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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Markel Group Inc | NYSE:MKL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
4.51 | 0.29% | 1,581.06 | 1,588.31 | 1,538.36 | 1,577.01 | 53,246 | 01:00:00 |
RICHMOND, Va., Feb. 2, 2022 /PRNewswire/ -- Markel Corporation (NYSE: MKL) today reported its financial results for the year ended December 31, 2021.
The following tables present summary financial data for 2021 and 2020.
Years Ended December 31, | |||||
(in thousands, except per share amounts) | 2021 | 2020 | |||
Earned premiums | $ | 6,503,029 | $ | 5,612,205 | |
Markel Ventures operating revenues | $ | 3,643,827 | $ | 2,794,959 | |
Net investment gains | $ | 1,978,534 | $ | 617,979 | |
Comprehensive income to shareholders | $ | 2,078,244 | $ | 1,191,634 | |
Diluted net income per common share | $ | 176.51 | $ | 55.63 | |
Combined Ratio | 90 % | 98 % | |||
(in thousands, except per share amounts) | December 31, 2021 | December 31, 2020 | |||
Book value per common share outstanding | $ | 1,034.56 | $ | 885.72 | |
Common shares outstanding | 13,632 | 13,783 |
Highlights of our 2021 results include:
"Our 2021 results show what we can achieve when all three of our operating engines – insurance, investments and Markel Ventures – power us forward. Each contributed in meaningful ways to a record-setting 2021 across many financial metrics, including operating revenues and operating income, among others," said Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers. "Our underwriting operations delivered a 90% combined ratio, which reflected the impact of recent underwriting actions we've taken to enhance our profitability while growing gross premium volume to $8.5 billion."
"We added two tremendous companies, Buckner and Metromont, to our Markel Ventures family of companies during a year in which revenues and EBITDA far surpassed previous record levels," Gayner and Whitt continued. "Our investment portfolio provided strong returns on the back of the terrific performance of our equity portfolio."
"We thank our employees, trading partners and customers, all of whom have played a tremendous role in our record-setting year as we continue our efforts to build shareholder value. We are especially grateful for our employees, who performed admirably in 2021 and continue to show their dedication to building Markel into one of the world's great companies."
We believe our financial performance is most meaningfully measured over longer periods of time, which tends to mitigate the effects of short-term volatility and also aligns with the longer-term perspective we apply to operating our businesses. We generally use five-year periods to measure our performance. Over the five-year period ended December 31, 2021, the compound annual growth in book value per common share outstanding was 11%. Over the five-year period ended December 31, 2021, our share price increased at a compound annual rate of 6%.
Underwriting Results
Consolidated
Years Ended December 31, | |||||||
(dollars in thousands) | 2021 | 2020 | % Change | ||||
Gross premium volume (1) | $ | 8,480,494 | $ | 7,154,628 | 19 % | ||
Net written premiums | $ | 7,119,731 | $ | 5,932,238 | 20 % | ||
Earned premiums | $ | 6,503,029 | $ | 5,612,205 | 16 % | ||
Underwriting profit | $ | 628,085 | $ | 127,617 | 392 % | ||
Underwriting Ratios (2) | Point Change | ||||||
Loss ratio | |||||||
Current accident year loss ratio | 62.4 % | 72.6 % | (10.2) | ||||
Prior accident years loss ratio | (7.4)% | (10.8)% | 3.4 | ||||
Loss ratio | 55.1 % | 61.8 % | (6.7) | ||||
Expense ratio | 35.3 % | 36.0 % | (0.7) | ||||
Combined ratio | 90.3 % | 97.7 % | (7.4) | ||||
Current accident year loss ratio catastrophe impact (3) | 3.0 % | 3.1 % | (0.1) | ||||
Current accident year loss ratio COVID-19 impact (3) | — % | 6.4 % | (6.4) | ||||
Prior accident years loss ratio COVID-19 impact (3) | 0.2 % | — % | 0.2 | ||||
Current accident year loss ratio, excluding COVID-19 and catastrophes | 59.4 % | 63.1 % | (3.7) | ||||
Combined ratio, excluding COVID-19 and current year catastrophes | 87.1 % | 88.3 % | (1.2) | ||||
(1) Gross premium volume excludes $3.0 billion and $2.1 billion for the years ended December 31, 2021 and 2020, respectively, | |||||||
(2) Amounts may not reconcile due to rounding. | |||||||
(3) The point impact of catastrophes and COVID-19 is calculated as the associated net losses and loss adjustment expenses |
Premiums
The increase in gross premium volume in our underwriting operations in 2021 was driven by new business and more favorable rates within our professional liability and general liability product lines across both of our underwriting segments. Net retention of gross premium volume for our underwriting operations was 84% in 2021 compared to 83% in 2020. The increase in earned premiums in our underwriting operations in 2021 was primarily attributable to higher gross premium volume within our professional liability and general liability product lines.
