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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
FORM
10-Q
______________________________________________________________________________________
☒ Quarterly
report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended
September 30, 2022
or
☐ Transition
report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to
_______
Commission File Number: 001-15811
_________________________________________
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________
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Virginia |
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54-1959284 |
(State or other jurisdiction of
incorporation or organization) |
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(I.R.S. Employer
Identification No.) |
4521 Highwoods Parkway, Glen Allen, Virginia
23060-6148
(Address of principal executive offices) (Zip Code)
(804) 747-0136
(Registrant's
telephone number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of exchange on which registered |
Common Stock, no par value |
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MKL |
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New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90
days. Yes x No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). Yes x
No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of "large accelerated filer," "accelerated filer,"
"smaller reporting company," and "emerging growth company" in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
x |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
Emerging growth company |
☐ |
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No x
Number of shares of the registrant's common stock outstanding at
October 25, 2022: 13,450,401
Markel Corporation
Form 10-Q
Index
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Page Number |
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Item 1. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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September 30,
2022 |
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December 31,
2021 |
(dollars in thousands) |
(unaudited) |
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ASSETS |
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Investments, at estimated fair value: |
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Fixed maturity securities, available-for-sale (amortized cost of
$12,845,579 in 2022 and $12,061,467 in 2021)
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$ |
11,726,357 |
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$ |
12,587,305 |
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Equity securities (cost of $3,005,729 in 2022 and $2,867,899 in
2021)
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6,950,357 |
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9,023,927 |
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Short-term investments, available-for-sale (estimated fair value
approximates cost) |
2,424,844 |
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1,799,988 |
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Total Investments |
21,101,558 |
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23,411,220 |
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Cash and cash equivalents |
3,540,690 |
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3,978,490 |
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Restricted cash and cash equivalents |
1,255,178 |
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902,457 |
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Receivables |
2,956,686 |
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2,413,938 |
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Reinsurance recoverables |
8,258,499 |
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7,293,555 |
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Deferred policy acquisition costs |
946,064 |
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794,145 |
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Prepaid reinsurance premiums |
2,285,959 |
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1,798,571 |
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Goodwill |
2,797,426 |
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2,899,140 |
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Intangible assets |
1,686,212 |
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1,822,486 |
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Other assets |
3,593,083 |
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3,163,094 |
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Total Assets |
$ |
48,421,355 |
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$ |
48,477,096 |
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LIABILITIES AND EQUITY |
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Unpaid losses and loss adjustment expenses |
$ |
20,194,374 |
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$ |
18,178,894 |
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Life and annuity benefits |
733,489 |
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902,980 |
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Unearned premiums |
6,514,980 |
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5,383,619 |
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Payables to insurance and reinsurance companies |
685,294 |
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616,665 |
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Senior long-term debt and other debt (estimated fair value of
$3,520,000 in 2022 and $5,017,000 in 2021)
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4,131,165 |
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4,361,266 |
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Other liabilities |
3,290,291 |
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3,832,084 |
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Total Liabilities |
35,549,593 |
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33,275,508 |
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Redeemable noncontrolling interests |
513,043 |
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461,378 |
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Commitments and contingencies |
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Shareholders' equity: |
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Preferred stock |
591,891 |
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591,891 |
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Common stock |
3,482,828 |
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3,441,079 |
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Retained earnings |
9,255,658 |
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10,446,763 |
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Accumulated other comprehensive income (loss) |
(1,036,454) |
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237,617 |
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Total Shareholders' Equity |
12,293,923 |
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14,717,350 |
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Noncontrolling interests |
64,796 |
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22,860 |
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Total Equity |
12,358,719 |
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14,740,210 |
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Total Liabilities and Equity |
$ |
48,421,355 |
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$ |
48,477,096 |
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See accompanying notes to consolidated financial
statements.
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME
(LOSS)
(Unaudited)
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|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
(dollars in thousands, except per share data) |
|
|
|
|
|
|
|
OPERATING REVENUES |
|
|
|
|
|
|
|
Earned premiums |
$ |
1,956,830 |
|
|
$ |
1,630,500 |
|
|
$ |
5,549,704 |
|
|
$ |
4,696,232 |
|
Net investment income |
107,731 |
|
|
91,264 |
|
|
274,123 |
|
|
284,095 |
|
Net investment gains (losses) |
(281,483) |
|
|
(25,833) |
|
|
(2,194,525) |
|
|
1,175,791 |
|
Products revenues |
586,531 |
|
|
405,711 |
|
|
1,845,111 |
|
|
1,327,144 |
|
Services and other revenues |
696,536 |
|
|
585,712 |
|
|
1,990,175 |
|
|
1,605,058 |
|
Total Operating Revenues |
3,066,145 |
|
|
2,687,354 |
|
|
7,464,588 |
|
|
9,088,320 |
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
Losses and loss adjustment expenses |
1,185,313 |
|
|
948,241 |
|
|
3,216,495 |
|
|
2,643,114 |
|
Underwriting, acquisition and insurance expenses |
643,272 |
|
|
569,756 |
|
|
1,843,106 |
|
|
1,644,863 |
|
Products expenses |
580,830 |
|
|
374,407 |
|
|
1,726,367 |
|
|
1,173,135 |
|
Services and other expenses |
540,569 |
|
|
513,994 |
|
|
1,692,203 |
|
|
1,442,342 |
|
Amortization of intangible assets |
43,418 |
|
|
39,268 |
|
|
134,990 |
|
|
118,550 |
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
2,993,402 |
|
|
2,445,666 |
|
|
8,613,161 |
|
|
7,022,004 |
|
Operating Income (Loss) |
72,743 |
|
|
241,688 |
|
|
(1,148,573) |
|
|
2,066,316 |
|
Interest expense |
(47,348) |
|
|
(46,455) |
|
|
(147,090) |
|
|
(135,412) |
|
Net foreign exchange gains |
115,130 |
|
|
48,850 |
|
|
245,356 |
|
|
61,677 |
|
|
|
|
|
|
|
|
|
Income (Loss) Before Income Taxes |
140,525 |
|
|
244,083 |
|
|
(1,050,307) |
|
|
1,992,581 |
|
Income tax (expense) benefit |
(17,995) |
|
|
(54,415) |
|
|
239,536 |
|
|
(419,898) |
|
Net Income (Loss) |
122,530 |
|
|
189,668 |
|
|
(810,771) |
|
|
1,572,683 |
|
Net income attributable to noncontrolling interests |
(57,161) |
|
|
(1,598) |
|
|
(93,062) |
|
|
(18,809) |
|
Net Income (Loss) to Shareholders |
65,369 |
|
|
188,070 |
|
|
(903,833) |
|
|
1,553,874 |
|
Preferred stock dividends |
— |
|
|
— |
|
|
(18,000) |
|
|
(18,000) |
|
|
|
|
|
|
|
|
|
Net Income (Loss) to Common Shareholders |
$ |
65,369 |
|
|
$ |
188,070 |
|
|
$ |
(921,833) |
|
|
$ |
1,535,874 |
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE LOSS |
|
|
|
|
|
|
|
Change in net unrealized gains (losses) on available-for-sale
investments, net of taxes: |
|
|
|
|
|
|
|
Net holding losses arising during the period |
$ |
(424,929) |
|
|
$ |
(104,238) |
|
|
$ |
(1,263,839) |
|
|
$ |
(262,679) |
|
|
|
|
|
|
|
|
|
Reclassification adjustments for net gains (losses) included in net
income (loss) |
591 |
|
|
224 |
|
|
2,289 |
|
|
(3,807) |
|
Change in net unrealized gains (losses) on available-for-sale
investments, net of taxes |
(424,338) |
|
|
(104,014) |
|
|
(1,261,550) |
|
|
(266,486) |
|
Change in foreign currency translation adjustments, net of
taxes |
(8,872) |
|
|
(4,437) |
|
|
(14,395) |
|
|
(330) |
|
Change in net actuarial pension loss, net of taxes |
303 |
|
|
586 |
|
|
1,808 |
|
|
1,832 |
|
Total Other Comprehensive Loss |
(432,907) |
|
|
(107,865) |
|
|
(1,274,137) |
|
|
(264,984) |
|
Comprehensive Income (Loss) |
(310,377) |
|
|
81,803 |
|
|
(2,084,908) |
|
|
1,307,699 |
|
Comprehensive income attributable to noncontrolling
interests |
(57,051) |
|
|
(1,567) |
|
|
(92,996) |
|
|
(18,812) |
|
Comprehensive Income (Loss) to Shareholders |
$ |
(367,428) |
|
|
$ |
80,236 |
|
|
$ |
(2,177,904) |
|
|
$ |
1,288,887 |
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) PER COMMON SHARE |
|
|
|
|
|
|
|
Basic |
$ |
3.51 |
|
|
$ |
15.12 |
|
|
$ |
(72.31) |
|
|
$ |
114.39 |
|
Diluted |
$ |
3.50 |
|
|
$ |
15.09 |
|
|
$ |
(72.31) |
|
|
$ |
114.20 |
|
See accompanying notes to consolidated financial
statements.
