RICHMOND, Va., Feb. 2, 2021 /PRNewswire/ -- Markel Corporation
(NYSE: MKL) today reported its financial results for the year ended
December 31, 2020.
The following tables present summary financial data for 2020 and
2019.
|
Years Ended December
31,
|
(in thousands,
except per share amounts)
|
2020
|
|
2019
|
Earned
premiums
|
$
|
5,612,205
|
|
|
$
|
5,049,793
|
|
Markel Ventures
operating revenues
|
$
|
2,794,959
|
|
|
$
|
2,055,020
|
|
Net investment
gains
|
$
|
617,979
|
|
|
$
|
1,601,722
|
|
Comprehensive income
to shareholders
|
$
|
1,191,634
|
|
|
$
|
2,093,888
|
|
Diluted net income
per common share
|
$
|
55.63
|
|
|
$
|
129.07
|
|
Combined
Ratio
|
98
|
%
|
|
94
|
%
|
|
|
|
|
(in thousands,
except per share amounts)
|
December 31,
2020
|
|
December 31,
2019
|
Book value per common
share outstanding
|
$
|
885.13
|
|
|
$
|
802.59
|
|
Common shares
outstanding
|
13,783
|
|
|
13,794
|
|
"Our insurance operations delivered an underwriting profit for
2020 in the face of significant losses attributable to the global
pandemic and the unusually high number of natural catastrophes as
we benefited from capturing meaningful rate increases and new
business in targeted growth areas globally, while exercising strong
expense discipline," commented Thomas S.
Gayner and Richard R. Whitt,
Co-Chief Executive Officers. "Encouragingly, for the fourth
quarter, we reported an 89% combined ratio, which included four
points of pandemic and catastrophe-related losses. Markel Ventures
also saw strong top and bottom line performance amid challenging
economic conditions and we achieved solid investment returns
despite volatile market conditions and historically low interest
rates."
"We are grateful and amazed by how our employees responded to
the global pandemic and continued to serve the needs of our
customers, trading partners, shareholders and each other," Gayner
and Whitt continued. "Markel enters 2021 well positioned to
continue the momentum of our excellent fourth quarter. We will help
our customers navigate continued near-term economic uncertainties
and cautiously look forward to greater opportunities as economies
around the world recover."
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 ourselves. Over the
five-year period ended December 31, 2020, the compound annual
growth in book value per common share outstanding was 10%. Over the
five-year period ended December 31, 2020, our share price
increased at a compound annual rate of 3%.
Results of
Operations
A summary of the results of operations attributable to our
underwriting, investing, Markel Ventures, insurance-linked
securities and program services operations, is included below.
Underwriting Results
The following table presents selected data from our underwriting
operations.
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
Earned
premiums
|
$
|
5,612,205
|
|
|
$
|
5,049,793
|
|
Losses and loss
adjustment expenses
|
$
|
3,466,961
|
|
|
$
|
2,891,190
|
|
Underwriting,
acquisition and insurance expenses
|
$
|
2,017,627
|
|
|
$
|
1,878,093
|
|
Underwriting
profit
|
$
|
127,617
|
|
|
$
|
280,510
|
|
Consolidated Combined
Ratio
|
98
|
%
|
|
94
|
%
|
Combined Ratio
Our consolidated combined ratio for 2020 included $360.4 million, or six points, of underwriting
loss attributed to COVID-19 and $168.9
million, or three points, of underwriting loss attributed to
natural catastrophes compared to $100.4
million, or two points, of catastrophe losses in 2019.
Excluding the impacts of COVID-19 and catastrophe losses, our
combined ratio improved due to a three point improvement in our
attritional loss ratio and a one point reduction in our expense
ratio arising from improved performance within our Insurance
segment in 2020 compared to 2019.
Our COVID-19 underwriting losses are primarily attributed to
business written within our international insurance operations and
are primarily associated with coverages for event cancellation and
business interruption losses in policies where no specific pandemic
exclusions exist.
Catastrophe losses in 2020 were attributed to Hurricanes Isaias,
Laura, Sally, Delta and Zeta, as well as wildfires in the western
U.S. and the derecho in Iowa (2020
Catastrophes). Catastrophe losses in 2019 were attributed to
Hurricane Dorian and Typhoons Faxai and Hagibis (2019
Catastrophes).
Insurance Segment
The combined ratio for the Insurance segment in 2020 was 96%
(including six points for underwriting losses attributed to
COVID-19 and three points for underwriting losses on the 2020
Catastrophes) compared to 93% in 2019.
The increase in the combined ratio was driven by the impact of
losses attributed to COVID-19 in 2020 and higher catastrophe losses
in 2020 compared to 2019, partially offset by a lower attritional
loss ratio and a lower expense ratio in 2020 compared to 2019.
Higher earned premiums in 2020 compared to 2019 had a favorable
impact on our expense ratio while reducing the benefit of the prior
accident years' loss ratio.
- Excluding the impact of losses attributed to COVID-19 and the
2020 and 2019 Catastrophes, the current accident year loss ratio
decreased primarily due to lower attritional loss ratios on our
property and professional liability product lines due to lower
attritional losses as well as a benefit from improved pricing in
2020. We also experienced lower attritional losses on our marine
and energy product lines in 2020, primarily due to changes in the
mix of business.
- The Insurance segment's 2020 combined ratio included
$554.6 million of favorable
development on prior years' loss reserves compared to $462.1 million in 2019. The increase in favorable
development was primarily due to more favorable development on our
professional liability product lines in 2020 compared to 2019 and
favorable development on our property product lines in 2020
compared to adverse development in 2019. These favorable changes
were partially offset by less favorable development on our general
liability product lines in 2020 compared to 2019. In 2020 and 2019,
favorable development was most significant on our general
liability, professional liability, workers' compensation and marine
and energy product lines.
- The decrease in the expense ratio in 2020 was primarily due to
the favorable impact of higher earned premiums in 2020 while
maintaining consistent levels of controllable expenses with
2019.
