Markel 10Q 2022 Q1 Quarterly report

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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 March 31, 2022

☐ 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

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 April 19, 2022: 13,567,910

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Markel Corporation

Form 10-Q

Index


		Page Number
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets—March 31, 2022 and December 31, 2021	3

	Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)—Three Months Ended March 31, 2022 and 2021	4

	Consolidated Statements of Changes in Equity—Three Months Ended March 31, 2022 and 2021	5

	Condensed Consolidated Statements of Cash Flows—Three Months Ended March 31, 2022 and 2021	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4.	Controls and Procedures	46

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

Item 6.	Exhibits	49

Signatures		51

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARKEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


	March 31, 2022		December 31, 2021
(dollars in thousands)	(unaudited)
ASSETS
Investments, at estimated fair value:
Fixed maturity securities, available-for-sale (amortized cost of $12,435,270 in 2022 and $12,061,467 in 2021)	$	12,295,298	$	12,587,305
Equity securities (cost of $2,876,496 in 2022 and $2,867,899 in 2021)	8,655,757		9,023,927
Short-term investments, available-for-sale (estimated fair value approximates cost)	2,093,215		1,799,988
Total Investments	23,044,270		23,411,220
Cash and cash equivalents	3,891,080		3,978,490
Restricted cash and cash equivalents	1,316,503		902,457
Receivables	2,686,731		2,413,938
Reinsurance recoverables	7,191,433		7,293,555
Deferred policy acquisition costs	899,358		794,145
Prepaid reinsurance premiums	1,940,719		1,798,571
Goodwill	2,773,587		2,899,140
Intangible assets	1,773,784		1,822,486
Other assets	3,467,792		3,163,094
Total Assets	$	48,985,257	$	48,477,096
LIABILITIES AND EQUITY
Unpaid losses and loss adjustment expenses	$	18,843,130	$	18,178,894
Life and annuity benefits	824,174		902,980
Unearned premiums	5,923,624		5,383,619
Payables to insurance and reinsurance companies	634,089		616,665
Senior long-term debt and other debt (estimated fair value of $4,602,000 in 2022 and $5,017,000 in 2021)	4,428,692		4,361,266
Other liabilities	3,744,465		3,832,084
Total Liabilities	34,398,174		33,275,508
Redeemable noncontrolling interests	480,351		461,378
Commitments and contingencies	0		0
Shareholders' equity:
Preferred stock	591,891		591,891
Common stock	3,469,449		3,441,079
Retained earnings	10,278,405		10,446,763
Accumulated other comprehensive income (loss)	(238,567)		237,617
Total Shareholders' Equity	14,101,178		14,717,350
Noncontrolling interests	5,554		22,860
Total Equity	14,106,732		14,740,210
Total Liabilities and Equity	$	48,985,257	$	48,477,096

See accompanying notes to consolidated financial statements.

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MARKEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three Months Ended March 31,
		2022		2021
(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums		$	1,759,770	$	1,497,695
Net investment income		72,734		96,570
Net investment gains (losses)		(358,399)		526,871
Products revenues		481,621		328,832
Services and other revenues		650,510		450,226
Total Operating Revenues		2,606,236		2,900,194
OPERATING EXPENSES
Losses and loss adjustment expenses		972,372		879,918
Underwriting, acquisition and insurance expenses		590,365		526,743
Products expenses		447,819		296,526
Services and other expenses		591,776		412,097
Amortization of intangible assets		46,049		39,553

Total Operating Expenses		2,648,381		2,154,837
Operating Income (Loss)		(42,145)		745,357
Interest expense		(49,692)		(42,389)
Net foreign exchange gains		23,494		25,084

Income (Loss) Before Income Taxes		(68,343)		728,052
Income tax (expense) benefit		18,429		(148,371)
Net Income (Loss)		(49,914)		579,681
Net income attributable to noncontrolling interests		(2,929)		(5,987)
Net Income (Loss) to Shareholders		(52,843)		573,694
Preferred stock dividends		—		—

Net Income (Loss) to Common Shareholders		$	(52,843)	$	573,694

OTHER COMPREHENSIVE LOSS
Change in net unrealized gains (losses) on available-for-sale investments, net of taxes:
Net holding losses arising during the period		$	(476,518)	$	(214,376)

Reclassification adjustments for net gains (losses) included in net income (loss)		437		(88)
Change in net unrealized gains (losses) on available-for-sale investments, net of taxes		(476,081)		(214,464)
Change in foreign currency translation adjustments, net of taxes		(1,248)		(808)
Change in net actuarial pension loss, net of taxes		1,132		592
Total Other Comprehensive Loss		(476,197)		(214,680)
Comprehensive Income (Loss)		(526,111)		365,001
Comprehensive income attributable to noncontrolling interests		(2,916)		(6,004)
Comprehensive Income (Loss) to Shareholders		$	(529,027)	$	358,997

NET INCOME (LOSS) PER COMMON SHARE
Basic		$	(6.58)	$	42.09
Diluted		$	(6.58)	$	42.02

See accompanying notes to consolidated financial statements.