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2022 |
Preferred
Stock |
|
Common
Stock |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Loss |
|
Total
Shareholders'
Equity |
|
Noncontrolling
Interests |
|
Total Equity |
|
Redeemable
Noncontrolling
Interests |
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2022 |
$ |
591,891 |
|
|
$ |
3,478,153 |
|
|
$ |
9,289,820 |
|
|
$ |
(603,657) |
|
|
$ |
12,756,207 |
|
|
$ |
11,125 |
|
|
$ |
12,767,332 |
|
|
$ |
495,378 |
|
Net income |
|
|
|
|
65,369 |
|
|
— |
|
|
65,369 |
|
|
52,867 |
|
|
118,236 |
|
|
4,294 |
|
Other comprehensive loss |
|
|
|
|
— |
|
|
(432,797) |
|
|
(432,797) |
|
|
— |
|
|
(432,797) |
|
|
(110) |
|
Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
(367,428) |
|
|
52,867 |
|
|
(314,561) |
|
|
4,184 |
|
Repurchase of common stock |
— |
|
|
— |
|
|
(81,799) |
|
|
— |
|
|
(81,799) |
|
|
— |
|
|
(81,799) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units expensed |
— |
|
|
4,661 |
|
|
— |
|
|
— |
|
|
4,661 |
|
|
— |
|
|
4,661 |
|
|
— |
|
Adjustment of redeemable noncontrolling interests |
— |
|
|
— |
|
|
(17,730) |
|
|
— |
|
|
(17,730) |
|
|
— |
|
|
(17,730) |
|
|
17,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
— |
|
|
14 |
|
|
(2) |
|
|
— |
|
|
12 |
|
|
804 |
|
|
816 |
|
|
(4,249) |
|
September 30, 2022 |
$ |
591,891 |
|
|
$ |
3,482,828 |
|
|
$ |
9,255,658 |
|
|
$ |
(1,036,454) |
|
|
$ |
12,293,923 |
|
|
$ |
64,796 |
|
|
$ |
12,358,719 |
|
|
$ |
513,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
Preferred
Stock |
|
Common
Stock |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income (Loss) |
|
Total
Shareholders'
Equity |
|
Noncontrolling
Interests |
|
Total Equity |
|
Redeemable
Noncontrolling
Interests |
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
$ |
591,891 |
|
|
$ |
3,441,079 |
|
|
$ |
10,446,763 |
|
|
$ |
237,617 |
|
|
$ |
14,717,350 |
|
|
$ |
22,860 |
|
|
$ |
14,740,210 |
|
|
$ |
461,378 |
|
Net income (loss) |
|
|
|
|
(903,833) |
|
|
— |
|
|
(903,833) |
|
|
78,283 |
|
|
(825,550) |
|
|
14,779 |
|
Other comprehensive loss |
|
|
|
|
— |
|
|
(1,274,071) |
|
|
(1,274,071) |
|
|
— |
|
|
(1,274,071) |
|
|
(66) |
|
Comprehensive Income (Loss) |
|
|
|
|
|
|
|
|
(2,177,904) |
|
|
78,283 |
|
|
(2,099,621) |
|
|
14,713 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
— |
|
|
— |
|
|
(208,090) |
|
|
— |
|
|
(208,090) |
|
|
— |
|
|
(208,090) |
|
|
— |
|
Preferred stock dividends |
— |
|
|
— |
|
|
(18,000) |
|
|
— |
|
|
(18,000) |
|
|
— |
|
|
(18,000) |
|
|
— |
|
Restricted stock units expensed |
— |
|
|
37,531 |
|
|
— |
|
|
— |
|
|
37,531 |
|
|
— |
|
|
37,531 |
|
|
— |
|
Adjustment of redeemable noncontrolling interests |
— |
|
|
— |
|
|
(62,168) |
|
|
— |
|
|
(62,168) |
|
|
— |
|
|
(62,168) |
|
|
62,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to Metromont purchase price allocation |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(18,681) |
|
Disposition of Velocity |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(22,059) |
|
|
(22,059) |
|
|
— |
|
Redemption of Markel CATCo Re noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(22,261) |
|
|
(22,261) |
|
|
— |
|
Other |
— |
|
|
4,218 |
|
|
986 |
|
|
— |
|
|
5,204 |
|
|
7,973 |
|
|
13,177 |
|
|
(6,535) |
|
September 30, 2022 |
$ |
591,891 |
|
|
$ |
3,482,828 |
|
|
$ |
9,255,658 |
|
|
$ |
(1,036,454) |
|
|
$ |
12,293,923 |
|
|
$ |
64,796 |
|
|
$ |
12,358,719 |
|
|
$ |
513,043 |
|
See accompanying notes to consolidated financial
statements.