Combined Ratio
In 2021, underwriting results included $195.0 million of net losses and loss adjustment expenses attributed to natural catastrophes, including Winter Storm Uri, the floods in Europe and Hurricane Ida (2021 Catastrophes) as well as $15.7 million of net losses and loss adjustment expenses resulting from an increase in our net estimate of ultimate losses and loss adjustment expenses attributed to COVID-19. In 2020, underwriting results included $358.3 million of net losses and loss adjustment expenses attributed to COVID-19 and $172.2 million of net losses and loss adjustment expenses from natural catastrophes, including Hurricanes Laura, Sally and Isaias, as well as the derecho in Iowa and wildfires in the western U.S. (2020 Catastrophes). Excluding losses attributed to catastrophes and COVID-19, the decrease in our consolidated combined ratio in 2021 compared to 2020 was driven by a lower current accident year loss ratio within our Insurance segment, partially offset by the impact of less favorable development on prior accident years loss reserves in 2021 compared to 2020. Higher earned premiums in 2021 compared to 2020 had a favorable impact on our expense ratio and an unfavorable impact on the prior accident years loss ratio.
The net losses and loss adjustment expenses attributed to the 2021 Catastrophes as of December 31, 2021 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, as well as analysis of our ceded reinsurance contracts. These estimates are based on various assumptions about coverage, liability and reinsurance and are subject to change. While we believe our reserves for the 2021 Catastrophes as of December 31, 2021 are adequate, we continue to closely monitor reported claims and may adjust our estimates of gross and net losses as new information becomes available.
Insurance Segment
Years Ended December 31, | |||||||
(dollars in thousands) | 2021 | 2020 | % Change | ||||
Gross premium volume | $ | 7,239,676 | $ | 6,029,024 | 20 % | ||
Net written premiums | $ | 5,998,890 | $ | 4,977,662 | 21 % | ||
Earned premiums | $ | 5,465,284 | $ | 4,688,448 | 17 % | ||
Underwriting profit | $ | 696,413 | $ | 169,001 | 312 % | ||
Underwriting Ratios (1) | Point Change | ||||||
Loss ratio | |||||||
Current accident year loss ratio | 60.6 % | 71.9% | (11.3) | ||||
Prior accident years loss ratio | (9.3)% | (11.8)% | 2.5 | ||||
Loss ratio | 51.3 % | 60.1 % | (8.8) | ||||
Expense ratio | 35.9 % | 36.3 % | (0.4) | ||||
Combined ratio | 87.3 % | 96.4 % | (9.1) | ||||
Current accident year loss ratio catastrophe impact (2) | 1.7 % | 2.7 % | (1.0) | ||||
Current accident year loss ratio COVID-19 impact (2) | — % | 6.3 % | (6.3) | ||||
Prior accident years loss ratio COVID-19 impact (2) | (0.1)% | — % | (0.1) | ||||
Current accident year loss ratio, excluding COVID-19 and catastrophes | 58.9 % | 63.0 % | (4.1) | ||||
Combined ratio, excluding COVID-19 and current year catastrophes | 85.6 % | 87.4 % | (1.8) | ||||
(1) Amounts may not reconcile due to rounding. | |||||||
(2) The point impact of catastrophes and COVID-19 is calculated as the associated net losses and loss adjustment expenses divided by |
Premiums
The increase in gross premium volume in our Insurance segment in 2021 was driven by growth across all of our product lines, most notably within our professional liability and general liability product lines, which experienced higher new business volume and benefited from more favorable rates and higher retention of renewals. Additionally, our personal lines product lines experienced significant growth in 2021 primarily attributable to the continued expansion of our classic cars business. Net retention of gross premium volume was 83% in both 2021 and 2020. The increase in earned premiums in 2021 was primarily due to the higher gross premium volume.
Combined Ratio
The Insurance segment's current accident year losses and loss adjustment expenses in 2021 included $94.7 million of net losses and loss adjustment expenses from the 2021 Catastrophes. Current accident year losses in 2020 included $296.4 million and $124.4 million of net losses and loss adjustment expenses attributed to COVID-19 and the 2020 Catastrophes, respectively. Excluding losses attributed to catastrophes and COVID-19, the decrease in the current accident year loss ratio in 2021 compared to 2020 was primarily attributable to lower attritional loss ratios within our professional liability, general liability and property product lines, primarily due to the benefit of achieving higher premium rates.
The Insurance segment's 2021 combined ratio included $506.3 million of favorable development on prior accident years loss reserves compared to $554.6 million in 2020. The decrease in favorable development was primarily due to less favorable development on our professional liability product lines in 2021 compared to 2020, partially offset by more favorable development on our property product lines in 2021 compared to 2020. Additionally, higher earned premiums in 2021 compared to 2020 had an unfavorable impact on the prior accident years loss ratio. In 2021 and 2020, favorable development was most significant on our general liability, workers' compensation, marine and energy and professional liability product lines. In 2021, we also had significant favorable development on our property product lines.
The modest decrease in the Insurance segment's expense ratio in 2021 was primarily due to the favorable impact of higher earned premiums, partially offset by higher profit sharing expenses in 2021 compared to 2020 as a result of improved profitability.
