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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, 2024
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 GROUP INC.
(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 23, 2024: 12,862,300
Markel Group Inc.
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 2. | | |
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Item 5. | | |
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Item 6. | | |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARKEL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
| September 30, 2024 | | December 31, 2023 |
(dollars in thousands) | (unaudited) | | |
ASSETS | | | |
Investments, at estimated fair value: | | | |
Fixed maturity securities, available-for-sale (amortized cost of $16,265,743 in 2024 and $14,932,286 in 2023) | $ | 16,067,848 | | | $ | 14,372,732 | |
Equity securities (cost of $3,798,549 in 2024 and $3,497,071 in 2023) | 11,591,298 | | | 9,577,871 | |
Short-term investments, available-for-sale (estimated fair value approximates cost) | 2,355,738 | | | 2,571,382 | |
Total Investments | 30,014,884 | | | 26,521,985 | |
Cash and cash equivalents | 3,873,041 | | | 3,747,060 | |
Restricted cash and cash equivalents | 753,476 | | | 584,974 | |
Receivables | 3,909,404 | | | 3,455,306 | |
Reinsurance recoverables | 10,746,213 | | | 9,235,501 | |
Deferred policy acquisition costs | 967,670 | | | 931,344 | |
Prepaid reinsurance premiums | 3,413,314 | | | 2,365,243 | |
Goodwill | 2,739,770 | | | 2,624,749 | |
Intangible assets | 1,507,581 | | | 1,588,684 | |
Other assets | 4,357,885 | | | 3,990,864 | |
Total Assets | $ | 62,283,238 | | | $ | 55,045,710 | |
LIABILITIES AND EQUITY | | | |
Unpaid losses and loss adjustment expenses | $ | 25,877,478 | | | $ | 23,483,321 | |
Life and annuity benefits | 623,445 | | | 649,054 | |
Unearned premiums | 7,887,057 | | | 6,642,426 | |
Payables to insurance and reinsurance companies | 1,448,951 | | | 1,037,722 | |
Senior long-term debt and other debt (estimated fair value of $4,028,000 in 2024 and $3,353,000 in 2023) | 4,356,054 | | | 3,779,796 | |
Other liabilities | 4,427,425 | | | 3,927,498 | |
Total Liabilities | 44,620,410 | | | 39,519,817 | |
Redeemable noncontrolling interests | 515,493 | | | 469,685 | |
Commitments and contingencies | | | |
Shareholders' equity: | | | |
Preferred stock | 591,891 | | | 591,891 | |
Common stock | 3,552,800 | | | 3,517,146 | |
Retained earnings | 13,063,403 | | | 11,353,101 | |
Accumulated other comprehensive loss | (193,855) | | | (478,210) | |
Total Shareholders' Equity | 17,014,239 | | | 14,983,928 | |
Noncontrolling interests | 133,096 | | | 72,280 | |
Total Equity | 17,147,335 | | | 15,056,208 | |
Total Liabilities and Equity | $ | 62,283,238 | | | $ | 55,045,710 | |
See accompanying notes to consolidated financial statements.
