattack on, enterprise
information technology systems that we use or a failure to comply
with data protection or privacy regulations;
- third-party providers may perform poorly, breach their
obligations to us or expose us to enhanced risks;
- our acquisitions may increase our operational and internal
control risks for a period of time;
- we may not realize the contemplated benefits, including cost
savings and synergies, of our acquisitions;
- any determination requiring the write-off of a significant
portion of our goodwill and intangible assets;
- the failure or inadequacy of any methods we employ to manage
our loss exposures;
- the loss of services of any senior executive or other key
personnel of our businesses could adversely impact one or more of
our operations;
- the manner in which we manage our global operations through a
network of business entities could result in inconsistent
management, governance and oversight practices and make it
difficult for us to implement strategic decisions and coordinate
procedures;
- our substantial international operations and investments expose
us to increased political, civil, operational and economic risks,
including foreign currency exchange rate and credit risk;
- our ability to obtain additional capital for our operations on
terms favorable to us;
- our compliance, or failure to comply, with covenants and other
requirements under our credit facilities, senior debt and other
indebtedness and our preferred shares;
- our ability to maintain or raise third-party capital for
existing or new investment vehicles and risks related to our
management of third-party capital;
- the effectiveness of our procedures for compliance with
existing and future guidelines, policies and legal and regulatory
standards, rules, laws and regulations;
- the impact of economic and trade sanctions and embargo programs
on our businesses, including instances in which the requirements
and limitations applicable to the global operations of U.S.
companies and their affiliates are more restrictive than, or
conflict with, those applicable to non-U.S. companies and their
affiliates;
- regulatory changes, or challenges by regulators, regarding the
use of certain issuing carrier or fronting arrangements;
- our dependence on a limited number of brokers for a large
portion of our revenues and third-party capital;
- adverse changes in our assigned financial strength, debt or
preferred share ratings or outlook could adversely impact us,
including our ability to attract and retain business, the amount of
capital our insurance subsidiaries must hold and the availability
and cost of capital;
- changes in the amount of statutory capital our insurance
subsidiaries are required to hold, which can vary significantly and
is based on many factors, some of which are outside our
control;
- losses from litigation and regulatory investigations and
actions;
- investor litigation or disputes, as well as regulatory
inquiries, investigations or proceedings related to our
Markel CATCo operations; delays or
disruptions in the run-off of those operations; or the failure to
realize the benefits of the transaction that permitted the
accelerated return of capital to our Markel
CATCo investors; and
- a number of additional factors may adversely affect our Markel
Ventures operations, and the markets they serve, and negatively
impact their revenues and profitability, including, among others:
adverse weather conditions, plant disease and other contaminants;
changes in government support for education, healthcare and
infrastructure projects; changes in capital spending levels;
changes in the housing, commercial and industrial construction
markets; liability for environmental matters; supply chain and
shipping issues, including increases in freight costs; volatility
in the market prices for their products; and volatility in
commodity, wholesale and raw materials prices and interest and
foreign currency exchange rates.
Results from our underwriting, investing, Markel Ventures and
other operations have been and will continue to be potentially
materially affected by these factors.
By making forward-looking statements, we do not intend to become
obligated to publicly update or revise any such statements whether
as a result of new information, future events or other changes.
Readers are cautioned not to place undue reliance on any
forward-looking statements, which speak only as at their dates.
* * * * * * * *
About Markel Corporation
Markel Corporation is a diverse financial holding company
serving a variety of niche markets. The Company's principal
business markets and underwrites specialty insurance products. In
each of the Company's businesses, it seeks to provide quality
products and excellent customer service so that it can be a market
leader. The financial goals of the Company are to earn consistent
underwriting and operating profits and superior investment returns
to build shareholder value. Visit Markel Corporation on the web at
www.markel.com.