Reinsurance Segment
Years Ended December 31, | |||||
(dollars in thousands) | 2021 | 2020 | % Change | ||
Gross premium volume | $ 1,246,143 | $ 1,130,923 | 10 % | ||
Net written premiums | $ 1,126,167 | $ 960,123 | 17 % | ||
Earned premiums | $ 1,042,048 | $ 929,348 | 12 % | ||
Underwriting loss | $ (55,238) | $ (34,009) | (62)% | ||
Underwriting Ratios (1) | Point Change | ||||
Loss ratio | |||||
Current accident year loss ratio | 72.0 % | 75.3 % | (3.3) | ||
Prior accident years loss ratio | 1.9 % | (5.6)% | 7.5 | ||
Loss ratio | 73.9 % | 69.8 % | 4.1 | ||
Expense ratio | 31.4 % | 33.9 % | (2.5) | ||
Combined ratio | 105.3 % | 103.7 % | 1.6 | ||
Current accident year loss ratio catastrophe impact (2) (3) | 9.6 % | 5.1 % | 4.5 | ||
Current accident year loss ratio COVID-19 impact (2) | — % | 6.7 % | (6.7) | ||
Prior accident years loss ratio COVID-19 impact (2) | 2.1 % | — % | 2.1 | ||
Current accident year loss ratio, excluding COVID-19 and catastrophes | 62.3 % | 63.5 % | (1.2) | ||
Combined ratio, excluding COVID-19 and current year catastrophes | 93.6 % | 91.9 % | 1.7 | ||
(1) Amounts may not reconcile due to rounding. | |||||
(2) The point impact of catastrophes and COVID-19 is calculated as the associated net losses and loss adjustment expenses | |||||
(3) The point impact of catastrophes does not include the favorable impact of assumed reinstatement premiums associated with |
Premiums
The increase in gross premium volume in our Reinsurance segment in 2021 was primarily attributable to new business and increases on renewals within our professional liability and general liability product lines, including favorable premium adjustments within our professional liability product lines, partially offset by lower gross premiums within our property product lines. The increases on renewals and favorable premium adjustments were primarily due to increased exposures arising from growth in underlying portfolios and more favorable rates. Significant variability in gross premium volume can be expected in our Reinsurance segment due to individually significant contracts and multi-year contracts.
Lower gross premiums within our property product lines in 2021 were primarily attributable to non-renewals following our decision to discontinue writing property reinsurance business on a risk-bearing basis effective January 1, 2021. We continued to have property loss exposure throughout 2021, including catastrophe exposure, on property treaties written in prior years with contract terms that extended beyond January 1, 2021 and on our retrocessional reinsurance property business, which we discontinued writing effective January 1, 2022. With few exceptions, effective January 1, 2022, we no longer have exposure to reinsurance and retrocessional reinsurance property risks within our Reinsurance segment.
Net retention of gross premium volume was 90% in 2021 compared to 85% in 2020. The increase in net retention was driven by changes in mix of business. Our growing professional liability and general liability product lines are fully retained while the non-renewed property business had a lower retention rate than the rest of the segment.
The increase in earned premiums in 2021 was primarily attributable to growth in gross premium volume within our general liability and professional liability product lines in recent years, partially offset by the impact of lower gross premiums within our property product lines as a result of our decision to discontinue writing property reinsurance business, as previously discussed.
Combined Ratio
The Reinsurance segment's current accident year losses and loss adjustment expenses in 2021 included $100.3 million of net losses and loss adjustment expenses attributed to the 2021 Catastrophes. Partially offsetting the impact of losses attributed to the 2021 Catastrophes was $21.7 million of favorable reinstatement premiums in 2021 attributed to these events. Current accident year losses in 2020 included $61.9 million and $47.8 million of net losses and loss adjustment expenses attributed to COVID-19 and the 2020 Catastrophes, respectively. Catastrophe losses and reinstatement premiums in 2021 were primarily attributed to our retrocessional reinsurance property business, a portion of which was ceded to Lodgepine Re effective July 1, 2021, and our property reinsurance product lines, both of which we have discontinued writing on a risk-bearing basis, as previously discussed. Catastrophe losses in 2020, and a portion of our 2020 COVID-19 losses, were also attributed to our property reinsurance product lines. Excluding the impact of catastrophes and COVID-19, the decrease in the current accident year loss ratio was driven by our professional liability and general liability product lines. These product lines benefited from higher premium rates and an increase in the proportion of quota share contract structures within our portfolio, which generally have lower loss ratios than excess of loss contracts. The favorable impact of changes in these product lines on the current accident year loss ratio was partially offset by an unfavorable impact from the change in mix of business within the segment as the non-renewed property business had a lower attritional loss ratio than the rest of the segment.
The Reinsurance segment's 2021 combined ratio included $19.9 million of adverse development on prior accident years loss reserves, which was primarily attributable to our property product lines, as well as additional exposures recognized on prior accident years related to net favorable premium adjustments on our professional liability product lines. Adverse development on our property product lines was primarily attributable to an increase in reserves attributed to COVID-19, reflecting changes in our net estimates resulting from updated and new loss information from cedents. We also had net adverse development within our property product lines on natural catastrophes that occurred in recent years, however, this adverse development was largely offset by favorable development on natural catastrophes within other product lines in the Reinsurance segment. In 2021, the increase in prior years loss reserves on our property and professional liability product lines was also partially offset by favorable development on our general liability and credit and surety product lines. In 2020, the combined ratio included $51.8 million of favorable development on prior accident years loss reserves, which reflected favorable development on our property product lines, partially offset by adverse development on our public entity and professional liability product lines and additional exposures recognized on prior accident years related to net favorable premium adjustments on our professional liability product lines.
The decrease in the Reinsurance segment's expense ratio in 2021 was primarily attributable to lower compensation and general expenses due to the discontinuation of our property reinsurance business as well as the favorable impact of higher earned premiums in 2021 compared to 2020.
Investing Results
We measure investing results by our net investment income, net investment gains and the change in net unrealized gains on available-for-sale investments, as well as investment yield and taxable equivalent total investment return. The following table summarizes our investment performance.