MARKEL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended September 30, | | Nine Months Ended September 30, |
| 2024 | | 2023 | | 2024 | | 2023 |
(dollars in thousands, except per share data) | | | | | | | |
OPERATING REVENUES | | | | | | | |
Earned premiums | $ | 2,110,108 | | | $ | 2,121,745 | | | $ | 6,314,834 | | | $ | 6,120,592 | |
Net investment income | 235,477 | | | 192,207 | | | 676,807 | | | 521,235 | |
Net investment gains (losses) | 917,530 | | | (265,917) | | | 1,689,794 | | | 591,173 | |
Products revenues | 612,277 | | | 601,524 | | | 2,060,336 | | | 1,964,332 | |
Services and other revenues | 735,872 | | | 725,627 | | | 2,037,991 | | | 1,963,779 | |
Total Operating Revenues | 4,611,264 | | | 3,375,186 | | | 12,779,762 | | | 11,161,111 | |
OPERATING EXPENSES | | | | | | | |
Losses and loss adjustment expenses | 1,290,612 | | | 1,404,325 | | | 3,810,934 | | | 3,765,215 | |
Underwriting, acquisition and insurance expenses | 743,556 | | | 698,129 | | | 2,192,603 | | | 2,071,721 | |
Products expenses | 549,990 | | | 545,567 | | | 1,766,930 | | | 1,712,792 | |
Services and other expenses | 609,321 | | | 606,810 | | | 1,757,222 | | | 1,678,246 | |
Amortization of acquired intangible assets | 46,459 | | | 47,545 | | | 134,981 | | | 136,367 | |
| | | | | | | |
Total Operating Expenses | 3,239,938 | | | 3,302,376 | | | 9,662,670 | | | 9,364,341 | |
Operating Income | 1,371,326 | | | 72,810 | | | 3,117,092 | | | 1,796,770 | |
Interest expense | (53,361) | | | (44,553) | | | (151,506) | | | (141,212) | |
Foreign exchange gains (losses) | (111,612) | | | 39,246 | | | (51,401) | | | (8,658) | |
| | | | | | | |
Income Before Income Taxes | 1,206,353 | | | 67,503 | | | 2,914,185 | | | 1,646,900 | |
Income tax expense | (259,411) | | | (14,235) | | | (628,211) | | | (339,903) | |
Net Income | 946,942 | | | 53,268 | | | 2,285,974 | | | 1,306,997 | |
Net income attributable to noncontrolling interests | (41,983) | | | (10,677) | | | (88,130) | | | (80,243) | |
Net Income to Shareholders | 904,959 | | | 42,591 | | | 2,197,844 | | | 1,226,754 | |
Preferred stock dividends | — | | | — | | | (18,000) | | | (18,000) | |
| | | | | | | |
Net Income to Common Shareholders | $ | 904,959 | | | $ | 42,591 | | | $ | 2,179,844 | | | $ | 1,208,754 | |
| | | | | | | |
OTHER COMPREHENSIVE INCOME (LOSS) | | | | | | | |
Change in net unrealized losses on available-for-sale investments, net of taxes: | | | | | | | |
Net holding gains (losses) arising during the period | $ | 434,310 | | | $ | (187,330) | | | $ | 265,586 | | | $ | (161,115) | |
| | | | | | | |
Reclassification adjustments for net losses in net income | 254 | | | 22,869 | | | 17,406 | | | 26,268 | |
Change in net unrealized losses on available-for-sale investments, net of taxes | 434,564 | | | (164,461) | | | 282,992 | | | (134,847) | |
Change in discount rate for life and annuity benefits, net of taxes | (14,298) | | | 14,609 | | | (1,907) | | | 8,781 | |
Change in foreign currency translation adjustments, net of taxes | 4,236 | | | (187) | | | 3,306 | | | 2,753 | |
Change in net actuarial pension loss, net of taxes | 21 | | | 20 | | | 60 | | | 56 | |
Total Other Comprehensive Income (Loss) | 424,523 | | | (150,019) | | | 284,451 | | | (123,257) | |
Comprehensive Income (Loss) | 1,371,465 | | | (96,751) | | | 2,570,425 | | | 1,183,740 | |
Comprehensive income attributable to noncontrolling interests | (42,007) | | | (10,749) | | | (88,226) | | | (80,326) | |
Comprehensive Income (Loss) to Shareholders | $ | 1,329,458 | | | $ | (107,500) | | | $ | 2,482,199 | | | $ | 1,103,414 | |
| | | | | | | |
NET INCOME PER COMMON SHARE | | | | | | | |
Basic | $ | 66.40 | | | $ | 3.15 | | | $ | 160.71 | | | $ | 90.86 | |
Diluted | $ | 66.25 | | | $ | 3.14 | | | $ | 160.42 | | | $ | 90.69 | |
See accompanying notes to consolidated financial statements.