Markel Corporation and
Subsidiaries
Consolidated
Statements of Income (Loss) and Comprehensive Income
(Loss)
|
|
|
Quarters Ended December
31,
|
|
Years Ended December
31,
|
(dollars in
thousands, except per share data)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
OPERATING
REVENUES
|
|
|
|
|
|
|
|
Earned
premiums
|
$
2,038,088
|
|
$
1,806,797
|
|
$
7,587,792
|
|
$
6,503,029
|
Net investment
income
|
145,069
|
|
96,200
|
|
446,755
|
|
367,417
|
Net investment gains
(losses)
|
598,792
|
|
802,743
|
|
(1,595,733)
|
|
1,978,534
|
Products
revenues
|
581,985
|
|
384,976
|
|
2,427,096
|
|
1,712,120
|
Services and other
revenues
|
846,813
|
|
667,389
|
|
2,809,425
|
|
2,285,325
|
Total Operating
Revenues
|
4,210,747
|
|
3,758,105
|
|
11,675,335
|
|
12,846,425
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
1,229,094
|
|
938,091
|
|
4,445,589
|
|
3,581,205
|
Underwriting,
acquisition and insurance expenses
|
672,477
|
|
648,876
|
|
2,515,583
|
|
2,293,739
|
Products
expenses
|
515,369
|
|
371,371
|
|
2,241,736
|
|
1,544,506
|
Services and other
expenses
|
614,432
|
|
580,593
|
|
2,306,635
|
|
2,022,935
|
Amortization of
intangible assets
|
43,788
|
|
41,989
|
|
178,778
|
|
160,539
|
Impairment of
goodwill
|
80,000
|
|
—
|
|
80,000
|
|
—
|
Total Operating
Expenses
|
3,155,160
|
|
2,580,920
|
|
11,768,321
|
|
9,602,924
|
Operating Income
(Loss)
|
1,055,587
|
|
1,177,185
|
|
(92,986)
|
|
3,243,501
|
Interest
expense
|
(48,972)
|
|
(48,167)
|
|
(196,062)
|
|
(183,579)
|
Net foreign exchange
gains (losses)
|
(105,147)
|
|
10,594
|
|
140,209
|
|
72,271
|
Income (Loss) Before
Income Taxes
|
901,468
|
|
1,139,612
|
|
(148,839)
|
|
3,132,193
|
Income tax (expense)
benefit
|
(191,900)
|
|
(264,560)
|
|
47,636
|
|
(684,458)
|
Net Income
(Loss)
|
709,568
|
|
875,052
|
|
(101,203)
|
|
2,447,735
|
Net income attributable
to noncontrolling interests
|
(19,858)
|
|
(3,923)
|
|
(112,920)
|
|
(22,732)
|
Net Income (Loss) to
Shareholders
|
689,710
|
|
871,129
|
|
(214,123)
|
|
2,425,003
|
Preferred stock
dividends
|
(18,000)
|
|
(18,000)
|
|
(36,000)
|
|
(36,000)
|
Net Income (Loss) to
Common Shareholders
|
$
671,710
|
|
$
853,129
|
|
$
(250,123)
|
|
$
2,389,003
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME (LOSS)
|
|
|
|
|
|
|
|
Change in net
unrealized gains (losses) on available-for-sale investments, net of
taxes:
|
|
|
|
|
|
|
|
Net holding gains
(losses) arising during the period
|
$
108,785
|
|
$
(85,636)
|
|
$
(1,155,054)
|
|
$
(348,315)
|
Reclassification
adjustments for net gains (losses) included in net income
(loss)
|
42,617
|
|
(2,816)
|
|
44,906
|
|
(6,623)
|
Change in net
unrealized gains (losses) on available-for-sale investments, net of
taxes
|
151,402
|
|
(88,452)
|
|
(1,110,148)
|
|
(354,938)
|
Change in foreign
currency translation adjustments, net of taxes
|
5,136
|
|
117
|
|
(9,259)
|
|
(213)
|
Change in net actuarial
pension loss, net of taxes
|
22,922
|