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MARKEL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Unaudited)


Three Months Ended March 31, 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)					(52,843)		—		(52,843)		(573)		(53,416)		3,502
Other comprehensive loss					—		(476,184)		(476,184)		—		(476,184)		(13)
Comprehensive Income (Loss)									(529,027)		(573)		(529,600)		3,489


Repurchase of common stock	—		—		(79,296)		—		(79,296)		—		(79,296)		—

Restricted stock units expensed	—		28,464		—		—		28,464		—		28,464		—
Adjustment of redeemable noncontrolling interests	—		—		(36,940)		—		(36,940)		—		(36,940)		36,940

Adjustment to Metromont purchase price allocation	—		—		—		—		—		—		—		(18,681)
Disposition of Velocity	—		—		—		—		—		(22,059)		(22,059)		—
Other	—		(94)		721		—		627		5,326		5,953		(2,775)
March 31, 2022	$	591,891	$	3,469,449	$	10,278,405	$	(238,567)	$	14,101,178	$	5,554	$	14,106,732	$	480,351


Three Months Ended March 31, 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 (loss)					573,694		—		573,694		6,675		580,369		(688)
Other comprehensive income (loss)					—		(214,697)		(214,697)		—		(214,697)		17
Comprehensive Income (Loss)									358,997		6,675		365,672		(671)

Repurchase of common stock	—		—		(22,023)		—		(22,023)		—		(22,023)		—
Restricted stock units expensed	—		19,160		—		—		19,160		—		19,160		—
Adjustment of redeemable noncontrolling interests	—		—		7,906		—		7,906		—		7,906		(7,906)
Purchase of noncontrolling interest	—		(531)		—		—		(531)		—		(531)		(147)
Other	—		645		1		—		646		(347)		299		(2,264)
March 31, 2021	$	591,891	$	3,447,614	$	8,777,062	$	369,679	$	13,186,246	$	21,220	$	13,207,466	$	234,654

See accompanying notes to consolidated financial statements.

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MARKEL CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended March 31,
	2022		2021
	(dollars in thousands)
OPERATING ACTIVITIES
Net income (loss)	$	(49,914)	$	579,681
Adjustments to reconcile net income (loss) to net cash provided by operating activities	464,787		(261,557)
Net Cash Provided By Operating Activities	414,873		318,124
INVESTING ACTIVITIES
Proceeds from sales, maturities, calls and prepayments of fixed maturity securities	119,545		100,123
Cost of fixed maturity securities purchased	(517,400)		(552,178)
Proceeds from sales of equity securities	76,788		69,118
Cost of equity securities purchased	(112,783)		(43,517)
Net change in short-term investments	(287,027)		(663,120)


Additions to property and equipment	(51,696)		(30,650)


Consolidation of Markel CATCo Re, net	629,955		—
Proceeds from sale of business, net	106,846		37,131
Other	(14,204)		5,506
Net Cash Used By Investing Activities	(49,976)		(1,077,587)
FINANCING ACTIVITIES
Additions to senior long-term debt and other debt	254,285		152,355
Repayment of senior long-term debt and other debt	(189,031)		(71,586)

Repurchases of common stock	(79,296)		(22,023)





Other	(4,808)		(5,039)
Net Cash Provided (Used) By Financing Activities	(18,850)		53,707
Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents	(19,411)		(12,989)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	326,636		(718,745)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	4,880,947		5,216,649
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD	$	5,207,583	$	4,497,904

See accompanying notes to consolidated financial statements.

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MARKEL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Markel Corporation is a diverse financial holding company serving a variety of niche markets. Markel Corporation's principal business markets and underwrites specialty insurance products. Through its wholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures), Markel Corporation also owns controlling interests in various businesses that operate outside of the specialty insurance marketplace. See note 2 for details regarding reportable segments.

a) Basis of Presentation. The consolidated balance sheet as of March 31, 2022 and the related consolidated statements of income (loss) and comprehensive income (loss) and changes in equity for the three months ended March 31, 2022 and 2021, and the condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. Except for the adjustment described in note 15, such adjustments consist only of normal, recurring items. Interim results are not necessarily indicative of results of operations for the entire year. The consolidated balance sheet as of December 31, 2021 was derived from Markel Corporation's audited annual consolidated financial statements.