MARKEL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter Ended September 30, 2024 | 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, 2024 | $ | 591,891 | | | $ | 3,546,661 | | | $ | 12,329,827 | | | $ | (618,355) | | | $ | 15,850,024 | | | $ | 98,530 | | | $ | 15,948,554 | | | $ | 476,518 | |
Net income | | | | | 904,959 | | | — | | | 904,959 | | | 32,566 | | | 937,525 | | | 9,417 | |
Other comprehensive income | | | | | — | | | 424,499 | | | 424,499 | | | — | | | 424,499 | | | 24 | |
Comprehensive income | | | | | | | | | 1,329,458 | | | 32,566 | | | 1,362,024 | | | 9,441 | |
Repurchase of common stock | — | | | — | | | (128,897) | | | — | | | (128,897) | | | — | | | (128,897) | | | — | |
| | | | | | | | | | | | | | | |
Equity awards expensed | — | | | 7,164 | | | — | | | — | | | 7,164 | | | — | | | 7,164 | | | — | |
Adjustment of redeemable noncontrolling interests | — | | | — | | | (42,565) | | | — | | | (42,565) | | | — | | | (42,565) | | | 42,565 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | — | | | (1,025) | | | 79 | | | 1 | | | (945) | | | 2,000 | | | 1,055 | | | (13,031) | |
September 30, 2024 | $ | 591,891 | | | $ | 3,552,800 | | | $ | 13,063,403 | | | $ | (193,855) | | | $ | 17,014,239 | | | $ | 133,096 | | | $ | 17,147,335 | | | $ | 515,493 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2024 | Preferred Stock | | Common Stock | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders' Equity | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
(dollars in thousands) | | | | | | | | | | | | | | | |
December 31, 2023 | $ | 591,891 | | | $ | 3,517,146 | | | $ | 11,353,101 | | | $ | (478,210) | | | $ | 14,983,928 | | | $ | 72,280 | | | $ | 15,056,208 | | | $ | 469,685 | |
Net income | | | | | 2,197,844 | | | — | | | 2,197,844 | | | 55,993 | | | 2,253,837 | | | 32,137 | |
Other comprehensive income | | | | | — | | | 284,355 | | | 284,355 | | | — | | | 284,355 | | | 96 | |
Comprehensive income | | | | | | | | | 2,482,199 | | | 55,993 | | | 2,538,192 | | | 32,233 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Repurchase of common stock | — | | | — | | | (389,089) | | | — | | | (389,089) | | | — | | | (389,089) | | | — | |
Preferred stock dividends | — | | | — | | | (18,000) | | | — | | | (18,000) | | | — | | | (18,000) | | | — | |
Equity awards expensed | — | | | 46,275 | | | — | | | — | | | 46,275 | | | — | | | 46,275 | | | — | |
Adjustment of redeemable noncontrolling interests | — | | | — | | | (81,267) | | | — | | | (81,267) | | | — | | | (81,267) | | | 81,267 | |
Purchase of noncontrolling interests | — | | | (9,596) | | | — | | | — | | | (9,596) | | | — | | | (9,596) | | | (36,896) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other | — | | | (1,025) | | | 814 | | | — | | | (211) | | | 4,823 | | | 4,612 | | | (30,796) | |
September 30, 2024 | $ | 591,891 | | | $ | 3,552,800 | | | $ | 13,063,403 | | | $ | (193,855) | | | $ | 17,014,239 | | | $ | 133,096 | | | $ | 17,147,335 | | | $ | 515,493 | |
See accompanying notes to consolidated financial statements.