|
6,558
|
|
24,730
|
|
8,390
|
Total Other
Comprehensive Income (Loss)
|
179,460
|
|
(81,777)
|
|
(1,094,677)
|
|
(346,761)
|
Comprehensive Income
(Loss)
|
889,028
|
|
793,275
|
|
(1,195,880)
|
|
2,100,974
|
Comprehensive income
attributable to noncontrolling interests
|
(19,941)
|
|
(3,918)
|
|
(112,937)
|
|
(22,730)
|
Comprehensive Income
(Loss) to Shareholders
|
$
869,087
|
|
$
789,357
|
|
$
(1,308,817)
|
|
$
2,078,244
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER
COMMON SHARE
|
|
|
|
|
|
|
|
Basic
|
$
49.21
|
|
$
62.65
|
|
$
(23.57)
|
|
$
176.92
|
Diluted
|
$
49.05
|
|
$
62.44
|
|
$
(23.57)
|
|
$
176.51
|
Markel Corporation
and Subsidiaries
Selected
Data
|
|
|
December 31,
|
(in thousands,
except per share data)
|
2022
|
|
2021
|
Total investments, cash
and cash equivalents and restricted cash and cash
equivalents
|
$
27,419,522
|
|
$
28,292,167
|
Reinsurance
recoverables
|
8,446,745
|
|
7,293,555
|
Goodwill and intangible
assets
|
4,386,302
|
|
4,721,626
|
Total assets
|
49,791,259
|
|
48,477,096
|
Unpaid losses and loss
adjustment expenses
|
20,947,898
|
|
18,178,894
|
Unearned
premiums
|
6,220,748
|
|
5,383,619
|
Senior long-term debt
and other debt
|
4,103,629
|
|
4,361,266
|
Total shareholders'
equity
|
13,065,534
|
|
14,717,350
|
Book value per common
share
|
$
929.27
|
|
$
1,036.20
|
Common shares
outstanding
|
13,423
|
|
13,632
|
Markel Corporation
and Subsidiaries
Supplemental
Financial Information
Components of
Consolidated Operating Income
Segment
Results
|
|
|
Quarter Ended
December 31, 2022
|
(dollars in
thousands)
|
Insurance
|
|
Reinsurance
|
|
Investing
|
|
Markel
Ventures
|
|
Other
(1)
|
|
Consolidated
|
Gross premium
volume
|
$
2,126,911
|
|
$
185,024
|
|
$
—
|
|
$
—
|
|
$
736,640
|
|
$
3,048,575
|
Net written
premiums
|
1,751,011
|
|
184,225
|
|
—
|
|
—
|
|
(5,542)
|
|
1,929,694
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
1,786,085
|
|
254,691
|
|
—
|
|
—
|
|
(2,688)
|
|
2,038,088
|
Losses and loss
adjustment expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Current accident
year
|
(1,030,394)
|
|
(161,735)
|
|
—
|
|
—
|
|
—
|
|
(1,192,129)
|
Prior accident
years
|
(53,169)
|
|
12,207
|
|
—
|
|
—
|
|
3,997
|
|
(36,965)
|
Underwriting,
acquisition and insurance expenses
|
(592,096)
|
|
(81,681)
|
|
—
|
|
—
|
|
1,300
|
|
(672,477)
|
Underwriting
profit
|
110,426
|
|
23,482
|
|
—
|
|
—
|
|
2,609
|
|
136,517
|
Net investment
income
|
—
|
|
—
|
|
144,584
|
|
485
|
|
—
|
|
145,069
|
Net investment
gains
|
—
|
|
—
|
|
598,792
|
|
—
|
|
—
|
|
598,792
|
Products
revenues
|
—
|
|
—
|
|
—
|
|
581,985
|
|
—
|
|
581,985
|
Services and other
revenues
|
—
|
|
—
|
|
9,902
|
|
647,204
|
|
189,707
|
|
846,813
|
Products
expenses
|
—
|
|
—
|
|
—
|
|
(515,369)
|
|
—
|
|
(515,369)
|
Services and other
expenses
|
—
|
|
—
|
|
—
|
|
(587,343)
|
|
(27,089)
|
|
(614,432)
|
Amortization of
intangible assets (2)
|
—
|
|
—
|
|
—
|
|
(18,966)
|
|
(24,822)