Years Ended December 31, | |||||
(dollars in thousands) | 2021 | 2020 | Change | ||
Net investment income | $ 374,601 | $ 371,830 | 1 % | ||
Net investment gains | $ 1,978,534 | $ 617,979 | $ 1,360,555 | ||
Change in net unrealized gains on available-for-sale investments (1) | $ (450,096) | $ 442,089 | $ (892,185) | ||
Investment yield (2) (3) | 2.0 % | 2.4 % | (0.4) | ||
Taxable equivalent total investment return (3) | 8.8 % | 9.4 % | (0.6) | ||
(1) The change in net unrealized gains on available-for-sale investments included an increase related to an adjustment | |||||
(2) Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost. | |||||
(3) See Supplemental Financial Information for a reconciliation of investment yield to taxable equivalent total investment return. |
The increase in net investment income in 2021 was driven by higher dividend income in 2021 and income on our equity method investments in 2021 compared to losses in 2020. This increase was partially offset by lower interest income on our short-term investments due to lower short-term interest rates in 2021 compared to 2020.
Net investment gains in both 2021 and 2020 were primarily attributable to an increase in the fair value of our equity securities driven by favorable market value movements. Net investment gains in 2020 reflected significant market volatility experienced during the year. The impact of significant declines in the fair value of our equity securities 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 securities over the subsequent three quarters of 2020.
The decrease in net unrealized gains on available-for-sale investments in 2021 was attributable to decreases in the fair value of our fixed maturity securities as a result of an increase in interest rates during 2021. The increase in net unrealized gains on available-for-sale investments in 2020 was attributable to increases in the fair value of our fixed maturity securities as a result of a decrease in interest rates during 2020.
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 August 2021, we acquired a controlling interest in Buckner HeavyLift Cranes (Buckner), a provider of crane rental services for large commercial contractors. In December 2021, we acquired a controlling interest in Metromont LLC (Metromont), a precast concrete manufacturer and concrete building solutions provider for commercial projects. Due to the one-month lag in consolidating the results of Markel Ventures, the results of Metromont will be included in our consolidated results beginning in January 2022. The following table summarizes the results from our Markel Ventures segment.
Years Ended December 31, | |||||
(dollars in thousands) | 2021 | 2020 | Change | ||
Operating revenues | $ 3,643,827 | $ 2,794,959 | 30 % | ||
Operating income (1) | $ 272,552 | $ 254,078 | 7 % | ||
EBITDA (1) | $ 402,700 | $ 366,934 | 10 % | ||
Net income to shareholders | $ 174,407 | $ 145,449 | 20 % | ||
(1) See Supplemental Financial Information for a reconciliation of Markel Ventures operating income to Markel |
The increase in operating revenues in 2021 was driven by an increase of $638.9 million from our construction services businesses primarily due to an increased contribution from Lansing Building Products, LLC (Lansing), which was acquired in April 2020, and the contribution from Buckner in the fourth quarter of 2021, as well as improved pricing and increased demand in 2021 compared to 2020. Additionally, operating revenues in 2021 increased across our transportation-related and equipment manufacturing businesses, due in part to lower sales volumes at most of these businesses in 2020 as a result of the economic and social disruption caused by the COVID-19 pandemic, and in our consumer and building products businesses, given increased demand reflecting increases in consumer spending in 2021. These increases in operating revenues were partially offset by lower operating revenues from our healthcare businesses due to the sale of certain subsidiaries of one of these businesses in January 2021.
The benefit of increases in operating revenues to operating income, EBITDA and net income to shareholders in 2021 was reduced by increased costs of goods sold across many of our businesses, which are reflective of current economic conditions where supply constraints are contributing to increasing wholesale prices, particularly for raw materials, across a variety of industries.
The increase in operating income, EBITDA and net income to shareholders in 2021 was driven by higher revenues at our construction services businesses, as previously discussed. The increase was also attributable to a pre-tax transaction gain of $22.0 million, which was included in services and other expenses and recognized in connection with the sale of certain subsidiaries at one of our healthcare businesses, as previously discussed, as well as other associated changes in this business. These increases were partially offset by the impact of lower revenues and operating margins at one of our consulting services businesses in 2021 as well as a $17.2 million pre-tax increase in our estimate of the contingent consideration obligations related to better than expected financial performance of certain of our recent acquisitions.
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, | |||||||||||
2021 | 2020 | ||||||||||
(dollars in thousands) | Services and | Services and | Amortization of | Services and | Services and | Amortization of | |||||
Other operations: | |||||||||||
Insurance-linked securities | $ 202,019 | $ 186,510 | $ 38,448 | $ 200,928 | $ 168,118 | $ 38,447 | |||||
Program services and other fronting | 125,716 | 20,132 | 20,938 | 104,171 | 20,427 | 20,937 | |||||
Life and annuity | 1,515 | 16,667 | — | 1,233 | 17,713 | — | |||||
Other (1) | 17,195 | 30,534 | 2,403 | 32,006 | 81,251 | 5,453 | |||||
346,445 | 253,843 | 61,789 | 338,338 | 287,509 | 64,837 | ||||||
Underwriting operations (2) | 41,182 | 41,906 | |||||||||
Total | $ 346,445 | $ 253,843 | $ 102,971 | $ 338,338 | $ 287,509 | $ 106,743 | |||||
(1) Other includes the results of our run-off Lodgepine and Markel CATCo operations for both periods presented. For the year ended December 31, 2020, services and | |||||||||||
(2) Amortization of intangible assets attributable to our underwriting operations is not allocated between the Insurance and Reinsurance segments. |
Insurance-Linked Securities
The increase in operating revenues in our Nephila insurance-linked securities operations in 2021 was driven by growth in our managing general agent operations, partially offset by lower investment management fees. The decrease in investment management fees was primarily due to higher management fees in 2020 attributable to releases of capital from side pocket reserves, which were more significant in 2020 than 2021, as well as lower average assets under management during 2021. Nephila's net assets under management were $8.8 billion and $9.6 billion as of December 31, 2021 and 2020, respectively.