Reinsurance Segment
The combined ratio for the Reinsurance segment was 104% in both
2020 and 2019. In 2020, the Reinsurance segment combined ratio
included seven points for underwriting losses attributed to
COVID-19 and five points for underwriting losses on the 2020
Catastrophes. In 2019, the Reinsurance segment combined ratio
included 10 points for underwriting losses on the 2019
Catastrophes.
Excluding the impact of COVID-19 and catastrophe losses, the
combined ratio decreased in 2020 due to a lower attritional loss
ratio, partially offset by the impact of less favorable development
on prior accident years' loss reserves.
- Excluding the impact of losses attributed to COVID-19 and the
2020 and 2019 Catastrophes, the current accident year loss ratio
decreased primarily due to fewer large loss events across several
product lines in 2020 compared to 2019, most notably on our
property product lines.
- The Reinsurance segment's 2020 combined ratio included
$51.8 million of favorable
development on prior years' loss reserves compared to $64.8 million in 2019. The decrease in favorable
development was primarily due to more adverse development on our
public entity product lines in 2020, as well as less favorable
development on our whole account product line in 2020 compared to
2019. These unfavorable changes were partially offset by more
favorable development on our property product lines in 2020
compared to 2019. In 2020, favorable development was most
significant on our property product lines. In 2020 we also
recognized additional exposure related to net favorable premium
adjustments along with adverse development on certain of our
professional liability product lines. The favorable development on
prior years' loss reserves in 2019 was most significant on our
property and whole account product lines.
Premiums
|
Years Ended December
31,
|
|
Gross Written
Premiums
|
|
Earned
Premiums
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Insurance
|
$
|
6,029,024
|
|
|
$
|
5,320,253
|
|
|
$
|
4,688,448
|
|
|
$
|
4,144,073
|
|
Reinsurance
|
1,130,923
|
|
|
1,114,153
|
|
|
929,348
|
|
|
903,587
|
|
Other
underwriting
|
58
|
|
|
(79)
|
|
|
(170)
|
|
|
581
|
|
Total
Underwriting
|
7,160,005
|
|
|
6,434,327
|
|
|
5,617,626
|
|
|
5,048,241
|
|
Program services and
other
|
2,106,660
|
|
|
2,345,644
|
|
|
(5,421)
|
|
|
1,552
|
|
Total
|
$
|
9,266,665
|
|
|
$
|
8,779,971
|
|
|
$
|
5,612,205
|
|
|
$
|
5,049,793
|
|
Gross Premium Volume
Gross premium volume in our underwriting operations increased
11% in 2020, primarily due to an increase in gross premium volume
in our Insurance segment. Also impacting consolidated gross premium
volume were gross premiums written through our program services
business and other fronting arrangements, which decreased 10% in
2020. The decrease in gross premium volume in our program services
business was driven by the run-off of one large program and the
cancellation of an in-force book of policies related to another
large program. Substantially all gross premiums from our program
services business and other fronting arrangements were ceded to
third parties in 2020 and 2019. See "Other Operations" for further
discussion on gross premiums from our program services
operations.
Gross premium volume in our Insurance segment increased 13% in
2020, primarily driven by new business and more favorable rates
within our professional liability, general liability, personal
lines and marine and energy product lines.
Gross premium volume in our Reinsurance segment increased 2% in
2020, driven by higher gross premiums within our professional
liability and general liability product lines, partially offset by
lower gross premiums within our credit and surety product lines.
Higher gross premiums within our professional liability product
lines were primarily due to increased exposures and improved
pricing on renewals, as well as new business. Higher gross premiums
within our general liability product lines were primarily due to
new business, partially offset by decreased exposures on renewals.
Lower gross premiums within our credit and surety product lines in
2020 were primarily due to unfavorable premium adjustments.
Significant variability in gross premium volume can be expected in
our Reinsurance segment due to individually significant contracts
and multi-year contracts.
Net Retention
Net retention of gross premium volume for our underwriting
operations was 83% in 2020 and 84% in 2019. The decrease in net
retention in 2020 was driven by our Insurance segment, due in part
to a new quota share agreement to fully cede premiums on a program
that was put into run-off in 2020. Within our underwriting
operations, we purchase reinsurance and retrocessional reinsurance
in order to manage our net retention on individual risks and
overall exposure to losses, and enable us to write policies with
sufficient limits to meet policyholder needs.
In late 2020, we decided to discontinue writing
catastrophe-exposed property reinsurance within our Reinsurance
segment on a risk-bearing basis, and beginning January 1, 2021, any such business will either be
written directly by, or ceded to, our Nephila insurance-linked
securities (ILS) operations to be placed with third party capital
to the extent it fits the ILS investors' risk profile. For the year
ended December 31, 2020, gross and
net written premiums for this business were $221.2 million and $125.2
million, respectively.
Earned Premiums
Earned premiums increased 11% in 2020, primarily due to the
increase in gross premium volume within our Insurance segment on
our professional liability and general liability product lines, as
described above.
Investing Results
We measure investing results by our net investment income and
net investment gains as well as our taxable equivalent total
investment return. The following table summarizes our investment
performance.
|
Years Ended
December 31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
Net investment
income
|
$
|
371,830
|
|
|
$
|
451,888
|
|
Net investment
gains
|
$
|
617,979
|
|
|
$
|
1,601,722
|
|
Change in net
unrealized investment gains on available-for-sale investments
(1)
|
$
|
442,089
|
|
|
$
|
381,890
|
|
Investment yield
(2)
|
2.4
|
%
|
|
3.0
|
%
|
Taxable equivalent
total investment return, before foreign currency effect
|
8.6
|
%
|
|
14.4
|
%
|
Taxable equivalent
total investment return
|
9.4
|
%
|
|
14.6
|
%
|
Invested assets, end
of year
|
$
|
24,926,592
|
|
|
$
|
22,258,265
|
|
|
|
(1)
|
The increase in net
unrealized gains on available-for-sale securities was net of an
adjustment related to our life and annuity benefit reserves of
$68.2 million and $51.4 million for the years ended December 31,
2020 and 2019, respectively.
|
(2)
|
Investment yield
reflects net investment income as a percentage of monthly average
invested assets at amortized cost.
|
See Supplemental Financial Information below for a
reconciliation of investment yield to taxable equivalent total
investment return.