|
|
(43,788)
|
Impairment of
goodwill
|
—
|
|
—
|
|
—
|
|
—
|
|
(80,000)
|
|
(80,000)
|
Operating
income
|
$
110,426
|
|
$
23,482
|
|
$
753,278
|
|
$
107,996
|
|
$
60,405
|
|
$
1,055,587
|
|
|
Quarter Ended
December 31, 2021
|
(dollars in
thousands)
|
Insurance
|
|
Reinsurance
|
|
Investing
|
|
Markel
Ventures
|
|
Other
(1)
|
|
Consolidated
|
Gross premium
volume
|
$
1,880,383
|
|
$
253,508
|
|
$
—
|
|
$
—
|
|
$
647,324
|
|
$
2,781,215
|
Net written
premiums
|
1,571,589
|
|
233,085
|
|
—
|
|
—
|
|
(2,274)
|
|
1,802,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
1,536,460
|
|
272,017
|
|
—
|
|
—
|
|
(1,680)
|
|
1,806,797
|
Losses and loss
adjustment expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Current accident
year
|
(863,151)
|
|
(188,589)
|
|
—
|
|
—
|
|
—
|
|
(1,051,740)
|
Prior accident
years
|
108,569
|
|
14,176
|
|
—
|
|
—
|
|
(9,096)
|
|
113,649
|
Underwriting,
acquisition and insurance expenses
|
(554,475)
|
|
(94,170)
|
|
—
|
|
—
|
|
(231)
|
|
(648,876)
|
Underwriting profit
(loss)
|
227,403
|
|
3,434
|
|
—
|
|
—
|
|
(11,007)
|
|
219,830
|
Net investment
income
|
—
|
|
—
|
|
96,197
|
|
3
|
|
—
|
|
96,200
|
Net investment
gains
|
—
|
|
—
|
|
802,743
|
|
—
|
|
—
|
|
802,743
|
Products
revenues
|
—
|
|
—
|
|
—
|
|
384,976
|
|
—
|
|
384,976
|
Services and other
revenues
|
—
|
|
—
|
|
(5,694)
|
|
568,555
|
|
104,528
|
|
667,389
|
Products
expenses
|
—
|
|
—
|
|
—
|
|
(371,371)
|
|
—
|
|
(371,371)
|
Services and other
expenses
|
—
|
|
—
|
|
—
|
|
(508,244)
|
|
(72,349)
|
|
(580,593)
|
Amortization of
intangible assets (2)
|
—
|
|
—
|
|
—
|
|
(16,464)
|
|
(25,525)
|
|
(41,989)
|
Operating income
(loss)
|
$
227,403
|
|
$
3,434
|
|
$
893,246
|
|
$
57,455
|
|
$
(4,353)
|
|
$
1,177,185
|
|
|
(1)
|
Other represents the
total profit (loss) attributable to our operations that are not
included in a reportable segment, as well as amortization of
intangible assets attributable to our underwriting segments, which
is not allocated between the Insurance and Reinsurance
segments.
|
(2)
|
Segment profit for the
Markel Ventures segment includes amortization of intangible assets
attributable to Markel Ventures.
|
|
Year Ended
December 31, 2022
|
(dollars in
thousands)
|
Insurance
|
|
Reinsurance
|
|
Investing
|
|
Markel
Ventures
|
|
Other
(1)
|
|
Consolidated
|
Gross premium
volume
|
$
8,606,700
|
|
$
1,229,851
|
|
$
—
|
|
$
—
|
|
$
3,365,131
|
|
$
13,201,682
|
Net written
premiums
|
7,040,176
|
|
1,167,312
|
|
—
|
|
—
|
|
(4,098)
|
|
8,203,390
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
6,528,263
|
|
1,063,347
|
|
—
|
|
—
|
|
(3,818)
|
|
7,587,792
|
Losses and loss
adjustment expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Current accident
year
|
(3,936,425)
|
|
(676,610)
|
|
—
|
|
—
|
|
—
|
|
(4,613,035)
|
Prior accident
years
|
142,924
|
|
26,052
|
|
—
|
|
—
|
|
(1,530)
|
|
167,446
|
Underwriting,
acquisition and insurance expenses
|
(2,184,891)
|
|