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2021 |
Preferred
Stock |
|
Common
Stock |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income |
|
Total
Shareholders'
Equity |
|
Noncontrolling
Interests |
|
Total Equity |
|
Redeemable
Noncontrolling
Interests |
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021 |
$ |
591,891 |
|
|
$ |
3,451,968 |
|
|
$ |
9,526,191 |
|
|
$ |
427,223 |
|
|
$ |
13,997,273 |
|
|
$ |
23,078 |
|
|
$ |
14,020,351 |
|
|
$ |
228,401 |
|
Net income |
|
|
|
|
188,070 |
|
|
— |
|
|
188,070 |
|
|
558 |
|
|
188,628 |
|
|
1,040 |
|
Other comprehensive loss |
|
|
|
|
— |
|
|
(107,834) |
|
|
(107,834) |
|
|
— |
|
|
(107,834) |
|
|
(31) |
|
Comprehensive Income |
|
|
|
|
|
|
|
|
80,236 |
|
|
558 |
|
|
80,794 |
|
|
1,009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
— |
|
|
— |
|
|
(61,551) |
|
|
— |
|
|
(61,551) |
|
|
— |
|
|
(61,551) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock units expensed |
— |
|
|
4,181 |
|
|
— |
|
|
— |
|
|
4,181 |
|
|
— |
|
|
4,181 |
|
|
— |
|
Acquisition of Buckner |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26,438 |
|
Adjustment of redeemable noncontrolling interests |
— |
|
|
— |
|
|
19,930 |
|
|
— |
|
|
19,930 |
|
|
— |
|
|
19,930 |
|
|
(19,930) |
|
Purchase of noncontrolling interest |
— |
|
|
(1,020) |
|
|
— |
|
|
— |
|
|
(1,020) |
|
|
— |
|
|
(1,020) |
|
|
(1,032) |
|
Other |
— |
|
|
— |
|
|
17 |
|
|
— |
|
|
17 |
|
|
(175) |
|
|
(158) |
|
|
(2,974) |
|
September 30, 2021 |
$ |
591,891 |
|
|
$ |
3,455,129 |
|
|
$ |
9,672,657 |
|
|
$ |
319,389 |
|
|
$ |
14,039,066 |
|
|
$ |
23,461 |
|
|
$ |
14,062,527 |
|
|
$ |
231,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
Preferred
Stock |
|
Common
Stock |
|
Retained
Earnings |
|
Accumulated
Other
Comprehensive
Income |
|
Total
Shareholders'
Equity |
|
Noncontrolling
Interests |
|
Total Equity |
|
Redeemable
Noncontrolling
Interests |
(dollars in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 |
$ |
591,891 |
|
|
$ |
3,428,340 |
|
|
$ |
8,195,182 |
|
|
$ |
584,376 |
|
|
$ |
12,799,789 |
|
|
$ |
14,892 |
|
|
$ |
12,814,681 |
|
|
$ |
245,642 |
|
Cumulative effect of change in accounting policy |
|
|
|
|
22,302 |
|
|
— |
|
|
22,302 |
|
|
— |
|
|
22,302 |
|
|
— |
|
January 1, 2021 |
591,891 |
|
|
3,428,340 |
|
|
8,217,484 |
|
|
584,376 |
|
|
12,822,091 |
|
|
14,892 |
|
|
12,836,983 |
|
|
245,642 |
|
Net income |
|
|
|
|
1,553,874 |
|
|
— |
|
|
1,553,874 |
|
|
7,960 |
|
|
1,561,834 |
|
|
10,849 |
|
Other comprehensive income (loss) |
|
|
|
|
— |
|
|
(264,987) |
|
|
(264,987) |
|
|
— |
|
|
(264,987) |
|
|
3 |
|
Comprehensive Income |
|
|
|
|
|
|
|
|
1,288,887 |
|
|
7,960 |
|
|
1,296,847 |
|
|
10,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock |
— |
|
|
— |
|
|
(122,377) |
|
|
— |
|
|
(122,377) |
|
|
— |
|
|
(122,377) |
|
|
— |
|
Preferred stock dividends |
— |
|
|
— |
|
|
(18,000) |
|
|
— |
|
|
(18,000) |
|
|
— |
|
|
(18,000) |
|
|
— |
|
Restricted stock units expensed |
— |
|
|
27,783 |
|
|
— |
|
|
— |
|
|
27,783 |
|
|
— |
|
|
27,783 |
|
|
— |
|
Acquisition of Buckner |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26,438 |
|
Adjustment of redeemable noncontrolling interests |
— |
|
|
— |
|
|
41,553 |
|
|
— |
|
|
41,553 |
|
|
— |
|
|
41,553 |
|
|
(41,553) |
|
Purchase of noncontrolling interest |
— |
|
|
(1,551) |
|
|
— |
|
|
— |
|
|
(1,551) |
|
|
— |
|
|
(1,551) |
|
|
(1,179) |
|
Other |
— |
|
|
557 |
|
|
123 |
|
|
— |
|
|
680 |
|
|
609 |
|
|
1,289 |
|
|
(8,288) |
|
September 30, 2021 |
$ |
591,891 |
|
|
$ |
3,455,129 |
|
|
$ |
9,672,657 |
|
|
$ |
319,389 |
|
|
$ |
14,039,066 |
|
|
$ |
23,461 |
|
|
$ |
14,062,527 |
|
|
$ |
231,912 |
|
See accompanying notes to consolidated financial
statements.
MARKEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
(dollars in thousands) |
OPERATING ACTIVITIES |
|
|
|
Net income (loss) |
$ |
(810,771) |
|
|
$ |
1,572,683 |
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities |
2,691,043 |
|
|
49,759 |
|
Net Cash Provided By Operating Activities |
1,880,272 |
|
|
1,622,442 |
|
INVESTING ACTIVITIES |
|
|
|
Proceeds from sales, maturities, calls and prepayments of fixed
maturity securities |
557,742 |
|
|
491,319 |
|
Cost of fixed maturity securities purchased |
(1,433,299) |
|
|
(2,201,622) |
|
Proceeds from sales of equity securities |
164,277 |
|
|
157,891 |
|
Cost of equity securities purchased |
(293,011) |
|
|
(178,368) |
|
Net change in short-term investments |
(625,261) |
|
|
(727,366) |
|
|
|
|
|
|
|
|
|
Additions to property and equipment |
(209,282) |
|
|
(80,758) |
|
|
|
|
|
Acquisitions, net of cash acquired |
(14,000) |
|
|
(241,210) |
|
Consolidation of Markel CATCo Re, net |
629,955 |
|
|
— |
|
Distributions to Markel CATCo Re noncontrolling interests for
buy-out transaction |
(169,380) |
|
|
— |
|
Proceeds from sale of business, net |
109,505 |
|
|
40,720 |
|
Other |
(571) |
|
|
6,903 |
|
Net Cash Used By Investing Activities |
(1,283,325) |
|
|
(2,732,491) |
|
FINANCING ACTIVITIES |
|
|
|
Additions to senior long-term debt and other debt |
757,941 |
|
|
989,067 |
|
Repayment of senior long-term debt and other debt |
(982,852) |
|
|
(370,157) |
|
|
|
|
|
|
|
|
|
Repurchases of common stock |
(208,090) |
|
|
(122,377) |
|
|
|
|
|
Dividends paid on preferred stock |
(18,000) |
|
|
(18,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
(40,053) |
|
|
(39,149) |
|
Net Cash Provided (Used) By Financing Activities |
(491,054) |
|
|
439,384 |
|
Effect of foreign currency rate changes on cash, cash equivalents,
restricted cash and restricted cash equivalents |
(190,972) |
|
|
(38,973) |
|
Decrease in cash, cash equivalents, restricted cash and restricted
cash equivalents |
(85,079) |
|
|
(709,638) |
|
Cash, cash equivalents, restricted cash and restricted cash
equivalents at beginning of period |
4,880,947 |
|
|
5,216,649 |
|
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH
EQUIVALENTS AT END OF PERIOD |
$ |
4,795,868 |
|
|
$ |
4,507,011 |
|
See accompanying notes to consolidated financial
statements.
MARKEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Markel Corporation is a diverse financial holding company serving a
variety of niche markets. Markel Corporation's principal business
markets and underwrites specialty insurance products. Through its
wholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures),
Markel Corporation also owns controlling interests in various
businesses that operate outside of the specialty insurance
marketplace. See note 2 for details regarding reportable
segments.
a) Basis of Presentation.
The consolidated balance sheet as of September 30, 2022 and
the related consolidated statements of income (loss) and
comprehensive income (loss) and changes in equity for the quarters
and nine months ended September 30, 2022 and 2021, and the
condensed consolidated statements of cash flows for the nine months
ended September 30, 2022 and 2021 are unaudited. In the
opinion of management, all adjustments necessary for fair
presentation of such consolidated financial statements have been
included. Except for the adjustment described in note 15, such
adjustments consist only of normal, recurring items. Interim
results are not necessarily indicative of results of operations for
the entire year. The consolidated balance sheet as of
December 31, 2021 was derived from Markel Corporation's
audited annual consolidated financial statements.
The accompanying consolidated financial statements have been
prepared in accordance with United States (U.S.) generally accepted
accounting principles (GAAP) and include the accounts of Markel
Corporation and its consolidated subsidiaries, as well as any
variable interest entities (VIEs) that meet the requirements for
consolidation (the Company). All significant intercompany balances
and transactions have been eliminated in consolidation. The Company
consolidates the results of its Markel Ventures subsidiaries on a
one-month lag, with the exception of significant transactions or
events that occur during the intervening period. Certain prior
period amounts have been reclassified to conform to the current
period presentation.
The preparation of financial statements in accordance with U.S.
GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities.
Actual results may differ materially from the estimates and
assumptions used in preparing the consolidated financial
statements.