The decrease in net investment income in 2020 was driven
primarily by the impact of lower short-term interest rates on
short-term investment income. We also earned lower interest income
on our fixed maturity investment portfolio due to lower average
holdings of fixed maturity securities during 2020 compared to 2019
and a lower yield, as fixed maturity securities purchased in 2020
had lower interest rates than securities that matured or were
called or sold in 2020.
Net investment gains in both 2020 and 2019 were primarily
attributable to an increase in the fair value of equity securities.
Net investment gains for 2020 reflected significant market
volatility experienced during the year. The impact of significant
declines in the fair value of our equity portfolio in the first
quarter of 2020, driven by unfavorable market value movements
resulting from the onset of the COVID-19 pandemic, were more than
offset by increases in the fair value of our equity portfolio over
the last three quarters.
Markel Ventures
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. In April 2020, we acquired a controlling interest in
Lansing Building Products, LLC, a supplier of exterior building
products and materials to professional contractors throughout the
U.S., which simultaneously acquired the distribution business of
Harvey Building Products to enhance its geographic reach and scale
(together, Lansing). The following
table summarizes the results from our Markel Ventures segment.
|
Years Ended December 31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
Operating
revenues
|
$
|
2,794,959
|
|
|
$
|
2,055,020
|
|
Operating
income
|
$
|
254,078
|
|
|
$
|
168,417
|
|
EBITDA
|
$
|
366,934
|
|
|
$
|
263,944
|
|
Net income to
shareholders
|
$
|
145,449
|
|
|
$
|
92,901
|
|
See Supplemental Financial Information below for a
reconciliation of Markel Ventures operating income to Markel
Ventures earnings before interest, income taxes, depreciation and
amortization (EBITDA).
Operating revenues from our Markel Ventures segment increased in
2020 due to the contribution of revenues from Lansing, which was acquired in April 2020, and VSC Fire & Security, Inc.
(VSC), which was acquired in November
2019. Operating revenues in 2020 attributable to these
acquisitions totaled $915.7 million.
Excluding the contributions of Lansing and VSC in 2020, operating revenues
from our other Markel Ventures businesses decreased in 2020,
primarily due to lower sales volumes at our transportation-related
and equipment manufacturing businesses due in part to impacts
attributable to the economic and social disruption caused by the
COVID-19 pandemic. These decreases were partially offset by the
impact of higher sales volumes at one of our consumer and building
products businesses in 2020 compared to 2019.
Operating income and EBITDA from our Markel Ventures segment
increased in 2020 due in part to the acquisitions of Lansing and VSC, as well as higher sales
volumes at one of our consumer and building products businesses, as
described above. The increase in operating income and EBITDA in
2020 was also due to a loss recognized in 2019 related to the
disposition of certain components of one of our equipment
manufacturing businesses. These increases were partially offset by
the impact of lower operating revenues at our
transportation-related businesses, as described above.
Net income to shareholders from our Markel Ventures segment
increased in 2020, primarily due to higher operating income,
partially offset by higher interest expense and income tax
expense.
Other Operations
The following table presents the components of operating
revenues and operating expenses that are not included in a
reportable segment.
|
Years Ended December
31,
|
|
2020
|
|
2019
|
(dollars in
thousands)
|
Services and
other revenues
|
|
Services and
other expenses
|
|
Amortization of
intangible assets
|
|
Services and
other revenues
|
|
Services and
other expenses
|
|
Amortization of
intangible assets
|
Other
operations:
|
|
|
|
|
|
|
|
|
|
|
|
Insurance-linked
securities
|
$
|
212,307
|
|
|
$
|
231,473
|
|
|
$
|
38,447
|
|
|
$
|
225,604
|
|
|
$
|
217,412
|
|
|
$
|
43,360
|
|
Program
services
|
104,171
|
|
|
20,427
|
|
|
20,937
|
|
|
108,813
|
|
|
19,556
|
|
|
20,938
|
|
Life and
annuity
|
1,233
|
|
|
17,713
|
|
|
—
|
|
|
1,507
|
|
|
21,062
|
|
|
—
|
|
Other
|
20,627
|
|
|
17,896
|
|
|
5,453
|
|
|
32,580
|
|
|
28,264
|
|
|
2,700
|
|
|
338,338
|
|
|
287,509
|
|
|
64,837
|
|
|
368,504
|
|
|
286,294
|
|
|
66,998
|
|
Underwriting
operations
|
|
|
|
|
41,906
|
|
|
|
|
|
|
39,667
|
|
Total
|
$
|
338,338
|
|
|
$
|
287,509
|
|
|
$
|
106,743
|
|
|
$
|
368,504
|
|
|
$
|
286,294
|
|
|
$
|
106,665
|
|
Insurance-Linked Securities
The decrease in operating revenues in our insurance-linked
securities operations in 2020 was driven by lower revenues from our
Markel CATCo operations, which are in run-off, primarily due to
lower assets under management during 2020 compared to 2019 and a
further reduction in the management fee rate in 2020. This decrease
was partially offset by higher revenues from our Nephila
operations. Higher revenues from our Nephila operations in 2020
were due to growth in our managing general agent operations,
partially offset by lower investment management fees as a result of
lower assets under management.
Nephila's net assets under management were $9.6 billion and $10.4
billion as of December 31,
2020 and 2019, respectively. Our Markel CATCo operations had
net assets under management of $1.0
billion and $2.8 billion as of
December 31, 2020 and 2019,
respectively.
The increase in services and other expenses in our
insurance-linked securities operations in 2020 was primarily due to
an increase in expenses at our Nephila operations due to growth in
our managing general agent operations in 2020, partially offset by
a favorable impact from acquisition-related costs in 2019 that did
not recur in 2020. Services and other expenses at our Markel CATCo
operations in 2020 were consistent with 2019 as expenses associated
with a legal settlement in 2020 were offset by lower professional
fees and general operating expenses in 2020, as these operations
are in run-off. Services and other expenses for both periods also
reflect start-up costs associated with our new retrocessional
insurance-linked securities fund manager, Lodgepine.