(328,930)
|
|
—
|
|
—
|
|
(1,762)
|
|
(2,515,583)
|
Underwriting profit
(loss)
|
549,871
|
|
83,859
|
|
—
|
|
—
|
|
(7,110)
|
|
626,620
|
Net investment
income
|
—
|
|
—
|
|
445,846
|
|
909
|
|
—
|
|
446,755
|
Net investment
losses
|
—
|
|
—
|
|
(1,595,733)
|
|
—
|
|
—
|
|
(1,595,733)
|
Products
revenues
|
—
|
|
—
|
|
—
|
|
2,427,096
|
|
—
|
|
2,427,096
|
Services and other
revenues
|
—
|
|
—
|
|
(17,661)
|
|
2,329,522
|
|
497,564
|
|
2,809,425
|
Products
expenses
|
—
|
|
—
|
|
—
|
|
(2,241,736)
|
|
—
|
|
(2,241,736)
|
Services and other
expenses
|
—
|
|
—
|
|
—
|
|
(2,111,510)
|
|
(195,125)
|
|
(2,306,635)
|
Amortization of
intangible assets (2)
|
—
|
|
—
|
|
—
|
|
(79,043)
|
|
(99,735)
|
|
(178,778)
|
Impairment of
goodwill
|
—
|
|
—
|
|
—
|
|
—
|
|
(80,000)
|
|
(80,000)
|
Operating income
(loss)
|
$
549,871
|
|
$
83,859
|
|
$
(1,167,548)
|
|
$
325,238
|
|
$
115,594
|
|
$
(92,986)
|
|
|
Year Ended
December 31, 2021
|
(dollars in
thousands)
|
Insurance
|
|
Reinsurance
|
|
Investing
|
|
Markel
Ventures
|
|
Other
(1)
|
|
Consolidated
|
Gross premium
volume
|
$
7,239,676
|
|
$
1,246,143
|
|
$
—
|
|
$
—
|
|
$
2,952,863
|
|
$
11,438,682
|
Net written
premiums
|
5,998,890
|
|
1,126,167
|
|
—
|
|
—
|
|
(5,326)
|
|
7,119,731
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned
premiums
|
5,465,284
|
|
1,042,048
|
|
—
|
|
—
|
|
(4,303)
|
|
6,503,029
|
Losses and loss
adjustment expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Current accident
year
|
(3,311,185)
|
|
(749,815)
|
|
—
|
|
—
|
|
—
|
|
(4,061,000)
|
Prior accident
years
|
506,292
|
|
(19,928)
|
|
—
|
|
—
|
|
(6,569)
|
|
479,795
|
Underwriting,
acquisition and insurance expenses
|
(1,963,978)
|
|
(327,543)
|
|
—
|
|
—
|
|
(2,218)
|
|
(2,293,739)
|
Underwriting profit
(loss)
|
696,413
|
|
(55,238)
|
|
—
|
|
—
|
|
(13,090)
|
|
628,085
|
Net investment
income
|
—
|
|
—
|
|
367,406
|
|
11
|
|
—
|
|
367,417
|
Net investment
gains
|
—
|
|
—
|
|
1,978,534
|
|
—
|
|
—
|
|
1,978,534
|
Products
revenues
|
—
|
|
—
|
|
—
|
|
1,712,120
|
|
—
|
|
1,712,120
|
Services and other
revenues
|
—
|
|
—
|
|
7,184
|
|
1,931,696
|
|
346,445
|
|
2,285,325
|
Products
expenses
|
—
|
|
—
|
|
—
|
|
(1,544,506)
|
|
—
|
|
(1,544,506)
|
Services and other
expenses
|
—
|
|
109
|
|
—
|
|
(1,769,201)
|
|
(253,843)
|
|
(2,022,935)
|
Amortization of
intangible assets (2)
|
—
|
|
—
|
|
—
|
|
(57,568)
|
|
(102,971)
|
|
(160,539)
|
Operating income
(loss)
|
$
696,413
|
|
$
(55,129)
|
|
$
2,353,124
|
|
$
272,552
|
|
$
(23,459)
|
|
$
3,243,501
|
|
|
(1)
|
Other represents the
total profit (loss) attributable to our operations that are not
included in a reportable segment as well as amortization of
intangible assets attributable to our underwriting segments, which
is not allocated between the Insurance and Reinsurance
segments.
|
(2)
|
Segment profit for the
Markel Ventures segment includes amortization of intangible assets
attributable to Markel Ventures.