MARKEL GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Quarter Ended September 30, 2023 | 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, 2023 | $ | 591,891 | | | $ | 3,515,362 | | | $ | 10,818,989 | | | $ | (740,743) | | | $ | 14,185,499 | | | $ | 53,582 | | | $ | 14,239,081 | | | $ | 464,442 | |
Net income | | | | | 42,591 | | | — | | | 42,591 | | | 2,502 | | | 45,093 | | | 8,175 | |
Other comprehensive income (loss) | | | | | — | | | (150,091) | | | (150,091) | | | — | | | (150,091) | | | 72 | |
Comprehensive income (loss) | | | | | | | | | (107,500) | | | 2,502 | | | (104,998) | | | 8,247 | |
| | | | | | | | | | | | | | | |
Repurchase of common stock | — | | | — | | | (82,432) | | | — | | | (82,432) | | | — | | | (82,432) | | | — | |
| | | | | | | | | | | | | | | |
Equity awards expensed | — | | | 4,949 | | | — | | | — | | | 4,949 | | | — | | | 4,949 | | | — | |
Adjustment of redeemable noncontrolling interests | — | | | — | | | (628) | | | — | | | (628) | | | — | | | (628) | | | 628 | |
Purchase of noncontrolling interest | — | | | (776) | | | — | | | — | | | (776) | | | — | | | (776) | | | 570 | |
| | | | | | | | | | | | | | | |
Other | — | | | (1) | | | 47 | | | 1 | | | 47 | | | — | | | 47 | | | (6,501) | |
September 30, 2023 | $ | 591,891 | | | $ | 3,519,534 | | | $ | 10,778,567 | | | $ | (890,833) | | | $ | 13,999,159 | | | $ | 56,084 | | | $ | 14,055,243 | | | $ | 467,386 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Nine Months Ended September 30, 2023 | Preferred Stock | | Common Stock | | Retained Earnings | | Accumulated Other Comprehensive Loss | | Total Shareholders' Equity | | Noncontrolling Interests | | Total Equity | | Redeemable Noncontrolling Interests |
(dollars in thousands) | | | | | | | | | | | | | | | |
December 31, 2022 | $ | 591,891 | | | $ | 3,493,893 | | | $ | 9,832,804 | | | $ | (767,494) | | | $ | 13,151,094 | | | $ | 62,791 | | | $ | 13,213,885 | | | $ | 523,154 | |
Net income | | | | | 1,226,754 | | | — | | | 1,226,754 | | | 55,940 | | | 1,282,694 | | | 24,303 | |
Other comprehensive income (loss) | | | | | — | | | (123,340) | | | (123,340) | | | — | | | (123,340) | | | 83 | |
Comprehensive income | | | | | | | | | 1,103,414 | | | 55,940 | | | 1,159,354 | | | 24,386 | |
| | | | | | | | | | | | | | | |
Repurchase of common stock | — | | | — | | | (269,593) | | | — | | | (269,593) | | | — | | | (269,593) | | | — | |
Preferred stock dividends | — | | | — | | | (18,000) | | | — | | | (18,000) | | | — | | | (18,000) | | | — | |
Equity awards expensed | — | | | 31,477 | | | — | | | — | | | 31,477 | | | — | | | 31,477 | | | — | |
Adjustment of redeemable noncontrolling interests | — | | | — | | | 7,087 | | | — | | | 7,087 | | | — | | | 7,087 | | | (7,087) | |
Purchase of noncontrolling interest | — | | | (5,464) | | | — | | | — | | | (5,464) | | | — | | | (5,464) | | | (48,907) | |
Redemption of Markel CATCo Re noncontrolling interests | — | | | — | | | — | | | — | | | — | | | (62,646) | | | (62,646) | | | — | |
Other | — | | | (372) | | | (485) | | | 1 | | | (856) | | | (1) | | | (857) | | | (24,160) | |
September 30, 2023 | $ | 591,891 | | | $ | 3,519,534 | | | $ | 10,778,567 | | | $ | (890,833) | | | $ | 13,999,159 | | | $ | 56,084 | | | $ | 14,055,243 | | | $ | 467,386 | |
See accompanying notes to consolidated financial statements.