Program Services
The decrease in operating revenues in our program services
operations in 2020 compared to 2019 was primarily due to lower
gross premium volume. Gross premiums in our program services
operations were $2.1 billion and
$2.3 billion for the years ended
December 31, 2020 and 2019,
respectively. The decrease in gross premium volume was driven by
the run-off of one large program and the cancellation of an
in-force book of policies related to another large program
resulting in a one-time unfavorable premium adjustment of
$55.0 million associated with the
return of unearned premium in 2020. These decreases were partially
offset by gross written premiums from new programs added in
2020.
Income Taxes
The effective tax rate was 17% in 2020 compared to 21% in 2019.
The effective tax rate for 2020 differs from the effective tax rate
for 2019 and the statutory rate of 21% primarily due to a tax
benefit that was recognized in 2020 for accumulated losses on
certain investments we sold that were not previously
deductible.
Financial Condition
Investments, cash and cash equivalents and restricted cash and
cash equivalents (invested assets) were $24.9 billion at December 31, 2020 compared
to $22.3 billion at December 31,
2019. The increase was primarily attributable to cash provided by
operating activities of $1.7 billion
in 2020. Net cash provided by operating activities increased from
$1.3 billion in 2019, primarily due
to higher net premium collections in our Insurance segment in
2020.
At December 31, 2020, our holding company held $4.1 billion of invested assets compared to
$4.0 billion of invested assets at
December 31, 2019. The increase in holding company invested
assets was primarily due to the proceeds from our preferred shares
offering and dividends from our subsidiaries, offset by cash used
in connection with the acquisition of Lansing.
Cautionary Disclosures about COVID-19 and Catastrophe Loss
Reserves
Our losses and loss adjustment expenses attributed to COVID-19
were primarily attributed to business written within our
international insurance operations and were primarily associated
with coverages for event cancellation and business interruption
losses in policies where no specific pandemic exclusions exist.
There are no recent historical events with similar characteristics
to COVID-19, and therefore we have no past loss experience on which
to base our estimates. Additionally, the economic and social
impacts of the pandemic continue to evolve. Due to the inherent
uncertainty associated with the assumptions surrounding the
COVID-19 pandemic, these estimates are subject to a wide range of
variability.
Our estimates for these losses and loss adjustment expenses
represent our best estimates as of December
31, 2020 based upon information currently available. These
estimates are based on reported claims, detailed policy level
reviews and reviews of in-force assumed reinsurance contracts for
potential exposures, as well as analysis of coverage provided by
our ceded reinsurance contracts and analysis provided by our
brokers and claims counsel. We also considered the results of
recent judicial rulings. However, assumptions about coverage,
liability and reinsurance continue to be subject to on-going
judicial review and may be subject to further government action.
Additionally, we have begun to see significant litigation involved
in the handling of business interruption claims associated with
COVID-19, and in certain instances, assessing the validity of
policy exclusions for pandemics and interpreting policy terms to
determine coverage for pandemics, which are also in the process of
being tested in various judicial systems. While we believe our net
reserves for losses and loss adjustment expenses for COVID-19 as of
December 31, 2020 are adequate based
on information available at this time, we continue to closely
monitor reported claims, government actions, judicial decisions and
changes in the levels of worldwide social disruption and economic
activity arising from the pandemic and will adjust our estimates of
gross and net losses as new information becomes available. Such
adjustments to our reserves for COVID-19 losses and loss adjustment
expenses may be material to our results of operations, financial
condition and cash flows.
We are also exposed to losses indirectly related to the COVID-19
pandemic and associated with a broader range of coverages,
including coverages within our trade credit, professional liability
and workers' compensation product lines, among others, as well as
our reinsurance product lines. Our net losses and loss adjustment
expenses in 2020 included $15.0
million of net losses and loss adjustment expenses in our
trade credit product line within our Insurance segment related to
losses that were indirectly attributable to the pandemic. We do not
believe any other significant indirect losses attributable to
COVID-19 have been incurred.
The net losses and loss adjustment expenses on the 2020
Catastrophes as of December 31, 2020
represent our best estimates based upon information currently
available. Our estimates for these losses are based on claims
received to date, detailed policy and reinsurance contract level
reviews, preliminary industry loss estimates and output from both
industry and proprietary models. Given the number of events
comprising the 2020 Catastrophes, and in certain instances, the
limited claims activity thus far, these estimates are still
dependent on broad assumptions about coverage, liability and
reinsurance and are therefore subject to a wide range of
variability. While we believe our reserves for the 2020
Catastrophes as of December 31, 2020
are adequate, we continue to closely monitor reported claims and
will adjust our estimates of gross and net losses as new
information becomes available.
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" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in our 2019 Annual Report on
Form 10-K, and under "Risk Factors" and Management's Discussion and
Analysis of Financial Condition and Results of Operations-Recent
Developments Related to COVID-19" in our most recent Quarterly
Report on Form 10-Q or are included in the items listed below:
- current global economic, market and industry conditions, as
well as significant volatility, uncertainty and disruption caused
by the COVID-19 pandemic, including governmental, legislative,
judicial or regulatory actions or developments affecting our
businesses;
- 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 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 legal and social
trends, and inherent 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 increases 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 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 and economic and currency concerns;
- the impacts that political and civil unrest and regional
conflicts 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 impacts that health epidemics and pandemics, including the
COVID-19 pandemic, as well as actions of local, state and federal
authorities in response thereto, may have on our business
operations and claims activity;
- the impact on our businesses in the event of a repeal, in part
or in whole, or modification of U.S. health care reform legislation
and regulations;
- 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 enterprise information
technology systems that we use or a failure to comply with data
protection or privacy regulations;
- outsourced 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 executive officer or other key
personnel 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, operational and economic risks,
including foreign currency exchange rate and credit risk;
- the political, legal, regulatory, financial, tax and general
economic impacts, and other impacts we cannot anticipate, related
to the United Kingdom's withdrawal
from the European Union (Brexit), which could have adverse
consequences for our businesses, particularly our London-based international insurance
operations;
- 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 revolving credit facility, 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; 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 and commercial construction markets;
liability for environmental matters; volatility in the market
prices for their products; and volatility in commodity 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. In addition, with respect to
previously reported developments at Markel CATCo and the decision
to place both the Markel CATCo Reinsurance Fund Ltd., a
Bermuda exempted mutual fund
company comprised of multiple segregated accounts, and Markel CATCo
Re Ltd. (Markel CATCo Re) into run-off:
- the inquiries by the U.S. Department of Justice, U.S.