|
Underwriting
Results
Components of
Quarter-to-Date Combined Ratio
|
|
|
Quarters Ended December
31,
|
|
2022
|
|
2021
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
Underwriting Ratios
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Loss ratio
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
loss ratio
|
57.7
%
|
|
63.5
%
|
|
58.5
%
|
|
56.2 %
|
|
69.3 %
|
|
58.2 %
|
Prior accident years
loss ratio
|
3.0
%
|
|
(4.8)
%
|
|
1.8
%
|
|
(7.1) %
|
|
(5.2) %
|
|
(6.3) %
|
Loss ratio
|
60.7
%
|
|
58.7
%
|
|
60.3
%
|
|
49.1 %
|
|
64.1 %
|
|
51.9 %
|
Expense
ratio
|
33.2
%
|
|
32.1
%
|
|
33.0
%
|
|
36.1 %
|
|
34.6 %
|
|
35.9 %
|
Combined
ratio
|
93.8
%
|
|
90.8
%
|
|
93.3
%
|
|
85.2 %
|
|
98.7 %
|
|
87.8 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
loss ratio catastrophe impact (2)
|
(1.3)
%
|
|
— %
|
|
(1.2)
%
|
|
0.4 %
|
|
2.5 %
|
|
0.7 %
|
Current accident year
loss ratio Russia-Ukraine conflict impact (2)
|
0.2
%
|
|
(0.9)
%
|
|
0.0
%
|
|
— %
|
|
— %
|
|
— %
|
Prior accident years
loss ratio COVID-19 impact (2)
|
(0.1)
%
|
|
(0.1)
%
|
|
(0.1)
%
|
|
(0.1) %
|
|
1.0 %
|
|
0.0 %
|
|
|
|
|
|
|
|
|
|
|
|
|
Current accident year
loss ratio, excluding catastrophes and Russia-Ukraine
conflict
|
58.9
%
|
|
64.4
%
|
|
59.6
%
|
|
55.8 %
|
|
66.8 %
|
|
57.5 %
|
Combined ratio,
excluding current year catastrophes, Russia-Ukraine conflict and
COVID-19
|
95.1
%
|
|
91.8
%
|
|
94.6
%
|
|
85.0 %
|
|
95.2 %
|
|
87.1 %
|
|
|
(1)
|
Amounts may not
reconcile due to rounding.
|
(2)
|
The point impact of
catastrophes, the Russia-Ukraine conflict and COVID-19 is
calculated as the associated net losses and loss adjustment
expenses divided by total earned premiums.
|
Net Income per Common
Share
|
|
|
Quarters Ended December
31,
|
|
Years Ended December
31,
|
(in thousands,
except per share amounts)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income (loss) to
common shareholders
|
$
671,710
|
|
$
853,129
|
|
$
(250,123)
|
|
$
2,389,003
|
Adjustment of
redeemable noncontrolling interests
|
(7,728)
|
|
5,321
|
|
(69,896)
|
|
46,874
|
Adjusted net income
(loss) to common shareholders
|
$
663,982
|
|
$
858,450
|
|
$
(320,019)
|
|
$
2,435,877
|
|
|
|
|
|
|
|
|
Basic common shares
outstanding
|
13,494
|
|
13,702
|
|
13,580
|
|
13,768
|
Dilutive potential
common shares from restricted stock units and restricted stock
(1)
|
42
|
|
47
|
|
—
|
|
32
|
Diluted common shares
outstanding
|
13,536
|
|
13,749
|
|
13,580
|
|
13,800
|
Basic net income (loss)
per common share
|
$
49.21
|
|
$
62.65
|
|
$
(23.57)
|
|
$
176.92
|
Diluted net income
(loss) per common share (1)
|
$
49.05
|
|
$
62.44
|
|
$
(23.57)
|
|
$
176.51
|
|
|
(1)
|
The impact of 33
thousand shares from restricted stock units and restricted stock
was excluded from the computation of diluted net loss per common
share for the year ended December 31, 2022 because the effect
would have been anti-dilutive.
|
Non-GAAP Financial Measures
Underwriting
In addition to the U.S. GAAP combined ratio, loss ratio and
expense ratio, we also evaluate our underwriting performance using
measures that exclude the impacts of certain items on these ratios.
We believe these adjusted measures, which are non-GAAP measures,
provide financial statement users with a better understanding of
the significant factors that comprise our underwriting results and
how management evaluates underwriting performance.
When analyzing our combined ratio, we exclude current accident
year losses and loss adjustment expenses attributed to natural
catastrophes. We also exclude losses and loss adjustment expenses
attributed to certain significant, infrequent loss events, for
example, the COVID-19 pandemic and the military conflict between
Russia and Ukraine. Due to the unique characteristics of
a catastrophe loss and other significant, infrequent events, there
is inherent variability as to the timing or loss amount, which
cannot be predicted in advance. We believe measures that exclude
the effects of catastrophe events, COVID-19 and the Russia-Ukraine conflict are meaningful to understand
the underlying trends and variability in our underwriting results
that may be obscured by these items.