Program Services and Other Fronting
The increase in operating revenues and operating income in our program services and other fronting operations in 2021 was primarily due to higher gross premium volume at our program services operations driven by the expansion of existing programs, as well as growth from new programs. Gross premiums in our program services operations were $2.7 billion and $2.1 billion for the years ended December 31, 2021 and 2020, respectively.
Income Taxes
The effective tax rate was 22% in 2021 compared to 17% in 2020. The effective tax rate for 2020 differs from the effective tax rate in 2021, 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 $28.3 billion at December 31, 2021 compared to $24.9 billion at December 31, 2020. The increase was primarily attributable to cash provided by operating activities of $2.3 billion, as well as an increase in the fair value of our equity securities, driven by favorable market value movements. Net cash provided by operating activities increased from $1.7 billion in 2020, primarily due to higher net premium collections, partially offset by higher claims settlement activity, as a result of continued growth in premium volume within our Insurance segment.
At December 31, 2021, our holding company held $5.3 billion of invested assets compared to $4.1 billion of invested assets at December 31, 2020. The increase in holding company invested assets was primarily due to dividends received from our subsidiaries, net proceeds from our May 2021 debt offering and an increase in the fair value of equity securities, partially offset by cash used in connection with the acquisition of Metromont and to repurchase outstanding shares of our common stock.
Investment in Hagerty
We hold an investment in Hagerty, Inc. (Hagerty), an automotive enthusiast brand offering integrated membership products and programs as well as a specialty insurance provider focused on the global automotive enthusiast market. Hagerty became a publicly traded company in December 2021 and in conjunction raised additional capital through a private offering, which included an additional $30.0 million investment by us. Following these transactions, our ownership interest in Hagerty is 23% and is comprised of Class A common shares, which are listed for trading on the New York Stock Exchange, as well as Class V common shares, associated with our original investment in 2019, that can be converted on a one-for-one basis into Class A common shares.
For accounting purposes, we are deemed to have the ability to exercise significant influence over Hagerty and are therefore required to account for our investment in Hagerty under the equity method, rather than at fair value. As of December 31, 2021, the carrying value of our investment in Hagerty was $256.6 million, which was included within other assets on the consolidated balance sheet. As of December 31, 2021, the estimated value of our investment, based on the closing stock price of Hagerty's Class A common shares, was $1.1 billion.
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 2020 Annual Report on Form 10-K, or our most recent Quarterly Report on Form 10-Q, or are included in the items listed below:
Results from our underwriting, investing, Markel Ventures and other operations have been and will continue to be potentially materially affected by these factors.
By making forward-looking statements, we do not intend to become obligated to publicly update or revise any such statements whether as a result of new information, future events or other changes. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as at their dates.
Our previously announced conference call, which will involve discussion of our quarterly and year-end financial results and business developments and may include forward-looking information, will be held Thursday, February 3, 2022, 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 at www.markel.com in the "For investors" section. Any person needing additional information can contact Markel's Investor Relations Department at IR@markel.com. A replay of the call also will be available on our website from approximately one hour after the conclusion of the call until Monday, February 14, 2022.