The consolidated financial statements and notes are presented as
permitted by Form 10-Q and do not contain certain information
included in the Company's annual consolidated financial statements
and notes. For a more complete description of the Company's
business and accounting policies, readers are urged to review the
Company's 2021 Annual Report on Form 10-K, as well as note 15 for
details regarding a change to the Company's policy for accounting
for deferred policy acquisition costs.
b) Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In August 2018, the Financial Accounting Standards Board (FASB)
issued Accounting Standards Update (ASU) No. 2018-12,
Financial Services—Insurance (Topic 944): Targeted Improvements to
the Accounting for Long-Duration Contracts.
The FASB subsequently issued several ASUs as amendments to ASU No.
2018-12. The standard requires insurance companies with long
duration contracts to: (1) review and, if there is a change, update
the assumptions used to measure expected cash flows at least
annually; (2) update the discount rate assumption at each reporting
date; and (3) enhance certain qualitative and quantitative
disclosures. ASU No. 2018-12 becomes effective for the Company
during the first quarter of 2023 and will be applied using a
modified retrospective approach that requires restatement of prior
periods presented, including a cumulative adjustment to accumulated
other comprehensive income as of January 1, 2021 (the transition
date). The standard will, among other things, impact the discount
rate used in estimating reserves for the Company's life and annuity
reinsurance portfolio, which is in runoff. Currently, the discount
rate assumption is locked-in for the life of the contracts, unless
there is a loss recognition event. Based on the Company's current
estimate, the adoption of ASU 2018-12 is expected to result in a
decrease to accumulated other comprehensive income of less than $25
million, net of taxes, as a result of changing the discount rate
assumption as of the transition date. However, the cumulative
impact of changes in the discount rate assumption upon adopting ASU
2018-12 in the first quarter of 2023 will be based on the discount
rate assumption determined as of the January 1, 2023 adoption date.
Based on increases in interest rates subsequent to the transition
date, the Company expects that an update to the discount rate
assumption as of September 30, 2022 would result in a cumulative
increase to accumulated other comprehensive income. The Company is
still determining the ultimate impact that adopting ASU No. 2018-12
will have on its consolidated financial statements.
In October 2021, the FASB issued ASU No. 2021-08,
Business Combinations (Topic 805): Accounting for Contract Assets
and Contract Liabilities from Contracts with
Customers,
which becomes effective for the Company during the first quarter of
2023. ASU No. 2021-08 requires contract assets and liabilities
accounted for under FASB Accounting Standards Codification (ASC)
606,
Revenue from Contracts with Customers,
to be recorded at the acquisition date as if the acquirer entered
into those contracts itself on the contract inception dates, rather
than at fair value. At adoption, ASU No. 2021-08 will not impact
the Company's financial position, results of operations or cash
flows, but prospectively, this ASU will impact amounts recorded by
the Company for assets acquired and liabilities assumed in
conjunction with certain acquisitions.
2. Segment Reporting Disclosures
The chief operating decision maker reviews the Company's ongoing
underwriting operations on a global basis in the following two
segments: Insurance and Reinsurance. In determining how to allocate
resources and assess the performance of the Company's underwriting
results, management considers many factors, including the nature of
the insurance product sold, the type of account written and the
type of customer served. The Insurance segment includes all direct
business and facultative placements written on a risk-bearing basis
within the Company's underwriting operations. The Reinsurance
segment includes all treaty reinsurance written on a risk-bearing
basis within the Company's underwriting operations. All investing
activities related to the Company's insurance operations are
included in the Investing segment.
The chief operating decision maker reviews and assesses Markel
Ventures' performance in the aggregate, as a single operating
segment. The Markel Ventures segment primarily consists of
controlling interests in a diverse portfolio of businesses that
operate in various industries.
The Company's other operations primarily consist of the results of
the Company's insurance-linked securities operations and program
services business. Other operations also include results for lines
of business discontinued prior to, or in conjunction with,
acquisitions, including development on asbestos and environmental
loss reserves and results attributable to the run-off of life and
annuity reinsurance business, which are monitored separately from
the Company's ongoing underwriting operations. For purposes of
segment reporting, none of these other operations are considered to
be reportable segments.
Segment profit for each of the Company's underwriting segments is
measured by underwriting profit. The property and casualty
insurance industry commonly defines underwriting profit as earned
premiums net of losses and loss adjustment expenses and
underwriting, acquisition and insurance expenses. Underwriting
profit does not replace operating income or net income computed in
accordance with U.S. GAAP as a measure of profitability.
Underwriting profit or loss provides a basis for management to
evaluate the Company's underwriting performance. Segment profit for
the Company's underwriting segments may also include other revenues
and expenses that are attributable to the Company's underwriting
operations that are not captured in underwriting profit. Segment
profit for the Investing segment is measured by net investment
income and net investment gains. Segment profit for the Markel
Ventures segment is measured by operating income.
For management reporting purposes, the Company allocates assets to
its underwriting operations and to its Investing and Markel
Ventures segments and certain of its other operations, including
its insurance-linked securities and program services operations.
Underwriting assets include assets attributed to the Company's
Insurance and Reinsurance segments, discontinued underwriting lines
of business, as well as assets that are not specifically allocated
to the Company's other operations. Generally, the Company manages
its underwriting assets in the aggregate and therefore does not
allocate assets to individual underwriting segments.
a)
The following tables summarize the Company's segment
disclosures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2022 |
(dollars in thousands) |
Insurance |
|
Reinsurance |
|
Investing |
|
Markel Ventures
(1)
|
|
Other
(2)
|
|
Consolidated |
Gross premium volume |
$ |
2,299,325 |
|
|
$ |
179,455 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
995,991 |
|
|
$ |
3,474,771 |
|
Net written premiums |
1,849,983 |
|
|
154,029 |
|
|
— |
|
|
— |
|
|
5,155 |
|
|
2,009,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
1,695,029 |
|
|
260,535 |
|
|
— |
|
|
— |
|
|
1,266 |
|
|
1,956,830 |
|
Losses and loss adjustment expenses: |
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
(1,100,511) |
|
|
(166,485) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,266,996) |
|
Prior accident years |
53,760 |
|
|
29,505 |
|
|
— |
|
|
— |
|
|
(1,582) |
|
|
81,683 |
|
Underwriting, acquisition and insurance expenses: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of policy acquisition costs |
(362,137) |
|
|
(68,662) |
|
|
— |
|
|
— |
|
|
(383) |
|
|
(431,182) |
|
Other underwriting expenses |
(200,604) |
|
|
(11,638) |
|
|
— |
|
|
— |
|
|
152 |
|
|
(212,090) |
|
Underwriting profit (loss) |
85,537 |
|
|
43,255 |
|
|
— |
|
|
— |
|
|
(547) |
|
|
128,245 |
|
Net investment income |
— |
|
|
— |
|
|
107,414 |
|
|
317 |
|
|
— |
|
|
107,731 |
|
Net investment losses |
— |
|
|
— |
|
|
(281,483) |
|
|
— |
|
|
— |
|
|
(281,483) |
|
Products revenues |
— |
|
|
— |
|
|
— |
|
|
586,531 |
|
|
— |
|
|
586,531 |
|
Services and other revenues |
— |
|
|
— |
|
|
— |
|
|
629,215 |
|
|
67,321 |
|
|
696,536 |
|
Products expenses |
— |
|
|
— |
|
|
— |
|
|
(580,830) |
|
|
— |
|
|
(580,830) |
|
Services and other expenses
(3)
|
— |
|
|
— |
|
|
— |
|
|
(556,207) |
|
|
15,638 |
|
|
(540,569) |
|
Amortization of intangible assets
(4)
|
— |
|
|
— |
|
|
— |
|
|
(18,567) |
|
|
(24,851) |
|
|
(43,418) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
$ |
85,537 |
|
|
$ |
43,255 |
|
|
$ |
(174,069) |
|
|
$ |
60,459 |
|
|
$ |
57,561 |
|
|
$ |
72,743 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(47,348) |
|
Net foreign exchange gains |
|
|
|
|
|
|
|
|
|
|
115,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
140,525 |
|
U.S. GAAP combined ratio
(5)
|
95 |
% |
|
83 |
% |
|
|
|
|
|
NM
(6)
|
|
93 |
% |
(1) Products
expenses and services and other expenses for the Markel Ventures
segment include depreciation expense of $23.7 million for the
quarter ended September 30, 2022.