MARKEL GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| Nine Months Ended September 30, |
| 2024 | | 2023 |
(dollars in thousands) |
| | |
OPERATING ACTIVITIES | | | |
Net income | $ | 2,285,974 | | | $ | 1,306,997 | |
Adjustments to reconcile net income to net cash provided by operating activities | (185,913) | | | 657,280 | |
Net Cash Provided By Operating Activities | 2,100,061 | | | 1,964,277 | |
INVESTING ACTIVITIES | | | |
Proceeds from sales, maturities, calls and prepayments of fixed maturity securities | 1,623,112 | | | 1,359,948 | |
Cost of fixed maturity securities purchased | (2,923,357) | | | (2,661,587) | |
Proceeds from sales of equity securities | 117,006 | | | 179,665 | |
Cost of equity securities purchased | (434,996) | | | (448,388) | |
Net change in short-term investments | 305,207 | | | 487,839 | |
| | | |
Cost of other investments purchased | (204,338) | | | (159,591) | |
Additions to property and equipment | (181,040) | | | (155,088) | |
Acquisitions, net of cash acquired | (207,231) | | | (3,584) | |
Proceeds from sales of subsidiaries, net | — | | | 41,302 | |
Other | 21,276 | | | 16,851 | |
Net Cash Used By Investing Activities | (1,884,361) | | | (1,342,633) | |
FINANCING ACTIVITIES | | | |
Additions to senior long-term debt and other debt | 1,278,485 | | | 475,964 | |
Repayment of senior long-term debt and other debt | (716,543) | | | (811,857) | |
| | | |
Repurchases of common stock | (389,089) | | | (269,593) | |
| | | |
Dividends paid on preferred stock | (18,000) | | | (18,000) | |
Redemption of Markel CATCo Re noncontrolling interests | — | | | (88,997) | |
Purchase of noncontrolling interests | (46,492) | | | (54,371) | |
Other | (42,629) | | | (32,434) | |
Net Cash Provided (Used) By Financing Activities | 65,732 | | | (799,288) | |
Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents | 13,051 | | | 993 | |
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | 294,483 | | | (176,651) | |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period | 4,332,034 | | | 5,221,513 | |
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD | $ | 4,626,517 | | | $ | 5,044,862 | |
See accompanying notes to consolidated financial statements.
MARKEL GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Markel Group Inc. (Markel Group) is a holding company comprised of a diverse group of companies and investments with specialty insurance at its core. Through its wholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures), Markel Group owns controlling interests in businesses that operate in a variety of industries. See note 2 for details regarding reportable segments.
a) Basis of Presentation. The consolidated balance sheet as of September 30, 2024 and the related consolidated statements of income and comprehensive income (loss) and changes in equity for the quarters and nine months ended September 30, 2024 and 2023, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2024 and 2023 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. 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, 2023 was derived from Markel Group'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 Group and its consolidated subsidiaries, as well as 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 2023 Annual Report on Form 10‑K.
b) Recent Accounting Pronouncements
Accounting Standards Not Yet Adopted
In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The standard requires public companies to, among other things: (1) disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss; (2) disclose, on an annual and interim basis, an amount for other segment expenses that are not separately disclosed as significant segment expenses and a description of its composition; (3) provide all annual disclosures about a reportable segment's profit or loss and assets currently required by Topic 280 in interim periods; and (4) disclose the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. ASU No. 2023-07 becomes effective for the Company in the fourth quarter of 2024 and will be applied using a retrospective approach that requires recasting of all prior periods presented. The standard only impacts required disclosures and will not impact the Company's financial position, results of operations or cash flows. The Company is still finalizing the impact of adopting ASU No. 2023-07 on its reportable segment disclosures, however, the ASU is not expected to result in significant changes to the Company's reportable segment disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard requires public companies, on an annual basis, to provide enhanced rate reconciliation disclosures, including disclosure of specific categories and additional information for reconciling items that meet a quantitative threshold. The standard also requires public companies to, among other things, disaggregate income taxes paid by federal, state and foreign taxes. ASU No. 2023-09 becomes effective for the Company's 2025 Annual Report on Form 10-K. The standard only impacts required disclosures and will not impact the Company's financial position, results of operations or cash flows.