When analyzing our loss ratio, we evaluate losses and loss
adjustment expenses attributable to the current accident year
separate from losses and loss adjustment expenses attributable to
prior accident years. Prior accident year reserve development,
which can either be favorable or unfavorable, represents changes in
our estimates of losses and loss adjustment expenses related to
loss events that occurred in prior years. We believe a discussion
of current accident year loss ratios, which exclude prior accident
year reserve development, is helpful since it provides more insight
into estimates of current underwriting performance and excludes
changes in estimates related to prior year loss reserves. We also
analyze our current accident year loss ratio excluding losses and
loss adjustment expenses attributable to catastrophes and, in 2022,
the Russia-Ukraine conflict. The current accident year
loss ratio excluding the impact of catastrophes and other
significant, infrequent loss events is also commonly referred to as
an attritional loss ratio within the property and casualty
insurance industry.
The components of our consolidated and segment combined ratios,
including the non-GAAP measures discussed above, are included in
"Underwriting Results".
Investing
One of the measures we use to evaluate our investment
performance is taxable equivalent total investment return, which is
a non-GAAP financial measure. Taxable equivalent total investment
return includes items that impact net income, such as coupon
interest on fixed maturity securities, changes in fair value of
equity securities, dividends on equity securities and realized
investment gains or losses on available-for-sale securities, as
well as changes in unrealized gains or losses on available-for-sale
securities, which do not impact net income. Certain items that are
included in net investment income have been excluded from the
calculation of taxable equivalent total investment return, such as
amortization and accretion of premiums and discounts on our fixed
maturity portfolio, to provide a comparable basis for measuring our
investment return against industry investment returns. The
calculation of taxable equivalent total investment return also
includes the current tax benefit associated with income on certain
investments that is either taxed at a lower rate than the statutory
income tax rate or is not fully included in U.S. taxable income. We
believe the taxable equivalent total investment return is a better
reflection of the economics of our decision to invest in certain
asset classes. We focus on our long-term investment return,
understanding that the level of investment gains or losses may vary
from one period to the next.
The following table reconciles investment yield to taxable
equivalent total investment return.
|
Years Ended December
31,
|
|
2022
|
|
2021
|
Investment yield
(1)
|
2.2
%
|
|
2.0 %
|
Adjustment of
investment yield from amortized cost to fair value
|
(0.5)
%
|
|
(0.6) %
|
Net amortization of
net premium on fixed maturity securities
|
0.4
%
|
|
0.4 %
|
Net investment gains
(losses) and change in net unrealized investment gains (losses) on
available-for-sale securities
|
(12.5)
%
|
|
5.9 %
|
Taxable equivalent
effect for interest and dividends (2)
|
0.1
%
|
|
0.1 %
|
Other
(3)
|
0.8
%
|
|
1.0 %
|
Taxable equivalent
total investment return
|
(9.5)
%
|
|
8.8 %
|
|
|
(1)
|
Investment yield
reflects net investment income as a percentage of monthly average
invested assets at amortized cost.
|
(2)
|
Adjustment to
tax-exempt interest and dividend income to reflect a taxable
equivalent basis.
|
(3)
|
Adjustment to reflect
the impact of time-weighting the inputs to the calculation of
taxable equivalent total investment return.
|
Markel Ventures
Markel Ventures EBITDA is a non-GAAP financial measure. We use
Markel Ventures EBITDA as an operating performance measure in
conjunction with U.S. GAAP measures, including operating income and
net income to shareholders, to monitor and evaluate the performance
of our Markel Ventures segment. Because EBITDA excludes interest,
income taxes, depreciation and amortization, it provides an
indicator of economic performance that is useful to both management
and investors in evaluating our Markel Ventures businesses as it is
not affected by levels of debt, interest rates, effective tax rates
or levels of depreciation or amortization resulting from purchase
accounting.
The following table reconciles Markel Ventures operating income
to Markel Ventures EBITDA.
|
Quarters Ended December
31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Markel Ventures
operating income
|
$
107,996
|
|
$
57,455
|
|
$
325,238
|
|
$
272,552
|
Depreciation
expense
|
26,751
|
|
24,898
|
|
102,055
|
|
72,580
|
Amortization of
intangible assets
|
18,966
|
|
16,464
|
|
79,043
|
|
57,568
|
Markel Ventures
EBITDA
|
$
153,713
|
|
$
98,817
|
|
$
506,336
|
|
$
402,700
|
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SOURCE Markel Corporation