(2) Other
represents the total profit (loss) attributable to the Company's
operations that are not included in a reportable segment as well as
any amortization of intangible assets that is not allocated to a
reportable segment. Amortization of intangible assets attributable
to the Company's underwriting segments was $9.6 million for the
quarter ended September 30, 2022, however, the Company does
not allocate amortization of intangible assets between the
Insurance and Reinsurance segments.
(3) Services
and other expenses for Other for the quarter ended
September 30, 2022 included $53.4 million of favorable loss
reserve development on the run-off of reinsurance contracts written
by Markel CATCo Re Ltd., all of which was attributable to
noncontrolling interests. See Note 11.
(4) Segment
profit for the Markel Ventures segment includes amortization of
intangible assets attributable to Markel Ventures. Amortization of
intangible assets is not allocated to the Company's Insurance and
Reinsurance segments.
(5) The
U.S. GAAP combined ratio is a measure of underwriting performance
and represents the relationship of incurred losses, loss adjustment
expenses and underwriting, acquisition and insurance expenses to
earned premiums.
(6) NM
- Ratio is not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, 2021 |
(dollars in thousands) |
Insurance |
|
Reinsurance |
|
Investing |
|
Markel Ventures
(1)
|
|
Other
(2)
|
|
Consolidated |
Gross premium volume |
$ |
1,899,592 |
|
|
$ |
180,673 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
888,337 |
|
|
$ |
2,968,602 |
|
Net written premiums |
1,545,428 |
|
|
141,642 |
|
|
— |
|
|
— |
|
|
(2,260) |
|
|
1,684,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
1,381,235 |
|
|
250,962 |
|
|
— |
|
|
— |
|
|
(1,697) |
|
|
1,630,500 |
|
Losses and loss adjustment expenses: |
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
(866,481) |
|
|
(221,872) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,088,353) |
|
Prior accident years |
124,133 |
|
|
16,292 |
|
|
— |
|
|
— |
|
|
(313) |
|
|
140,112 |
|
Underwriting, acquisition and insurance expenses: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of policy acquisition costs |
(289,201) |
|
|
(63,723) |
|
|
— |
|
|
— |
|
|
— |
|
|
(352,924) |
|
Other underwriting expenses |
(202,961) |
|
|
(12,101) |
|
|
— |
|
|
— |
|
|
(1,770) |
|
|
(216,832) |
|
Underwriting profit (loss) |
146,725 |
|
|
(30,442) |
|
|
— |
|
|
— |
|
|
(3,780) |
|
|
112,503 |
|
Net investment income |
— |
|
|
— |
|
|
91,261 |
|
|
3 |
|
|
— |
|
|
91,264 |
|
Net investment losses |
— |
|
|
— |
|
|
(25,833) |
|
|
— |
|
|
— |
|
|
(25,833) |
|
Products revenues |
— |
|
|
— |
|
|
— |
|
|
405,711 |
|
|
— |
|
|
405,711 |
|
Services and other revenues |
— |
|
|
— |
|
|
— |
|
|
502,471 |
|
|
83,241 |
|
|
585,712 |
|
Products expenses |
— |
|
|
— |
|
|
— |
|
|
(374,407) |
|
|
— |
|
|
(374,407) |
|
Services and other expenses |
— |
|
|
— |
|
|
— |
|
|
(465,268) |
|
|
(48,726) |
|
|
(513,994) |
|
Amortization of intangible assets
(3)
|
— |
|
|
— |
|
|
— |
|
|
(13,541) |
|
|
(25,727) |
|
|
(39,268) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
$ |
146,725 |
|
|
$ |
(30,442) |
|
|
$ |
65,428 |
|
|
$ |
54,969 |
|
|
$ |
5,008 |
|
|
$ |
241,688 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(46,455) |
|
Net foreign exchange gains |
|
|
|
|
|
|
|
|
|
|
48,850 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
244,083 |
|
U.S. GAAP combined ratio
(4)
|
89 |
% |
|
112 |
% |
|
|
|
|
|
NM
(5)
|
|
93 |
% |
(1) Products
expenses and services and other expenses for the Markel Ventures
segment include depreciation expense of $15.8 million for the
quarter ended September 30, 2021.
(2) Other
represents the total profit (loss) attributable to the Company's
operations that are not included in a reportable segment as well as
any amortization of intangible assets that is not allocated to a
reportable segment. Amortization of intangible assets attributable
to the Company's underwriting segments was $10.3 million for
the quarter ended September 30, 2021, however, the Company
does not allocate amortization of intangible assets between the
Insurance and Reinsurance segments.
(3) Segment
profit for the Markel Ventures segment includes amortization of
intangible assets attributable to Markel Ventures. Amortization of
intangible assets is not allocated to the Company's Insurance and
Reinsurance segments.
(4) The
U.S. GAAP combined ratio is a measure of underwriting performance
and represents the relationship of incurred losses, loss adjustment
expenses and underwriting, acquisition and insurance expenses to
earned premiums.
(5) NM
- Ratio is not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
(dollars in thousands) |
Insurance |
|
Reinsurance |
|
Investing |
|
Markel Ventures
(1)
|
|
Other
(2)
|
|
Consolidated |
Gross premium volume |
$ |
6,479,789 |
|
|
$ |
1,044,827 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,628,491 |
|
|
$ |
10,153,107 |
|
Net written premiums |
5,289,165 |
|
|
983,087 |
|
|
— |
|
|
— |
|
|
1,444 |
|
|
6,273,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
4,742,178 |
|
|
808,656 |
|
|
— |
|
|
— |
|
|
(1,130) |
|
|
5,549,704 |
|
Losses and loss adjustment expenses: |
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
(2,906,031) |
|
|
(514,875) |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,420,906) |
|
Prior accident years |
196,093 |
|
|
13,845 |
|
|
— |
|
|
— |
|
|
(5,527) |
|
|
204,411 |
|
Underwriting, acquisition and insurance expenses: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of policy acquisition costs |
(996,369) |
|
|
(209,541) |
|
|
— |
|
|
— |
|
|
(415) |
|
|
(1,206,325) |
|
Other underwriting expenses |
(596,426) |
|
|
(37,708) |
|
|
— |
|
|
— |
|
|
(2,647) |
|
|
(636,781) |
|
Underwriting profit (loss) |
439,445 |
|
|
60,377 |
|
|
— |
|
|
— |
|
|
(9,719) |
|
|
490,103 |
|
Net investment income |
— |
|
|
— |
|
|
273,699 |
|
|
424 |
|
|
— |
|
|
274,123 |
|
Net investment losses |
— |
|
|
— |
|
|
(2,194,525) |
|
|
— |
|
|
— |
|
|
(2,194,525) |
|
Products revenues |
— |
|
|
— |
|
|
— |
|
|
1,845,111 |
|
|
— |
|
|
1,845,111 |
|
Services and other revenues |
— |
|
|
— |
|
|
— |
|
|
1,682,318 |
|
|
307,857 |
|
|
1,990,175 |
|
Products expenses |
— |
|
|
— |
|
|
— |
|
|
(1,726,367) |
|
|
— |
|
|
(1,726,367) |
|
Services and other expenses
(3)
|
— |
|
|
— |
|
|
— |
|
|
(1,524,167) |
|
|
(168,036) |
|
|
(1,692,203) |
|
Amortization of intangible assets
(4)
|
— |
|
|
— |
|
|
— |
|
|
(60,077) |
|
|
(74,913) |
|
|
(134,990) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
$ |
439,445 |
|
|
$ |
60,377 |
|
|
$ |
(1,920,826) |
|
|
$ |
217,242 |
|
|
$ |
55,189 |
|
|
$ |
(1,148,573) |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(147,090) |
|
Net foreign exchange gains |
|
|
|
|
|
|
|
|
|
|
245,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
(1,050,307) |
|
U.S. GAAP combined ratio
(5)
|
91 |
% |
|
93 |
% |
|
|
|
|
|
NM
(6)
|
|
91 |
% |
(1) Products
expenses and services and other expenses for the Markel Ventures
segment include depreciation expense of $75.3 million for the nine
months ended September 30, 2022.