* * * * * * * *
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) | 2021 | 2020 | 2021 | 2020 | |||
OPERATING REVENUES | |||||||
Earned premiums | $ 1,806,797 | $ 1,526,894 | $ 6,503,029 | $ 5,612,205 | |||
Net investment income | 90,506 | 97,588 | 374,601 | 371,830 | |||
Net investment gains | 802,743 | 848,875 | 1,978,534 | 617,979 | |||
Products revenues | 384,976 | 321,734 | 1,712,120 | 1,439,515 | |||
Services and other revenues | 673,083 | 560,559 | 2,278,141 | 1,693,537 | |||
Total Operating Revenues | 3,758,105 | 3,355,650 | 12,846,425 | 9,735,066 | |||
OPERATING EXPENSES | |||||||
Losses and loss adjustment expenses | 938,091 | 814,150 | 3,581,205 | 3,466,961 | |||
Underwriting, acquisition and insurance expenses | 648,876 | 540,278 | 2,293,739 | 2,017,627 | |||
Products expenses | 371,371 | 281,234 | 1,544,506 | 1,256,159 | |||
Services and other expenses | 580,593 | 536,387 | 2,022,935 | 1,561,120 | |||
Amortization of intangible assets | 41,989 | 39,039 | 160,539 | 159,315 | |||
Total Operating Expenses | 2,580,920 | 2,211,088 | 9,602,924 | 8,461,182 | |||
Operating Income | 1,177,185 | 1,144,562 | 3,243,501 | 1,273,884 | |||
Interest expense | (48,167) | (44,381) | (183,579) | (177,582) | |||
Net foreign exchange gains (losses) | 10,594 | (87,117) | 72,271 | (95,853) | |||
Income Before Income Taxes | 1,139,612 | 1,013,064 | 3,132,193 | 1,000,449 | |||
Income tax expense | (264,560) | (165,635) | (684,458) | (168,682) | |||
Net Income | 875,052 | 847,429 | 2,447,735 | 831,767 | |||
Net income attributable to noncontrolling interests | (3,923) | (130) | (22,732) | (15,737) | |||
Net Income to Shareholders | 871,129 | 847,299 | 2,425,003 | 816,030 | |||
Preferred stock dividends | (18,000) | (18,400) | (36,000) | (18,400) | |||
Net Income to Common Shareholders | $ 853,129 | $ 828,899 | $ 2,389,003 | $ 797,630 | |||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||
Change in net unrealized gains on available-for-sale investments, net of taxes: | |||||||
Net holding gains (losses) arising during the period | $ (85,636) | $ 54,672 | $ (348,315) | $ 356,159 | |||
Reclassification adjustments for net gains (losses) included in net income | (2,816) | 174 | (6,623) | (3,386) | |||
Change in net unrealized gains on available-for-sale investments, net of taxes | (88,452) | 54,846 | (354,938) | 352,773 | |||
Change in foreign currency translation adjustments, net of taxes | 117 | 38,230 | (213) | 29,847 | |||
Change in net actuarial pension loss, net of taxes | 6,558 | (8,420) | 8,390 | (6,998) | |||
Total Other Comprehensive Income (Loss) | (81,777) | 84,656 | (346,761) | 375,622 | |||
Comprehensive Income | 793,275 | 932,085 | 2,100,974 | 1,207,389 | |||
Comprehensive income attributable to noncontrolling interests | (3,918) | (124) | (22,730) | (15,755) | |||
Comprehensive Income to Shareholders | $ 789,357 | $ 931,961 | $ 2,078,244 | $ 1,191,634 | |||
NET INCOME PER COMMON SHARE | |||||||
Basic | $ 62.65 | $ 59.44 | $ 176.92 | $ 55.67 | |||
Diluted | $ 62.44 | $ 59.33 | $ 176.51 | $ 55.63 |
Markel Corporation and Subsidiaries Selected Data | |||
December 31, | |||
(in thousands, except per share data) | 2021 | 2020 | |
Total investments, cash and cash equivalents and restricted cash and cash equivalents | $ 28,292,167 | $ 24,926,592 | |
Reinsurance recoverables | 7,293,555 | 5,989,337 | |
Goodwill and intangible assets | 4,271,626 | 4,387,342 | |
Total assets | 48,448,866 | 41,710,054 | |
Unpaid losses and loss adjustment expenses | 18,178,894 | 16,222,376 | |
Unearned premiums | 5,383,619 | 4,433,245 | |
Senior long-term debt and other debt | 4,361,266 | 3,484,023 | |
Total shareholders' equity | 14,695,048 | 12,799,789 | |
Book value per common share outstanding | $ 1,034.56 | $ 885.72 | |
Common shares outstanding | 13,632 | 13,783 |
Markel Corporation and Subsidiaries Supplemental Financial Information | |||||||||||
Components of Consolidated Operating Income Segment Results | |||||||||||
Quarter Ended December 31, 2021 | |||||||||||
(dollars in thousands) | Insurance | Reinsurance | Investing | Markel Ventures | Other (1) | Consolidated | |||||
Gross premium volume | $ 1,880,383 | $ 253,508 | $ — | $ — | $ 647,324 | $ 2,781,215 | |||||
Net written premiums | 1,571,589 | 233,085 | — | — | (2,274) | 1,802,400 | |||||
Earned premiums | 1,536,460 | 272,017 | — | — | (1,680) | 1,806,797 | |||||
Losses and loss adjustment expenses: | |||||||||||
Current accident year | (863,151) | (188,589) | — | — | — | (1,051,740) | |||||
Prior accident years | 108,569 | 14,176 | — | — | (9,096) | 113,649 | |||||
Underwriting, acquisition and insurance expenses | (554,475) | (94,170) | — | — | (231) | (648,876) | |||||
Underwriting profit (loss) | 227,403 | 3,434 | — | — | (11,007) | 219,830 | |||||
Net investment income | — | — | 90,503 | 3 | — | 90,506 | |||||
Net investment gains | — | — | 802,743 | — | — | 802,743 | |||||
Products revenues | — | — | — | 384,976 | — | 384,976 | |||||