2. Segment Reporting Disclosures
The Company has four reportable segments: Insurance, Reinsurance, Investing and Markel Ventures.
The chief operating decision maker reviews the Company's ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance. The Insurance segment includes all direct business and facultative reinsurance 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.
The Company's other insurance operations primarily consist of the results of the Company's program services and other fronting business and insurance-linked securities operations. Other insurance 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 insurance operations are considered to be reportable segments.
The Company's Investing segment includes all investing activities related to the Company's insurance operations, as well as investing activities at Markel Group. Invested assets managed through the Investing segment include the Company's portfolio of publicly traded fixed maturity and equity securities, as well as cash and short-term investments.
The Markel Ventures segment primarily consists of controlling interests in a diverse portfolio of businesses that operate in various industries. The Company's chief operating decision maker reviews and assesses Markel Ventures' performance in the aggregate, as a single operating segment.
Segment profit for all of the Company's segments is measured by operating income. Segment operating income excludes amortization of intangible assets arising from purchase accounting for acquisitions, which the chief operating decision maker does not consider in assessing the financial performance of, or allocating resources to, operating segments. Amortization of acquired intangible assets is considered a corporate expense because it is not a cost of operating the underlying businesses. For the Insurance and Reinsurance segments, segment operating income is typically consistent with underwriting profit, which the property and casualty insurance industry commonly defines as earned premiums net of losses and loss adjustment expenses and underwriting, acquisition and insurance expenses. Segment operating income for these two segments may also include other revenues and expenses that are not captured in underwriting profit.
Prior to 2024, the segment profitability metric for the Markel Ventures segment included amortization of acquired intangible assets. The new metric, as previously described, better aligns with how the chief operating decision maker reviews and assesses the performance of the Markel Ventures segment. Prior periods have been recast to conform to the current presentation. Management continues to evaluate the Company's segments as its business evolves and may further refine its segments and segment profitability metric.
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 insurance operations, including its program services and other fronting business and insurance-linked securities business. 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 insurance 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, 2024 |
(dollars in thousands) | Insurance | | Reinsurance | | Investing | | Markel Ventures | | Other insurance operations | | Corporate | | Consolidated |
Earned premiums | $ | 1,859,934 | | | $ | 250,680 | | | $ | — | | | $ | — | | | $ | (506) | | | $ | — | | | $ | 2,110,108 | |
Net investment income | — | | | — | | | 233,384 | | | 2,093 | | | — | | | — | | | 235,477 | |
Net investment gains | — | | | — | | | 917,530 | | | — | | | — | | | — | | | 917,530 | |
Products revenues | — | | | — | | | — | | | 612,277 | | | — | | | — | | | 612,277 | |
Services and other revenues | — | | | — | | | 14,971 | | | 645,251 | | | 75,650 | | | — | | | 735,872 | |