(2) Other
represents the total profit (loss) attributable to the Company's
operations that are not included in a reportable segment as well as
any amortization of intangible assets that is not allocated to a
reportable segment. Amortization of intangible assets attributable
to the Company's underwriting segments was $29.0 million for the
nine months ended September 30, 2022, however, the Company
does not allocate amortization of intangible assets between the
Insurance and Reinsurance segments.
(3) Services
and other expenses for Other for the nine months ended
September 30, 2022 included $81.6 million of favorable loss
reserve development on the run-off of reinsurance contracts written
by Markel CATCo Re Ltd., all of which was attributable to
noncontrolling interests. See Note 11.
(4) Segment
profit for the Markel Ventures segment includes amortization of
intangible assets attributable to Markel Ventures. Amortization of
intangible assets is not allocated to the Company's Insurance and
Reinsurance segments.
(5) The
U.S. GAAP combined ratio is a measure of underwriting performance
and represents the relationship of incurred losses, loss adjustment
expenses and underwriting, acquisition and insurance expenses to
earned premiums.
(6) NM
- Ratio is not meaningful
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
(dollars in thousands) |
Insurance |
|
Reinsurance |
|
Investing |
|
Markel Ventures
(1)
|
|
Other
(2)
|
|
Consolidated |
Gross premium volume |
$ |
5,359,293 |
|
|
$ |
992,635 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
2,305,539 |
|
|
$ |
8,657,467 |
|
Net written premiums |
4,427,301 |
|
|
893,082 |
|
|
— |
|
|
— |
|
|
(3,052) |
|
|
5,317,331 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earned premiums |
3,928,824 |
|
|
770,031 |
|
|
— |
|
|
— |
|
|
(2,623) |
|
|
4,696,232 |
|
Losses and loss adjustment expenses: |
|
|
|
|
|
|
|
|
|
|
|
Current accident year |
(2,448,034) |
|
|
(561,226) |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,009,260) |
|
Prior accident years |
397,723 |
|
|
(34,104) |
|
|
— |
|
|
— |
|
|
2,527 |
|
|
366,146 |
|
Underwriting, acquisition and insurance expenses: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of policy acquisition costs |
(814,623) |
|
|
(193,697) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,008,320) |
|
Other underwriting expenses |
(594,880) |
|
|
(39,676) |
|
|
— |
|
|
— |
|
|
(1,987) |
|
|
(636,543) |
|
Underwriting profit (loss) |
469,010 |
|
|
(58,672) |
|
|
— |
|
|
— |
|
|
(2,083) |
|
|
408,255 |
|
Net investment income |
— |
|
|
— |
|
|
284,087 |
|
|
8 |
|
|
— |
|
|
284,095 |
|
Net investment gains |
— |
|
|
— |
|
|
1,175,791 |
|
|
— |
|
|
— |
|
|
1,175,791 |
|
Products revenues |
— |
|
|
— |
|
|
— |
|
|
1,327,144 |
|
|
— |
|
|
1,327,144 |
|
Services and other revenues |
— |
|
|
— |
|
|
— |
|
|
1,363,141 |
|
|
241,917 |
|
|
1,605,058 |
|
Products expenses |
— |
|
|
— |
|
|
— |
|
|
(1,173,135) |
|
|
— |
|
|
(1,173,135) |
|
Services and other expenses |
— |
|
|
109 |
|
|
— |
|
|
(1,260,957) |
|
|
(181,494) |
|
|
(1,442,342) |
|
Amortization of intangible assets
(3)
|
— |
|
|
— |
|
|
— |
|
|
(41,104) |
|
|
(77,446) |
|
|
(118,550) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment profit (loss) |
$ |
469,010 |
|
|
$ |
(58,563) |
|
|
$ |
1,459,878 |
|
|
$ |
215,097 |
|
|
$ |
(19,106) |
|
|
$ |
2,066,316 |
|
Interest expense |
|
|
|
|
|
|
|
|
|
|
(135,412) |
|
Net foreign exchange gains |
|
|
|
|
|
|
|
|
|
|
61,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
|
|
|
|
|
|
|
|
$ |
1,992,581 |
|
U.S. GAAP combined ratio
(4)
|
88 |
% |
|
108 |
% |
|
|
|
|
|
NM
(5)
|
|
91 |
% |
(1)
Products expenses and services and other
expenses for the Markel Ventures segment include depreciation
expense of $47.7 million for the nine months ended
September 30, 2021.
(2)
Other represents the total profit (loss)
attributable to the Company's operations that are not included in a
reportable segment as well as any amortization of intangible assets
that is not allocated to a reportable segment. Amortization of
intangible assets attributable to the Company's underwriting
segments was $31.1 million for the nine months ended
September 30, 2021, however, the Company does not allocate
amortization of intangible assets between the Insurance and
Reinsurance segments.
(3)
Segment profit for the Markel Ventures
segment includes amortization of intangible assets attributable to
Markel Ventures. Amortization of intangible assets is not allocated
to the Company's Insurance and Reinsurance segments.
(4)
The U.S. GAAP combined ratio is a measure
of underwriting performance and represents the relationship of
incurred losses, loss adjustment expenses and underwriting,
acquisition and insurance expenses to earned premiums.
(5)
NM - Ratio is not meaningful
b)
The following table reconciles segment assets to the Company's
consolidated balance sheets.
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
September 30, 2022 |
|
December 31, 2021 |
Segment assets: |
|
|
|
Investing |
$ |
25,389,047 |
|
|
$ |
28,277,801 |
|
Underwriting |
8,805,475 |
|
|
8,111,316 |
|
Markel Ventures |
5,230,393 |
|
|
4,958,279 |
|
Total segment assets |
39,424,915 |
|
|
41,347,396 |
|
Other operations |
8,996,440 |
|
|
7,129,700 |
|
Total assets |
$ |
48,421,355 |
|
|
$ |
48,477,096 |
|
3. Acquisitions and Dispositions
Velocity
In February 2022, the Company sold the majority of its controlling
interest in its Velocity managing general agent companies
(Velocity) for total cash consideration of $181.3 million, which
resulted in a gain of $107.3 million that was included in services
and other revenues. Velocity provides risk origination services for
the Company's Nephila insurance-linked securities fund management
operations, as well as for third parties. The Company retained a
minority interest in Velocity that was recorded at fair value as of
the transaction date ($47.4 million) and is accounted for under the
equity method.
Volante
In October 2022, the Company sold its controlling interest in its
Volante managing general agent companies (Volante) for estimated
total cash consideration of $155 million. Volante underwrites and
administers specialty insurance and reinsurance policies and
provides delegated underwriting services to third-party providers
of insurance capital. The Company will complete the accounting for
the disposition in the fourth quarter of 2022.
Metromont LLC
In December 2021, the Company acquired 51% of Metromont LLC
(Metromont), a precast concrete manufacturer and concrete building
solutions provider for commercial projects. Under the terms of the
acquisition agreement, the Company has the option to acquire the
remaining equity interests and the remaining equity holders have
the option to sell their interests to the Company in the future.
The redemption value of the remaining equity interests is generally
based on Metromont's earnings in specified periods preceding the
redemption dates. Total consideration for the transaction was
$282.3 million, all of which was cash.
As of December 31, 2021, the purchase price was preliminarily
allocated to the acquired assets and liabilities based on estimated
fair value at the acquisition date, which was subsequently updated
during the first quarter of 2022. During the first quarter of 2022,
the Company decreased the allocation to redeemable noncontrolling
interests by $18.7 million with an offsetting decrease to goodwill
of $18.7 million, resulting in a preliminary purchase price
allocation that reflected goodwill of $200.6 million, intangible
assets of $143.9 million and redeemable noncontrolling interests of
$251.2 million. Goodwill is primarily attributable to expected
future earnings and cash flow potential of Metromont, and it is
expected to be deductible for income tax purposes. Results
attributable to Metromont are included in the Company's Markel
Ventures segment.