Securities and Exchange Commission and Bermuda Monetary Authority
into loss reserves recorded in late 2017 and early 2018 at Markel
CATCo Re (the Markel CATCo Inquiries) may result in adverse
findings, reputational damage, the imposition of sanctions,
increased costs, litigation and other negative consequences;
and
- management time and resources may be diverted to address the
Markel CATCo Inquiries, as well as related litigation.
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.
Our previously announced conference call, which will involve
discussion of our financial results and business developments and
may include forward-looking information, will be held Wednesday, February 3, 2021, beginning at
9:30 a.m. (Eastern Time). Investors,
analysts and the general public may listen to the call free over
the Internet through Markel Corporation's website, www.markel.com.
Any person needing additional information can contact Markel's
Investor Relations Department at investorrelations@markel.com. A
replay of the call also will be available on our website from
approximately one hour after the conclusion of the call until
Monday, February 15, 2021.
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 and Comprehensive Income
|
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands, except per share data)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
OPERATING
REVENUES
|
|
|
|
|
|
|
|
Earned
premiums
|
$
|
1,526,894
|
|
|
$
|
1,346,323
|
|
|
$
|
5,612,205
|
|
|
$
|
5,049,793
|
|
Net investment
income
|
97,588
|
|
|
112,493
|
|
|
371,830
|
|
|
451,888
|
|
Net investment
gains
|
848,875
|
|
|
531,734
|
|
|
617,979
|
|
|
1,601,722
|
|
Products
revenues
|
321,734
|
|
|
372,408
|
|
|
1,439,515
|
|
|
1,609,586
|
|
Services and other
revenues
|
560,559
|
|
|
218,571
|
|
|
1,693,537
|
|
|
813,202
|
|
Total Operating
Revenues
|
3,355,650
|
|
|
2,581,529
|
|
|
9,735,066
|
|
|
9,526,191
|
|
OPERATING
EXPENSES
|
|
|
|
|
|
|
|
Losses and loss
adjustment expenses
|
814,150
|
|
|
773,190
|
|
|
3,466,961
|
|
|
2,891,190
|
|
Underwriting,
acquisition and insurance expenses
|
540,278
|
|
|
485,346
|
|
|
2,017,627
|
|
|
1,878,093
|
|
Products
expenses
|
281,234
|
|
|
356,277
|
|
|
1,256,159
|
|
|
1,455,245
|
|
Services and other
expenses
|
536,387
|
|
|
176,919
|
|
|
1,561,120
|
|
|
675,679
|
|
Amortization of
intangible assets
|
39,039
|
|
|
35,975
|
|
|
159,315
|
|
|
148,638
|
|
Total Operating
Expenses
|
2,211,088
|
|
|
1,827,707
|
|
|
8,461,182
|
|
|
7,048,845
|
|
Operating
Income
|
1,144,562
|
|
|
753,822
|
|
|
1,273,884
|
|
|
2,477,346
|
|
Interest
expense
|
(44,381)
|
|
|
(42,665)
|
|
|
(177,582)
|
|
|
(171,687)
|
|
Net foreign exchange
losses
|
(87,117)
|
|
|
(59,266)
|
|
|
(95,853)
|
|
|
(2,265)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(10,881)
|
|
|
—
|
|
|
(17,586)
|
|
Income Before Income
Taxes
|
1,013,064
|
|
|
641,010
|
|
|
1,000,449
|
|
|
2,285,808
|
|
Income tax
expense
|
(165,635)
|
|
|
(129,497)
|
|
|
(168,682)
|
|
|
(486,346)
|
|
Net Income
|
847,429
|
|
|
511,513
|
|
|
831,767
|
|
|
1,799,462
|
|
Net income
attributable to noncontrolling interests
|
(130)
|
|
|
(409)
|
|
|
(15,737)
|
|
|
(8,996)
|
|
Net Income to
Shareholders
|
847,299
|
|
|
511,104
|
|
|
816,030
|
|
|
1,790,466
|
|
Preferred stock
dividends
|
(18,400)
|
|
|
—
|
|
|
(18,400)
|
|
|
—
|
|
Net Income to Common
Shareholders
|
$
|
828,899
|
|
|
$
|
511,104
|
|
|
$
|
797,630
|
|
|
$
|
1,790,466
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
Change in net
unrealized gains on available-for-sale investments, net of
taxes:
|
|
|
|
|
|
|
|
Net holding gains
(losses) arising during the period
|
$
|
54,672
|
|
|
$
|
(29,988)
|
|
|
$
|
356,159
|
|
|
$
|
299,125
|
|
Reclassification
adjustments for net gains (losses) included in net
income
|
174
|
|
|
(1,908)
|
|
|
(3,386)
|
|
|
(1,148)
|
|
Change in net
unrealized gains on available-for-sale investments, net of
taxes
|
54,846
|
|
|
(31,896)
|
|
|
352,773
|
|
|
297,977
|
|
Change in foreign
currency translation adjustments, net of taxes
|
38,230
|
|
|
6,360
|
|
|
29,847
|
|
|
382
|
|
Change in net
actuarial pension loss, net of taxes
|
(8,420)
|
|
|
2,704
|
|
|
(6,998)
|
|
|
5,042
|
|
Total Other
Comprehensive Income (Loss)
|
84,656
|
|
|
(22,832)
|
|
|
375,622
|
|
|
303,401
|
|
Comprehensive
Income
|
932,085
|
|
|
488,681
|
|
|
1,207,389
|
|
|
2,102,863
|
|
Comprehensive income
attributable to noncontrolling interests
|
(124)
|
|
|
(437)
|
|
|
(15,755)
|
|
|
(8,975)
|
|
Comprehensive Income
to Shareholders
|
$
|
931,961
|
|
|
$
|
488,244
|
|
|
$
|
1,191,634
|
|
|
$
|
2,093,888
|
|
|
|
|
|
|
|
|
|
NET INCOME PER COMMON
SHARE
|
|
|