Services and other revenues | — | — | — | 568,555 | 104,528 | 673,083 | |||||
Products expenses | — | — | — | (371,371) | — | (371,371) | |||||
Services and other expenses | — | — | — | (508,244) | (72,349) | (580,593) | |||||
Amortization of intangible assets (2) | — | — | — | (16,464) | (25,525) | (41,989) | |||||
Operating income (loss) | $ 227,403 | $ 3,434 | $ 893,246 | $ 57,455 | $ (4,353) | $ 1,177,185 | |||||
Combined ratio | 85 % | 99 % | NM (3) | 88 % | |||||||
Quarter Ended December 31, 2020 | |||||||||||
(dollars in thousands) | Insurance | Reinsurance | Investing | Markel Ventures | Other (1) | Consolidated | |||||
Gross premium volume | $ 1,546,875 | $ 172,394 | $ — | $ — | $ 578,646 | $ 2,297,915 | |||||
Net written premiums | 1,293,895 | 139,550 | — | — | (1,356) | 1,432,089 | |||||
Earned premiums | 1,287,688 | 240,464 | — | — | (1,258) | 1,526,894 | |||||
Losses and loss adjustment expenses: | |||||||||||
Current accident year | (819,075) | (166,022) | — | — | — | (985,097) | |||||
Prior accident years | 149,937 | 22,706 | — | — | (1,696) | 170,947 | |||||
Underwriting, acquisition and insurance expenses | (453,208) | (87,072) | — | — | 2 | (540,278) | |||||
Underwriting profit (loss) | 165,342 | 10,076 | — | — | (2,952) | 172,466 | |||||
Net investment income | — | — | 97,585 | 3 | — | 97,588 | |||||
Net investment gains | — | — | 848,875 | — | — | 848,875 | |||||
Products revenues | — | — | — | 321,734 | — | 321,734 | |||||
Services and other revenues | — | — | — | 459,730 | 100,829 | 560,559 | |||||
Products expenses | — | — | — | (281,234) | — | (281,234) | |||||
Services and other expenses | — | (41,461) | — | (433,648) | (61,278) | (536,387) | |||||
Amortization of intangible assets (2) | — | — | — | (13,273) | (25,766) | (39,039) | |||||
Operating income (loss) | $ 165,342 | $ (31,385) | $ 946,460 | $ 53,312 | $ 10,833 | $ 1,144,562 | |||||
Combined ratio | 87 % | 96 % | NM (3) | 89 % | |||||||
(1) Other represents the total profit (loss) attributable to our operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated | |||||||||||
(2) Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets attributable to our underwriting | |||||||||||
(3) NM - Ratio is not meaningful |
Year Ended December 31, 2021 | |||||||||||
(dollars in thousands) | Insurance | Reinsurance | Investing | Markel Ventures | Other (1) | Consolidated | |||||
Gross premium volume | $ 7,239,676 | $ 1,246,143 | $ — | $ — | $ 2,952,863 | $ 11,438,682 | |||||
Net written premiums | 5,998,890 | 1,126,167 | — | — | (5,326) | 7,119,731 | |||||
Earned premiums | 5,465,284 | 1,042,048 | — | — | (4,303) | 6,503,029 | |||||
Losses and loss adjustment expenses: | |||||||||||
Current accident year | (3,311,185) | (749,815) | — | — | — | (4,061,000) | |||||
Prior accident years | 506,292 | (19,928) | — | — | (6,569) | 479,795 | |||||
Underwriting, acquisition and insurance expenses | (1,963,978) | (327,543) | — | — | (2,218) | (2,293,739) | |||||
Underwriting profit (loss) | 696,413 | (55,238) | — | — | (13,090) | 628,085 | |||||
Net investment income | — | — | 374,590 | 11 | — | 374,601 | |||||
Net investment gains | — | — | 1,978,534 | — | — | 1,978,534 | |||||
Products revenues | — | — | — | 1,712,120 | — | 1,712,120 | |||||
Services and other revenues | — | — | — | 1,931,696 | 346,445 | 2,278,141 | |||||
Products expenses | — | — | — | (1,544,506) | — | (1,544,506) | |||||
Services and other expenses | — | 109 | — | (1,769,201) | (253,843) | (2,022,935) | |||||
Amortization of intangible assets (2) | — | — | — | (57,568) | (102,971) | (160,539) | |||||
Operating income (loss) | $ 696,413 | $ (55,129) | $ 2,353,124 | $ 272,552 | $ (23,459) | $ 3,243,501 | |||||
Combined ratio | 87 % | 105 % | NM (3) | 90 % | |||||||
Year Ended December 31, 2020 | |||||||||||
(dollars in thousands) | Insurance | Reinsurance | Investing | Markel Ventures | Other (1) | Consolidated | |||||
Gross premium volume | $ 6,029,024 | $ 1,130,923 | $ — | $ — | $ 2,106,718 | $ 9,266,665 | |||||
Net written premiums | 4,977,662 | 960,123 | — | — | (5,547) | 5,932,238 | |||||
Earned premiums | 4,688,448 | 929,348 | — | — | (5,591) | 5,612,205 | |||||
Losses and loss adjustment expenses: | |||||||||||
Current accident year | (3,373,085) | (700,240) | — | — | — | (4,073,325) | |||||
Prior accident years | 554,586 | 51,755 | — | — | 23 | 606,364 | |||||
Underwriting, acquisition and insurance expenses | (1,700,948) | (314,872) | — | — | (1,807) | (2,017,627) | |||||
Underwriting profit (loss) | 169,001 | (34,009) | — | — | (7,375) | 127,617 | |||||
Net investment income | — | — | 371,585 | 245 | — | 371,830 | |||||
Net investment gains | — | — | 617,979 | — | — | 617,979 | |||||
Products revenues | — | — | — | 1,439,515 | — | 1,439,515 | |||||
Services and other revenues | — | — | — | 1,355,199 | 338,338 | 1,693,537 | |||||
Products expenses | — | — | — | (1,256,159) | — | (1,256,159) | |||||
Services and other expenses | — | (41,461) | — | (1,232,150) | (287,509) | (1,561,120) | |||||