The Company has not completed the process of determining the fair
value of the assets acquired and liabilities assumed. These
valuations are required to be completed within 12 months from the
acquisition date. As a result, the fair value recorded for these
items is a provisional estimate and is subject to adjustment. Once
completed, any adjustments resulting from the valuations may impact
the individual amounts recorded for assets acquired and liabilities
assumed, as well as the residual goodwill.
Buckner HeavyLift Cranes
In August 2021, the Company acquired 90% of the holding company for
the Buckner HeavyLift Cranes companies (Buckner), a provider of
crane rental services for large commercial contractors. Under the
terms of the acquisition agreement, the Company has the option to
acquire the remaining equity interests and the remaining equity
holders have the option to sell their interests to the Company in
the future. The redemption value of the remaining equity interests
is generally based on Buckner's earnings in specified periods
preceding the redemption dates. Total consideration for the
transaction was $237.9 million, all of which was cash.
As of December 31, 2021, the purchase price was preliminarily
allocated to the acquired assets and liabilities of Buckner based
on estimated fair value at the acquisition date. During the third
quarter of 2022, the Company completed the process of determining
the fair value of the assets acquired and liabilities assumed with
Buckner. The Company recognized goodwill of $109.9 million,
intangible assets of $60.0 million and fixed assets of $290.4
million, primarily related to cranes. The final purchase price
allocation reflected a decrease in the amount recognized for the
cranes upon completion of a third-party valuation, which resulted
in an increase to goodwill from the preliminary amount recognized.
Goodwill is primarily attributable to expected future earnings and
cash flow potential of Buckner, and it is not expected to be
deductible for income tax purposes. Intangible assets include $50.0
million of customer relationships and $10.0 million of trade names,
which are expected to be amortized over 7 years and 15 years,
respectively. Additionally, the Company assumed long-term debt of
$165.1 million and recognized redeemable noncontrolling interests
of $26.4 million. Results attributable to Buckner are included in
the Company's Markel Ventures segment.
4. Investments
a)
The following tables summarize the Company's available-for-sale
investments. Commercial and residential mortgage-backed securities
include securities issued by U.S. government-sponsored enterprises
and U.S. government agencies. The net unrealized holding gains
(losses) in the tables below are presented before taxes and any
reserve deficiency adjustments for life and annuity benefit
reserves. See note 9.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
(dollars in thousands) |
Amortized
Cost |
|
Gross
Unrealized
Holding
Gains |
|
Gross
Unrealized
Holding
Losses |
|
|
|
Estimated
Fair
Value |
Fixed maturity securities: |
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
$ |
3,145,087 |
|
|
$ |
— |
|
|
$ |
(186,666) |
|
|
|
|
$ |
2,958,421 |
|
U.S. government-sponsored enterprises |
838,518 |
|
|
42 |
|
|
(113,378) |
|
|
|
|
725,182 |
|
Obligations of states, municipalities and political
subdivisions |
3,975,846 |
|
|
3,479 |
|
|
(265,982) |
|
|
|
|
3,713,343 |
|
Foreign governments |
1,388,221 |
|
|
— |
|
|
(215,332) |
|
|
|
|
1,172,889 |
|
Commercial mortgage-backed securities |
2,103,907 |
|
|
1 |
|
|
(171,243) |
|
|
|
|
1,932,665 |
|
Residential mortgage-backed securities |
582,833 |
|
|
127 |
|
|
(25,627) |
|
|
|
|
557,333 |
|
Asset-backed securities |
2,066 |
|
|
— |
|
|
(54) |
|
|
|
|
2,012 |
|
Corporate bonds |
809,101 |
|
|
10 |
|
|
(144,599) |
|
|
|
|
664,512 |
|
Total fixed maturity securities |
12,845,579 |
|
|
3,659 |
|
|
(1,122,881) |
|
|
|
|
11,726,357 |
|
Short-term investments |
2,441,719 |
|
|
147 |
|
|
(17,022) |
|
|
|
|
2,424,844 |
|
Investments, available-for-sale |
$ |
15,287,298 |
|
|
$ |
3,806 |
|
|
$ |
(1,139,903) |
|
|
|
|
$ |
14,151,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
(dollars in thousands) |
Amortized
Cost |
|
Gross
Unrealized
Holding
Gains |
|
Gross
Unrealized
Holding
Losses |
|
Estimated
Fair
Value |
Fixed maturity securities: |
|
|
|
|
|
|
|
U.S. Treasury securities |
$ |
2,489,032 |
|
|
$ |
2,633 |
|
|
$ |
(21,471) |
|
|
$ |
2,470,194 |
|
U.S. government-sponsored enterprises |
753,029 |
|
|
28,997 |
|
|
(6,439) |
|
|
775,587 |
|
Obligations of states, municipalities and political
subdivisions |
4,007,211 |
|
|
266,575 |
|
|
(7,862) |
|
|
4,265,924 |
|
Foreign governments |
1,394,771 |
|
|
134,071 |
|
|
(9,488) |
|
|
1,519,354 |
|
Commercial mortgage-backed securities |
1,928,775 |
|
|
69,810 |
|
|
(8,152) |
|
|
1,990,433 |
|
Residential mortgage-backed securities |
699,136 |
|
|
27,084 |
|
|
(170) |
|
|
726,050 |
|
Asset-backed securities |
3,035 |
|
|
46 |
|
|
— |
|
|
3,081 |
|
Corporate bonds |
786,478 |
|
|
54,475 |
|
|
(4,271) |
|
|
836,682 |
|
Total fixed maturity securities |
12,061,467 |
|
|
583,691 |
|
|
(57,853) |
|
|
12,587,305 |
|
Short-term investments |
1,805,300 |
|
|
28 |
|
|
(5,340) |
|
|
1,799,988 |
|
Investments, available-for-sale |
$ |
13,866,767 |
|
|
$ |
583,719 |
|
|
$ |
(63,193) |
|
|
$ |
14,387,293 |
|
b)
The following tables summarize gross unrealized investment losses
on available-for-sale investments by the length of time that
securities have continuously been in an unrealized loss
position.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
Less than 12 months |
|
12 months or longer |
|
Total |
(dollars in thousands) |
Estimated
Fair
Value |
|
Gross
Unrealized
Holding Losses |
|
Estimated
Fair
Value |
|
Gross
Unrealized
Holding Losses |
|
Estimated
Fair
Value |
|
Gross
Unrealized
Holding Losses |
Fixed maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
$ |
1,208,818 |
|
|
$ |
(59,585) |
|
|
$ |
1,749,603 |
|
|
$ |
(127,081) |
|
|
$ |
2,958,421 |
|
|
$ |
(186,666) |
|
U.S. government-sponsored enterprises |
486,025 |
|
|
(63,103) |
|
|
224,076 |
|
|
(50,275) |
|
|
710,101 |
|
|
(113,378) |
|
Obligations of states, municipalities and political
subdivisions |
2,955,371 |
|
|
(205,139) |
|
|
253,651 |
|
|
(60,843) |
|
|
3,209,022 |
|
|
(265,982) |
|
Foreign governments |
1,006,658 |
|
|
(177,900) |
|
|
166,232 |
|
|
(37,432) |
|
|
1,172,890 |
|
|
(215,332) |
|
Commercial mortgage-backed securities |
1,677,058 |
|
|
(122,811) |
|
|
255,181 |
|
|
(48,432) |
|
|
1,932,239 |
|
|
(171,243) |
|
Residential mortgage-backed securities |
510,227 |
|
|
(24,860) |
|
|
3,899 |
|
|
(767) |
|
|
514,126 |
|
|
(25,627) |
|
Asset-backed securities |
2,012 |
|
|
(54) |
|
|
— |
|
|
— |
|
|
2,012 |
|
|
(54) |
|
Corporate bonds |
551,417 |
|
|
(118,451) |
|
|
105,459 |
|
|
(26,148) |
|
|
656,876 |
|