|
|
|
|
|
Basic
|
$
|
59.44
|
|
|
$
|
36.34
|
|
|
$
|
55.67
|
|
|
$
|
129.25
|
|
Diluted
|
$
|
59.33
|
|
|
$
|
36.26
|
|
|
$
|
55.63
|
|
|
$
|
129.07
|
|
Markel Corporation
and Subsidiaries
Selected
Data
|
|
|
December
31,
|
(in thousands,
except per share data)
|
2020
|
|
2019
|
Total investments,
cash and cash equivalents and restricted cash and cash
equivalents
|
$
|
24,926,592
|
|
|
$
|
22,258,265
|
|
Reinsurance
recoverables
|
5,989,337
|
|
|
5,432,712
|
|
Goodwill and
intangible assets
|
4,387,342
|
|
|
4,047,022
|
|
Total
assets
|
41,710,054
|
|
|
37,473,815
|
|
Unpaid losses and
loss adjustment expenses
|
16,222,376
|
|
|
14,728,676
|
|
Unearned
premiums
|
4,433,245
|
|
|
4,057,727
|
|
Senior long-term debt
and other debt
|
3,484,023
|
|
|
3,534,183
|
|
Total shareholders'
equity
|
12,799,789
|
|
|
11,070,867
|
|
Book value per common
share outstanding
|
$
|
885.13
|
|
|
$
|
802.59
|
|
Common shares
outstanding
|
13,783
|
|
|
13,794
|
|
Markel Corporation
and Subsidiaries
Supplemental
Financial Information
For the Quarters
and Years Ended December 31, 2020 and 2019
|
|
Components of
Consolidated Operating Income
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Insurance segment
profit (1)
|
$
|
165,342
|
|
|
$
|
128,833
|
|
|
$
|
169,001
|
|
|
$
|
309,778
|
|
Reinsurance segment
loss (1)
|
(31,385)
|
|
|
(45,696)
|
|
|
(75,470)
|
|
|
(39,999)
|
|
Investing segment
profit (2)
|
946,460
|
|
|
644,103
|
|
|
989,564
|
|
|
2,052,874
|
|
Markel Ventures
segment profit (3)
|
53,312
|
|
|
21,361
|
|
|
254,078
|
|
|
168,417
|
|
Other operations
(4)
|
10,833
|
|
|
5,221
|
|
|
(63,289)
|
|
|
(13,724)
|
|
Consolidated Operating
Income
|
$
|
1,144,562
|
|
|
$
|
753,822
|
|
|
$
|
1,273,884
|
|
|
$
|
2,477,346
|
|
|
|
(1)
|
Segment profit (loss)
for each of the Company's underwriting segments includes
underwriting profit (loss), as well as other revenues and expenses
attributable to our underwriting operations that are not captured
in underwriting profit (loss). The Reinsurance segment loss for the
quarter and year ended December 31, 2020 included a disposal loss
of $41.5 million attributable to the planned disposition of the
Company's reinsurance operations in Latin America, which is not
included in the segment's underwriting profit (loss).
|
(2)
|
Net investment income
and net investment gains, if any, attributable to Markel Ventures
are included in segment profit for Markel Ventures. All other net
investment income and net investment gains are included in
Investing segment profit.
|
(3)
|
Segment profit for
the Markel Ventures segment includes amortization of intangible
assets attributable to Markel Ventures.
|
(4)
|
Other operations
includes the results 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 $41.9 million and $39.7
million for the years ended December 31, 2020 and 2019,
respectively; however, the Company does not allocate amortization
of intangible assets between the Insurance and Reinsurance
segments.
|
|
|
Gross Written
Premiums
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Insurance
|
$
|
1,546,875
|
|
|
$
|
1,340,694
|
|
|
$
|
6,029,024
|
|
|
$
|
5,320,253
|
|
Reinsurance
|
172,395
|
|
|
151,008
|
|
|
1,130,923
|
|
|
1,114,153
|
|
Other
underwriting
|
3
|
|
|
(91)
|
|
|
58
|
|
|
(79)
|
|
Total
Underwriting
|
1,719,273
|
|
|
1,491,611
|
|
|
7,160,005
|
|
|
6,434,327
|
|
Program services and
other
|
578,643
|
|
|
521,679
|
|
|
2,106,660
|
|
|
2,345,644
|
|
Total
|
$
|
2,297,916
|
|
|
$
|
2,013,290
|
|
|
$
|
9,266,665
|
|
|
$
|
8,779,971
|
|
|
|
|
|
|
|
|
|
Net Written
Premiums
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Insurance
|
$
|
1,293,895
|
|
|
$
|
1,138,255
|
|
|
$
|
4,977,662
|
|
|
$
|
4,444,702
|
|
Reinsurance
|
139,550
|
|
|
119,998
|
|
|
960,123
|
|
|
964,947
|
|
Other
underwriting
|
(221)
|
|
|
482
|
|
|
(170)
|
|
|
581
|
|
Total
Underwriting
|
1,433,224
|
|
|
1,258,735
|
|
|
5,937,615
|
|
|
5,410,230
|
|
Program services and
other
|
(1,135)
|
|
|
221
|
|
|
(5,377)
|
|
|
1,841
|
|
Total
|
$
|
1,432,089
|
|
|
$
|
1,258,956
|
|
|
$
|
5,932,238
|
|
|
$
|
5,412,071
|
|
|
|
|
|
|
|
|
|
Net Earned
Premiums
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Insurance
|
$
|
1,287,688
|
|
|
$
|
1,120,208
|
|
|
$
|
4,688,448
|
|
|
$
|
4,144,073
|
|
Reinsurance
|
240,464
|
|
|
225,205
|
|
|
929,348
|
|
|
903,587
|
|
Other
underwriting
|
(221)
|
|
|
482
|
|
|
(170)
|
|
|
581
|
|
Total
Underwriting
|
1,527,931
|
|
|
1,345,895
|
|
|
5,617,626
|
|
|
5,048,241
|
|
Program services and
other
|
(1,037)
|
|
|
428
|
|
|
(5,421)
|
|
|
1,552
|
|
Total
|
$
|
1,526,894
|
|
|
$
|
1,346,323
|
|
|
$
|
5,612,205
|
|
|
$
|
5,049,793
|
|