Total operating revenues | 1,859,934 | | | 250,680 | | | 1,165,885 | | | 1,259,621 | | | 75,144 | | | — | | | 4,611,264 | |
Losses and loss adjustment expenses: | | | | | | | | | | | | | |
Current accident year | (1,215,469) | | | (198,057) | | | — | | | — | | | — | | | — | | | (1,413,526) | |
Prior accident years | 130,431 | | | (7,937) | | | — | | | — | | | 420 | | | — | | | 122,914 | |
Underwriting, acquisition and insurance expenses: | | | | | | | | | | | | | |
Amortization of policy acquisition costs | (369,320) | | | (62,354) | | | — | | | — | | | — | | | — | | | (431,674) | |
Other underwriting expenses | (295,992) | | | (15,863) | | | — | | | — | | | (27) | | | — | | | (311,882) | |
Products expenses | — | | | — | | | — | | | (549,990) | | | — | | | — | | | (549,990) | |
Services and other expenses | — | | | — | | | — | | | (603,004) | | | (6,317) | | | — | | | (609,321) | |
Amortization of acquired intangible assets | | | | | | | | | | | (46,459) | | | (46,459) | |
| | | | | | | | | | | | | |
Operating income (loss) | $ | 109,584 | | | $ | (33,531) | | | $ | 1,165,885 | | | $ | 106,627 | | | $ | 69,220 | | | $ | (46,459) | | | $ | 1,371,326 | |
Interest expense | | | | | | | | | | | | | (53,361) | |
Net foreign exchange losses | | | | | | | | | | | | | (111,612) | |
| | | | | | | | | | | | | |
Income before income taxes | | | | | | | | | | | | | $ | 1,206,353 | |
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| Quarter Ended September 30, 2023 |
(dollars in thousands) | Insurance | | Reinsurance | | Investing | | Markel Ventures | | Other insurance operations | | Corporate | | Consolidated |
Earned premiums | $ | 1,848,267 | | | $ | 274,161 | | | $ | — | | | $ | — | | | $ | (683) | | | $ | — | | | $ | 2,121,745 | |
Net investment income | — | | | — | | | 191,015 | | | 1,192 | | | — | | | — | | | 192,207 | |
Net investment losses | — | | | — | | | (265,917) | | | — | | | — | | | — | | | (265,917) | |
Products revenues | — | | | — | | | — | | | 601,524 | | | — | | | — | | | 601,524 | |
Services and other revenues | — | | | — | | | (5,033) | | | 644,053 | | | 86,607 | | | — | | | 725,627 | |
Total operating revenues | 1,848,267 | | | 274,161 | | | (79,935) | | | 1,246,769 | | | 85,924 | | | — | | | 3,375,186 | |
Losses and loss adjustment expenses: | | | | | | | | | | | | | |
Current accident year | (1,258,864) | | | (176,007) | | | — | | | — | | | — | | | — | | | (1,434,871) | |
Prior accident years | 55,374 | | | (23,262) | | | — | | | — | | | (1,566) | | | — | | | 30,546 | |
Underwriting, acquisition and insurance expenses: | | | | | | | | | | | | | |
Amortization of policy acquisition costs | (369,001) | | | (68,919) | | | — | | | — | | | — | | | — | | | (437,920) | |
Other underwriting expenses | (250,684) | | | (11,785) | | | — | | | — | | | 2,260 | | | — | | | (260,209) | |
Products expenses | — | | | — | | | — | | | (545,567) | | | — | | | — | | | (545,567) | |
Services and other expenses | — | | | — | | | — | | | (570,782) | | | (36,028) | | | — | | | (606,810) | |
Amortization of acquired intangible assets | | | | | | | | | | | (47,545) | | | (47,545) | |
| | | | | | | | | | | | | |
Operating income (loss) | $ | 25,092 | | | $ | (5,812) | | | $ | (79,935) | | | $ | 130,420 | | | $ | 50,590 | | | $ | (47,545) | | | $ | 72,810 | |
Interest expense | | | | | | | | | | | | | (44,553) | |
Net foreign exchange gains | | | | | | | | | | | | | 39,246 | |
| | | | | | | | | | | | | |
Income before income taxes | | | | | | | | | | | | | $ | 67,503 | |
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| Nine Months Ended September 30, 2024 |
(dollars in thousands) | Insurance | | Reinsurance | | Investing | | Markel Ventures | | Other insurance operations | | Corporate | | Consolidated |
