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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)
___________________________________________________________________________________
| | | | | | | | |
Virginia | | 54-1959284 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
4521 Highwoods Parkway, Glen Allen, Virginia 23060-6148
(Address of principal executive offices) (Zip Code)
(804) 747-0136
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
Title of each class | | Trading Symbol(s) | | Name of exchange on which registered |
Common Stock, no par value | | MKL | | New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
Large accelerated filer | x | Accelerated filer | ☐ | Non-accelerated filer | ☐ |
Smaller reporting company | ☐ | Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
Number of shares of the registrant's common stock outstanding at October 25, 2022: 13,450,401
Markel Corporation
Form 10-Q
Index
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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
| | | | | | | | | | | |
| September 30, 2022 | | December 31, 2021 |
(dollars in thousands) | (unaudited) | | |
ASSETS | | | |
Investments, at estimated fair value: | | | |
Fixed maturity securities, available-for-sale (amortized cost of $12,845,579 in 2022 and $12,061,467 in 2021) | $ | 11,726,357 | | | $ | 12,587,305 | |
Equity securities (cost of $3,005,729 in 2022 and $2,867,899 in 2021) | 6,950,357 | | | 9,023,927 | |
Short-term investments, available-for-sale (estimated fair value approximates cost) | 2,424,844 | | | 1,799,988 | |
Total Investments | 21,101,558 | | | 23,411,220 | |
Cash and cash equivalents | 3,540,690 | | | 3,978,490 | |
Restricted cash and cash equivalents | 1,255,178 | | | 902,457 | |
Receivables | 2,956,686 | | | 2,413,938 | |
Reinsurance recoverables | 8,258,499 | | | 7,293,555 | |
Deferred policy acquisition costs | 946,064 | | | 794,145 | |
Prepaid reinsurance premiums | 2,285,959 | | | 1,798,571 | |
Goodwill | 2,797,426 | | | 2,899,140 | |
Intangible assets | 1,686,212 | | | 1,822,486 | |
Other assets | 3,593,083 | | | 3,163,094 | |
Total Assets | $ | 48,421,355 | | | $ | 48,477,096 | |
LIABILITIES AND EQUITY | | | |
Unpaid losses and loss adjustment expenses | $ | 20,194,374 | | | $ | 18,178,894 | |
Life and annuity benefits | 733,489 | | | 902,980 | |
Unearned premiums | 6,514,980 | | | 5,383,619 | |
Payables to insurance and reinsurance companies | 685,294 | | | 616,665 | |
Senior long-term debt and other debt (estimated fair value of $3,520,000 in 2022 and $5,017,000 in 2021) | 4,131,165 | | | 4,361,266 | |
Other liabilities | 3,290,291 | | | 3,832,084 | |
Total Liabilities | 35,549,593 | | | 33,275,508 | |
Redeemable noncontrolling interests | 513,043 | | | 461,378 | |
Commitments and contingencies | | | |
Shareholders' equity: | | | |
Preferred stock | 591,891 | | | 591,891 | |
Common stock | 3,482,828 | | | 3,441,079 | |
Retained earnings | 9,255,658 | | | 10,446,763 | |
Accumulated other comprehensive income (loss) | (1,036,454) | | | 237,617 | |
Total Shareholders' Equity | 12,293,923 | | | 14,717,350 | |
Noncontrolling interests | 64,796 | | | 22,860 | |
Total Equity | 12,358,719 | | | 14,740,210 | |
Total Liabilities and Equity | $ | 48,421,355 | | | $ | 48,477,096 | |
See accompanying notes to consolidated financial statements.
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| 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) | | | |