|
|
|
|
|
|
|
|
Combined
Ratios
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Insurance
|
87
|
%
|
|
89
|
%
|
|
96
|
%
|
|
93
|
%
|
Reinsurance
|
96
|
%
|
|
120
|
%
|
|
104
|
%
|
|
104
|
%
|
Consolidated
|
89
|
%
|
|
93
|
%
|
|
98
|
%
|
|
94
|
%
|
|
Products, Services
and Other Revenues
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Products
revenues:
|
|
|
|
|
|
|
|
Markel
Ventures
|
$
|
321,734
|
|
|
$
|
372,408
|
|
|
$
|
1,439,515
|
|
|
$
|
1,609,586
|
|
Services and other
revenues:
|
|
|
|
|
|
|
|
Markel
Ventures
|
$
|
459,730
|
|
|
$
|
114,045
|
|
|
$
|
1,355,199
|
|
|
$
|
444,698
|
|
Insurance-linked
securities
|
66,042
|
|
|
67,034
|
|
|
212,307
|
|
|
225,604
|
|
Program
services
|
29,610
|
|
|
29,418
|
|
|
104,171
|
|
|
108,813
|
|
Life and
annuity
|
162
|
|
|
362
|
|
|
1,233
|
|
|
1,507
|
|
Other
|
5,015
|
|
|
7,712
|
|
|
20,627
|
|
|
32,580
|
|
Total services and
other revenues
|
$
|
560,559
|
|
|
$
|
218,571
|
|
|
$
|
1,693,537
|
|
|
$
|
813,202
|
|
|
Products, Services
and Other Expenses
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Products
expenses:
|
|
|
|
|
|
|
|
Markel
Ventures
|
$
|
281,234
|
|
|
$
|
356,277
|
|
|
$
|
1,256,159
|
|
|
$
|
1,455,245
|
|
Services and other
expenses:
|
|
|
|
|
|
|
|
Markel
Ventures
|
$
|
433,648
|
|
|
$
|
98,640
|
|
|
$
|
1,232,150
|
|
|
$
|
389,385
|
|
Insurance-linked
securities
|
47,659
|
|
|
58,406
|
|
|
231,473
|
|
|
217,412
|
|
Program
services
|
4,354
|
|
|
5,256
|
|
|
20,427
|
|
|
19,556
|
|
Life and
annuity
|
5,100
|
|
|
6,778
|
|
|
17,713
|
|
|
21,062
|
|
Underwriting
(1)
|
41,461
|
|
|
—
|
|
|
41,461
|
|
|
—
|
|
Other
|
4,165
|
|
|
7,839
|
|
|
17,896
|
|
|
28,264
|
|
Total services and
other expenses
|
$
|
536,387
|
|
|
$
|
176,919
|
|
|
$
|
1,561,120
|
|
|
$
|
675,679
|
|
|
|
(1)
|
Other expenses
attributable to the Company's underwriting operations for the
quarter and year ended December 31, 2020 represents a disposal loss
attributable to the planned disposition of the Company's
reinsurance operations in Latin America, which was not included in
the Reinsurance segment's underwriting profit (loss).
|
Net Income per
Common Share
|
|
The following table
presents net income per common share and diluted net income per
common share.
|
|
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(in thousands,
except per share amounts)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income to common
shareholders
|
$
|
828,899
|
|
|
$
|
511,104
|
|
|
$
|
797,630
|
|
|
$
|
1,790,466
|
|
Adjustment of
redeemable noncontrolling interests
|
(8,024)
|
|
|
(8,359)
|
|
|
(28,705)
|
|
|
1,105
|
|
Adjusted net income
to common shareholders
|
$
|
820,875
|
|
|
$
|
502,745
|
|
|
$
|
768,925
|
|
|
$
|
1,791,571
|
|
|
|
|
|
|
|
|
|
Basic common shares
outstanding
|
13,811
|
|
|
13,835
|
|
|
13,811
|
|
|
13,861
|
|
Dilutive potential
common shares from restricted stock units and restricted stock
(1)
|
24
|
|
|
29
|
|
|
12
|
|
|
20
|
|
Diluted common shares
outstanding
|
13,835
|
|
|
13,864
|
|
|
13,823
|
|
|
13,881
|
|
Basic net income per
common share
|
$
|
59.44
|
|
|
$
|
36.34
|
|
|
$
|
55.67
|
|
|
$
|
129.25
|
|
Diluted net income
per common share
|
$
|
59.33
|
|
|
$
|
36.26
|
|
|
$
|
55.63
|
|
|
$
|
129.07
|
|
|
|
(1)
|
The Company has an
equity incentive compensation plan that provides for grants and
awards of restricted stock units to employees as a performance,
retention or hiring incentive. The plan also provides for awards of
restricted stock to non-employee directors. At December 31,
2020, there were 179,565 shares available for future awards under
the Company's equity incentive compensation plan.
|
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 underwriting
losses attributed to natural catastrophes and certain significant,
infrequent loss events, for example, the COVID-19 pandemic in 2020.
Due to the unique characteristics of a catastrophe loss, there is
inherent variability as to the timing or loss amount, which cannot
be predicted in advance. The same is true for the COVID-19
pandemic, as there are no events in recent history with
characteristics similar to COVID-19. We believe measures that
exclude the effects of catastrophe events, and COVID-19, 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 loss ratios excluding losses and loss adjustment
expenses attributable to catastrophes, and in 2020, the COVID-19
pandemic, for the reasons previously discussed. The current
accident year loss ratio excluding the impact of catastrophes and
significant, infrequent loss events is also commonly referred to as
an attritional loss ratio within the property and casualty
insurance industry.