Amortization of intangible assets (2) | — | — | — | (52,572) | (106,743) | (159,315) | |||||
Operating income (loss) | $ 169,001 | $ (75,470) | $ 989,564 | $ 254,078 | $ (63,289) | $ 1,273,884 | |||||
Combined ratio | 96 % | 104 % | NM (3) | 98 % | |||||||
(1) Other represents the total profit (loss) attributable to our operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a | |||||||||||
(2) Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets attributable to our underwriting segments | |||||||||||
(3) NM - Ratio is not meaningful |
Underwriting Results Components of Quarter-to-Date Combined Ratio | |||||||||||
Quarters Ended December 31, | |||||||||||
2021 | 2020 | ||||||||||
Insurance | Reinsurance | Consolidated | Insurance | Reinsurance | Consolidated | ||||||
Underwriting Ratios (1) | |||||||||||
Loss ratio | |||||||||||
Current accident year loss ratio | 56.2 % | 69.3 % | 58.2 % | 63.6 % | 69.0 % | 64.5% | |||||
Prior accident years loss ratio | (7.1)% | (5.2)% | (6.3)% | (11.6)% | (9.4)% | (11.2)% | |||||
Loss ratio | 49.1 % | 64.1 % | 51.9 % | 52.0 % | 59.6 % | 53.3 % | |||||
Expense ratio | 36.1 % | 34.6 % | 35.9 % | 35.2 % | 36.2 % | 35.4 % | |||||
Combined ratio | 85.2 % | 98.7 % | 87.8 % | 87.2 % | 95.8 % | 88.7 % | |||||
Current accident year loss ratio catastrophe impact (2) | 0.4 % | 2.5 % | 0.7 % | 4.5 % | 5.3 % | 4.6 % | |||||
Current accident year loss ratio COVID-19 impact (2) | — % | — % | — % | (0.7)% | (1.9)% | (0.9)% | |||||
Prior accident years loss ratio COVID-19 impact (2) | (0.1) % | 1.0 % | — % | — % | — % | — % | |||||
Current accident year loss ratio, excluding COVID-19 and catastrophes | 55.8 % | 66.8 % | 57.5 % | 59.8 % | 65.7 % | 60.8 % | |||||
Combined ratio, excluding COVID-19 and current year catastrophes | 85.0 % | 95.2 % | 87.1 % | 83.4 % | 92.5 % | 85.0 % | |||||
(1) Amounts may not reconcile due to rounding. | |||||||||||
(2) The point impact of catastrophes and COVID-19 is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums. |
Net Income per Common Share | |||||||
Quarters Ended December 31, | Years Ended December 31, | ||||||
(in thousands, except per share amounts) | 2021 | 2020 | 2021 | 2020 | |||
Net income to common shareholders | $ 853,129 | $ 828,899 | $ 2,389,003 | $ 797,630 | |||
Adjustment of redeemable noncontrolling interests | 5,321 | (8,024) | 46,874 | (28,705) | |||
Adjusted net income to common shareholders | $ 858,450 | $ 820,875 | $ 2,435,877 | $ 768,925 | |||
Basic common shares outstanding | 13,702 | 13,811 | 13,768 | 13,811 | |||
Dilutive potential common shares from restricted stock units and restricted stock | 47 | 24 | 32 | 12 | |||
Diluted common shares outstanding | 13,749 | 13,835 | 13,800 | 13,823 | |||
Basic net income per common share | $ 62.65 | $ 59.44 | $ 176.92 | $ 55.67 | |||
Diluted net income per common share | $ 62.44 | $ 59.33 | $ 176.51 | $ 55.63 |
Non-GAAP Financial Measures
Underwriting
In addition to the U.S. GAAP combined ratio, loss ratio and expense ratio, we also evaluate our underwriting performance using measures that exclude the impacts of certain items on these ratios. We believe these adjusted measures, which are non-GAAP measures, provide financial statement users with a better understanding of the significant factors that comprise our underwriting results and how management evaluates underwriting performance.
When analyzing our combined ratio, we exclude current accident year losses and loss adjustment expenses attributed to natural catastrophes. We also exclude losses and loss adjustment expenses attributed to certain significant, infrequent loss events, for example, the COVID-19 pandemic. 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 current accident year loss ratio 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 components of our consolidated and segment combined ratios, including the non-GAAP measures discussed above, are included in "Underwriting Results".
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, | |||
2021 | 2020 | ||
Investment yield (1) | 2.0 % | 2.4 % | |
Adjustment of investment yield from amortized cost to fair value | (0.6)% | (0.5)% | |
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 | 5.9 % | 5.8 % | |
Taxable equivalent effect for interest and dividends (2) | 0.1 % | 0.1 % | |
Other (3) | 1.0 % | 1.2 % | |
Taxable equivalent total investment return | 8.8 % | 9.4 % | |
(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 EBITDA.
Quarters Ended December 31, | Years Ended December 31, | ||||||
(dollars in thousands) | 2021 | 2020 | 2021 | 2020 | |||
Markel Ventures operating income | $ 57,455 | $ 53,312 | $ 272,552 | $ 254,078 | |||
Depreciation expense | 24,898 | 16,813 | 72,580 | 60,284 | |||
Amortization of intangible assets | 16,464 | 13,273 | 57,568 | 52,572 | |||
Markel Ventures EBITDA | $ 98,817 | $ 83,398 | $ 402,700 | $ 366,934 |
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SOURCE Markel Corporation
Copyright 2022 PR Newswire
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