Earned premiums | $ | 5,547,398 | | | $ | 768,649 | | | $ | — | | | $ | — | | | $ | (1,213) | | | $ | — | | | $ | 6,314,834 | |
Net investment income | — | | | — | | | 671,042 | | | 5,765 | | | — | | | — | | | 676,807 | |
Net investment gains | — | | | — | | | 1,689,794 | | | — | | | — | | | — | | | 1,689,794 | |
Products revenues | — | | | — | | | — | | | 2,060,336 | | | — | | | — | | | 2,060,336 | |
Services and other revenues | — | | | — | | | 45,174 | | | 1,787,907 | | | 204,910 | | | — | | | 2,037,991 | |
Total operating revenues | 5,547,398 | | | 768,649 | | | 2,406,010 | | | 3,854,008 | | | 203,697 | | | — | | | 12,779,762 | |
Losses and loss adjustment expenses: | | | | | | | | | | | | | |
Current accident year | (3,608,979) | | | (546,167) | | | — | | | — | | | — | | | — | | | (4,155,146) | |
Prior accident years | 374,215 | | | (13,749) | | | — | | | — | | | (16,254) | | | — | | | 344,212 | |
Underwriting, acquisition and insurance expenses: | | | | | | | | | | | | | |
Amortization of policy acquisition costs | (1,101,256) | | | (186,644) | | | — | | | — | | | — | | | — | | | (1,287,900) | |
Other underwriting expenses | (861,305) | | | (42,289) | | | — | | | — | | | (1,109) | | | — | | | (904,703) | |
Products expenses | — | | | — | | | — | | | (1,766,930) | | | — | | | — | | | (1,766,930) | |
Services and other expenses | — | | | — | | | — | | | (1,699,038) | | | (58,184) | | | — | | | (1,757,222) | |
Amortization of acquired intangible assets | | | | | | | | | | | (134,981) | | | (134,981) | |
| | | | | | | | | | | | | |
Operating income (loss) | $ | 350,073 | | | $ | (20,200) | | | $ | 2,406,010 | | | $ | 388,040 | | | $ | 128,150 | | | $ | (134,981) | | | $ | 3,117,092 | |
Interest expense | | | | | | | | | | | | | (151,506) | |
Net foreign exchange losses | | | | | | | | | | | | | (51,401) | |
| | | | | | | | | | | | | |
Income before income taxes | | | | | | | | | | | | | $ | 2,914,185 | |
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| Nine Months Ended September 30, 2023 |
(dollars in thousands) | Insurance | | Reinsurance | | Investing | | Markel Ventures | | Other insurance operations | | Corporate | | Consolidated |
Earned premiums | $ | 5,322,377 | | | $ | 799,683 | | | $ | — | | | $ | — | | | $ | (1,468) | | | $ | — | | | $ | 6,120,592 | |
Net investment income | — | | | — | | | 518,536 | | | 2,699 | | | — | | | — | | | 521,235 | |
Net investment gains | — | | | — | | | 591,173 | | | — | | | — | | | — | | | 591,173 | |
Products revenues | — | | | — | | | — | | | 1,964,332 | | | — | | | — | | | 1,964,332 | |
Services and other revenues | — | | | — | | | (13,791) | | | 1,770,997 | | | 206,573 | | | — | | | 1,963,779 | |
Total operating revenues | 5,322,377 | | | 799,683 | | | 1,095,918 | | | 3,738,028 | | | 205,105 | | | — | | | 11,161,111 | |
Losses and loss adjustment expenses: | | | | | | | | | | | | | |
Current accident year | (3,415,860) | | | (519,109) | | | — | | | — | | | — | | | — | | | (3,934,969) | |
Prior accident years | 179,564 | | | (6,584) | | | — | | | — | | | (3,226) | | | — | | | 169,754 | |
Underwriting, acquisition and insurance expenses: | | | | | | | | | | | | | |
Amortization of policy acquisition costs | (1,096,500) | | | (202,271) | | | — | | | — | | | — | | | — | | | (1,298,771) | |
Other underwriting expenses | (733,334) | | | (38,113) | | | — | | | — | | | (1,503) | | | — | | | (772,950) | |
Products expenses | — | | | — | | | — | | | (1,712,792) | | | — | | | — | | | (1,712,792) | |
Services and other expenses | — | | | — | | | — | | | (1,632,588) | | | (45,658) | | | — | | | (1,678,246) | |
Amortization of acquired intangible assets | | | | | | | | | | | (136,367) | | | (136,367) | |
| | | | | | | | | | | | | |
Operating income | $ | 256,247 | | | $ | 33,606 | | | $ | 1,095,918 | | | $ | 392,648 | | | $ | 154,718 | | | |