The following tables reconcile the combined ratio to the
combined ratio excluding the impact of COVID-19 and catastrophes,
by underwriting segment.
|
Quarters Ended
December 31,
|
|
2020
|
|
2019
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
Combined
ratio
|
87.2
|
%
|
|
95.8
|
%
|
|
88.7
|
%
|
|
88.5
|
%
|
|
120.3
|
%
|
|
93.5
|
%
|
COVID-19
impact
|
0.7
|
%
|
|
1.9
|
%
|
|
0.9
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Catastrophe
impact
|
(4.5)
|
%
|
|
(4.3)
|
%
|
|
(4.5)
|
%
|
|
0.5
|
%
|
|
(28.5)
|
%
|
|
(4.4)
|
%
|
Combined ratio,
excluding COVID-19 and catastrophes
|
83.4
|
%
|
|
93.4
|
%
|
|
85.1
|
%
|
|
89.0
|
%
|
|
91.8
|
%
|
|
89.1
|
%
|
|
Years Ended
December 31,
|
|
2020
|
|
2019
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
Combined
ratio
|
96.4
|
%
|
|
103.7
|
%
|
|
97.7
|
%
|
|
92.5
|
%
|
|
104.4
|
%
|
|
94.4
|
%
|
COVID-19
impact
|
(6.4)
|
%
|
|
(6.6)
|
%
|
|
(6.4)
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Catastrophe
impact
|
(2.7)
|
%
|
|
(4.8)
|
%
|
|
(3.0)
|
%
|
|
(0.2)
|
%
|
|
(10.3)
|
%
|
|
(2.0)
|
%
|
Combined ratio,
excluding COVID-19 and catastrophes
|
87.3
|
%
|
|
92.3
|
%
|
|
88.3
|
%
|
|
92.3
|
%
|
|
94.1
|
%
|
|
92.4
|
%
|
The following tables reconcile the loss ratio to the current
accident year loss ratio excluding the impact of COVID-19 and
catastrophes, by underwriting segment.
|
Quarters Ended
December 31,
|
|
2020
|
|
2019
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
Loss ratio
|
52.0
|
%
|
|
59.6
|
%
|
|
53.3
|
%
|
|
51.8
|
%
|
|
86.4
|
%
|
|
57.4
|
%
|
Impact of favorable
development on prior accident years' loss reserves
|
11.6
|
%
|
|
9.4
|
%
|
|
11.2
|
%
|
|
13.6
|
%
|
|
19.6
|
%
|
|
14.7
|
%
|
Current accident year
loss ratio
|
63.6
|
%
|
|
69.0
|
%
|
|
64.5
|
%
|
|
65.4
|
%
|
|
106.0
|
%
|
|
72.1
|
%
|
COVID-19
impact
|
0.7
|
%
|
|
1.9
|
%
|
|
0.9
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Catastrophe
impact
|
(4.5)
|
%
|
|
(4.6)
|
%
|
|
(4.5)
|
%
|
|
0.5
|
%
|
|
(29.3)
|
%
|
|
(4.6)
|
%
|
Current accident year
loss ratio, excluding COVID-19 and catastrophes
|
59.8
|
%
|
|
66.3
|
%
|
|
60.9
|
%
|
|
65.9
|
%
|
|
76.7
|
%
|
|
67.5
|
%
|
|
Years Ended
December 31,
|
|
2020
|
|
2019
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
|
Insurance
|
|
Reinsurance
|
|
Consolidated
|
Loss ratio
|
60.1
|
%
|
|
69.8
|
%
|
|
61.8
|
%
|
|
54.7
|
%
|
|
69.8
|
%
|
|
57.3
|
%
|
Impact of favorable
development on prior accident years' loss reserves
|
11.8
|
%
|
|
5.6
|
%
|
|
10.8
|
%
|
|
11.2
|
%
|
|
7.2
|
%
|
|
10.6
|
%
|
Current accident year
loss ratio
|
71.9
|
%
|
|
75.4
|
%
|
|
72.6
|
%
|
|
65.9
|
%
|
|
77.0
|
%
|
|
67.9
|
%
|
COVID-19
impact
|
(6.4)
|
%
|
|
(6.7)
|
%
|
|
(6.4)
|
%
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Catastrophe
impact
|
(2.7)
|
%
|
|
(4.9)
|
%
|
|
(3.0)
|
%
|
|
(0.2)
|
%
|
|
(10.7)
|
%
|
|
(2.1)
|
%
|
Current accident year
loss ratio, excluding COVID-19 and catastrophes
|
62.8
|
%
|
|
63.8
|
%
|
|
63.2
|
%
|
|
65.7
|
%
|
|
66.3
|
%
|
|
65.8
|
%
|
Investing
We evaluate our investment performance by analyzing 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,
|
|
2020
|
|
2019
|
Investment yield
(1)
|
2.4
|
%
|
|
3.0
|
%
|
Adjustment of investment
yield from amortized cost to fair value
|
(0.5)
|
%
|
|
(0.7)
|
%
|
Net amortization of net premium on fixed maturity
securities
|
0.4
|
%
|
|
0.4
|
%
|
Net investment gains and change in net unrealized investment
gains on available-for-sale securities
|
5.8
|
%
|
|
10.3
|
%
|
Taxable equivalent effect for interest and dividends
(2)
|
0.1
|
%
|
|
0.2
|
%
|
Other (3)
|
1.2
|
%
|
|
1.4
|
%
|
Taxable equivalent
total investment return
|
9.4
|
%
|
|
14.6
|
%
|
|
|
(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 revenues,
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 earnings before interest, income taxes,
depreciation and amortization (EBITDA).
|
Quarters Ended
December 31,
|
|
Years Ended December
31,
|
(dollars in
thousands)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Markel Ventures
operating income
|
$
|
53,312
|
|
|
$
|
21,361
|
|
|
$
|
254,078
|
|
|
$
|
168,417
|
|
Depreciation
expense
|
16,813
|
|
|
13,153
|
|
|
60,284
|
|
|
53,554
|
|
Amortization of intangible
assets
|
13,273
|
|
|
10,299
|
|
|
52,572
|
|
|
41,973
|
|
Markel Ventures
EBITDA
|
$
|
83,398
|
|
|
$
|
44,813
|
|
|
$
|
366,934
|
|
|
$
|
263,944
|
|
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multimedia:http://www.prnewswire.com/news-releases/markel-reports-2020-financial-results-301220673.html
SOURCE Markel Corporation