|
(144,599) |
|
Total fixed maturity securities |
8,397,586 |
|
|
(771,903) |
|
|
2,758,101 |
|
|
(350,978) |
|
|
11,155,687 |
|
|
(1,122,881) |
|
Short-term investments |
1,107,053 |
|
|
(17,022) |
|
|
— |
|
|
— |
|
|
1,107,053 |
|
|
(17,022) |
|
Total |
$ |
9,504,639 |
|
|
$ |
(788,925) |
|
|
$ |
2,758,101 |
|
|
$ |
(350,978) |
|
|
$ |
12,262,740 |
|
|
$ |
(1,139,903) |
|
At September 30, 2022, the Company held 1,548
available-for-sale securities in an unrealized loss position with a
total estimated fair value of $12.3 billion and gross unrealized
losses of $1.1 billion. Of these 1,548 securities, 172 securities
had been in a continuous unrealized loss position for one year or
longer and had a total estimated fair value of $2.8 billion and
gross unrealized losses of $351.0 million.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2021 |
|
Less than 12 months |
|
12 months or longer |
|
Total |
(dollars in thousands) |
Estimated
Fair
Value |
|
Gross
Unrealized
Holding Losses |
|
Estimated
Fair
Value |
|
Gross
Unrealized
Holding Losses |
|
Estimated
Fair
Value |
|
Gross
Unrealized
Holding Losses |
Fixed maturity securities: |
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury securities |
$ |
2,236,637 |
|
|
$ |
(18,433) |
|
|
$ |
97,173 |
|
|
$ |
(3,038) |
|
|
$ |
2,333,810 |
|
|
$ |
(21,471) |
|
U.S. government-sponsored enterprises |
381,495 |
|
|
(5,640) |
|
|
14,010 |
|
|
(799) |
|
|
395,505 |
|
|
(6,439) |
|
Obligations of states, municipalities and political
subdivisions |
393,249 |
|
|
(6,941) |
|
|
23,589 |
|
|
(921) |
|
|
416,838 |
|
|
(7,862) |
|
Foreign governments |
322,813 |
|
|
(8,596) |
|
|
25,564 |
|
|
(892) |
|
|
348,377 |
|
|
(9,488) |
|
Commercial mortgage-backed securities |
345,616 |
|
|
(7,765) |
|
|
9,189 |
|
|
(387) |
|
|
354,805 |
|
|
(8,152) |
|
Residential mortgage-backed securities |
12,828 |
|
|
(159) |
|
|
269 |
|
|
(11) |
|
|
13,097 |
|
|
(170) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
193,786 |
|
|
(4,271) |
|
|
— |
|
|
— |
|
|
193,786 |
|
|
(4,271) |
|
Total fixed maturity securities |
3,886,424 |
|
|
(51,805) |
|
|
169,794 |
|
|
(6,048) |
|
|
4,056,218 |
|
|
(57,853) |
|
Short-term investments |
228,870 |
|
|
(5,340) |
|
|
— |
|
|
— |
|
|
228,870 |
|
|
(5,340) |
|
Total |
$ |
4,115,294 |
|
|
$ |
(57,145) |
|
|
$ |
169,794 |
|
|
$ |
(6,048) |
|
|
$ |
4,285,088 |
|
|
$ |
(63,193) |
|
At December 31, 2021, the Company held 277 available-for-sale
securities in an unrealized loss position with a total estimated
fair value of $4.3 billion and gross unrealized losses of $63.2
million. Of these 277 securities, 13 securities had been in a
continuous unrealized loss position for one year or longer and had
a total estimated fair value of $169.8 million and gross unrealized
losses of $6.0 million.
The Company completes a detailed analysis each quarter to assess
whether the decline in the fair value of any investment below its
cost basis is the result of a credit loss. All available-for-sale
securities with unrealized losses are reviewed. The Company
considers many factors in completing its quarterly review of
securities with unrealized losses for credit-related impairment to
determine whether a credit loss exists, including the extent to
which fair value is below cost, the implied yield to maturity,
rating downgrades of the security and whether or not the issuer has
failed to make scheduled principal or interest payments. The
Company also takes into consideration information about the
financial condition of the issuer and industry factors that could
negatively impact the capital markets.
If the decline in fair value of an available-for-sale security
below its amortized cost is considered to be the result of a credit
loss, the Company compares the estimated present value of the cash
flows expected to be collected to the amortized cost of the
security. The extent to which the estimated present value of the
cash flows expected to be collected is less than the amortized cost
of the security represents the credit loss, which is recorded as an
allowance and recognized in net income. The allowance is limited to
the difference between the fair value and the amortized cost of the
security. Any remaining decline in fair value represents the
non-credit portion of the impairment, which is recognized in other
comprehensive income.
The Company did not have an allowance for credit losses as of
September 30, 2022 or December 31, 2021.
Quarterly, the Company also considers whether it intends to sell an
available-for-sale security or if it is more likely than not that
it will be required to sell a security before recovery of its
amortized cost. In these instances, a decline in fair value is
recognized in net income based on the fair value of the security at
the time of assessment, resulting in a new cost basis for the
security. As of
September 30, 2022, the
Company did not intend to sell or believe it would be required to
sell any available-for-sale securities in an unrealized loss
position before recovery of their amortized cost.
c)
The amortized cost and estimated fair value of fixed maturity
securities at September 30, 2022 are shown below by
contractual maturity.
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
Amortized
Cost |
|
Estimated
Fair Value |
Due in one year or less |
$ |
1,392,651 |
|
|
$ |
1,357,060 |
|
Due after one year through five years |
3,943,834 |
|
|
3,649,795 |
|
Due after five years through ten years |
2,993,861 |
|
|
2,618,759 |
|
Due after ten years |
1,826,427 |
|
|
1,608,733 |
|
|
10,156,773 |
|
|
9,234,347 |
|
Commercial mortgage-backed securities |
2,103,907 |
|
|
1,932,665 |
|
Residential mortgage-backed securities |
582,833 |
|
|
557,333 |
|
Asset-backed securities |
2,066 |
|
|
2,012 |
|
Total fixed maturity securities |
$ |
12,845,579 |
|
|
$ |
11,726,357 |
|
d)
The following table presents the components of net investment
income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended September 30, |
|
Nine Months Ended September 30, |
(dollars in thousands) |
2022 |
|
2021 |
|
2022 |
|
2021 |
Interest: |
|
|
|
|
|
|
|
Tax-exempt municipal bonds |
$ |
12,673 |
|
|
$ |
14,293 |
|
|
$ |
39,408 |
|
|
$ |
43,631 |
|
Taxable municipal bonds |
17,488 |
|
|
16,320 |
|
|
52,613 |
|
|
49,236 |
|
Other taxable bonds |
42,316 |
|
|
39,705 |
|
|
123,520 |
|
|
119,718 |
|
Short-term investments, including overnight deposits |
17,633 |
|
|
633 |
|
|
24,634 |
|
|
2,179 |
|
Dividends on equity securities |
25,962 |
|
|
23,400 |
|
|
74,289 |
|
|
68,583 |
|
Income (loss) from equity method investments |
(5,509) |
|
|
882 |
|
|
(35,002) |
|
|
13,825 |
|
Other |
1,103 |
|
|
(335) |
|
|
7,041 |
|
|
(947) |
|
|
111,666 |
|
|
94,898 |
|
|
286,503 |
|
|
296,225 |
|
Investment expenses |
(3,935) |
|
|
(3,634) |
|
|
(12,380) |
|
|
(12,130) |
|
Net investment income |
$ |
107,731 |
|
|
$ |
91,264 |
|
|
$ |
274,123 |
|
|
$ |
284,095 |
|