The accompanying consolidated financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and include the accounts of Markel Corporation and its consolidated subsidiaries, as well as any variable interest entities (VIEs) that meet the requirements for consolidation (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The Company consolidates the results of its Markel Ventures subsidiaries on a one-month lag, with the exception of significant transactions or events that occur during the intervening period. Certain prior period amounts have been reclassified to conform to the current period presentation.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements.

The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes. For a more complete description of the Company's business and accounting policies, readers are urged to review the Company's 2021 Annual Report on Form 10-K, as well as note 15 for details regarding a change to the Company's policy for accounting for deferred policy acquisition costs.

b) Recent Accounting Pronouncements

Accounting Standards Not Yet Adopted

In August 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The FASB subsequently issued several ASUs as amendments to ASU No. 2018-12. The standard requires insurance companies with long duration contracts to: (1) review and, if there is a change, update the assumptions used to measure expected cash flows at least annually; (2) update the discount rate assumption at each reporting date; and (3) enhance disclosures related to the significant inputs, judgments, assumptions and methods used to measure the liability. ASU No. 2018-12 becomes effective for the Company during the first quarter of 2023 and will be applied using a modified retrospective approach that requires restatement of prior periods presented. The standard will, among other things, impact the discount rate used in estimating reserves for the Company's life and annuity reinsurance portfolio, which is in runoff. Currently, the discount rate assumption is locked-in for the life of the contracts, unless there is a loss recognition event. The Company is currently evaluating ASU No. 2018-12 to determine the impact that adopting this standard will have on its consolidated financial statements.

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In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which becomes effective for the Company during the first quarter of 2023. ASU No. 2021-08 requires contract assets and liabilities accounted for under FASB ASC 606, Revenue from Contracts with Customers, to be recorded at the acquisition date as if the acquirer entered into those contracts itself on the contract inception dates, rather than at fair value. At adoption, ASU No. 2021-08 will not impact the Company's financial position, results of operations or cash flows, but prospectively, this ASU will impact amounts recorded by the Company for assets acquired and liabilities assumed in conjunction with certain acquisitions.

2. Segment Reporting Disclosures

The chief operating decision maker reviews the Company's ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance. In determining how to allocate resources and assess the performance of the Company's underwriting results, management considers many factors, including the nature of the insurance product sold, the type of account written and the type of customer served. The Insurance segment includes all direct business and facultative placements written on a risk-bearing basis within the Company's underwriting operations. The Reinsurance segment includes all treaty reinsurance written on a risk-bearing basis within the Company's underwriting operations. All investing activities related to the Company's insurance operations are included in the Investing segment.

The chief operating decision maker reviews and assesses Markel Ventures' performance in the aggregate, as a single operating segment. The Markel Ventures segment primarily consists of controlling interests in a diverse portfolio of businesses that operate in various industries.

The Company's other operations primarily consist of the results of the Company's insurance-linked securities operations and program services business. Other operations also include results for lines of business discontinued prior to, or in conjunction with, acquisitions, including development on asbestos and environmental loss reserves and results attributable to the run-off of life and annuity reinsurance business, which are monitored separately from the Company's ongoing underwriting operations. For purposes of segment reporting, none of these other operations are considered to be reportable segments.

Segment profit for each of the Company's underwriting segments is measured by underwriting profit. The property and casualty insurance industry commonly defines underwriting profit as earned premiums net of losses and loss adjustment expenses and underwriting, acquisition and insurance expenses. Underwriting profit does not replace operating income or net income computed in accordance with U.S. GAAP as a measure of profitability. Underwriting profit or loss provides a basis for management to evaluate the Company's underwriting performance. Segment profit for the Company's underwriting segments may also include other revenues and expenses that are attributable to the Company's underwriting operations that are not captured in underwriting profit. Segment profit for the Investing segment is measured by net investment income and net investment gains. Segment profit for the Markel Ventures segment is measured by operating income.

For management reporting purposes, the Company allocates assets to its underwriting operations and to its Investing and Markel Ventures segments and certain of its other operations, including its insurance-linked securities and program services operations. Underwriting assets include assets attributed to the Company's Insurance and Reinsurance segments, discontinued underwriting lines of business, as well as assets that are not specifically allocated to the Company's other operations. Generally, the Company manages its underwriting assets in the aggregate and therefore does not allocate assets to individual underwriting segments.

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a) The following tables summarize the Company's segment disclosures.


	Three Months Ended March 31, 2022
(dollars in thousands)	Insurance			Reinsurance			Investing		Markel Ventures (1)		Other (2)		Consolidated
Gross premium volume	$	1,943,306		$	576,316		$	—	$	—	$	878,665	$	3,398,287
Net written premiums	1,611,020			555,220			—		—		(1,506)		2,164,734

Earned premiums	1,477,148			283,967			—		—		(1,345)		1,759,770
Losses and loss adjustment expenses:
Current accident year	(886,237)			(182,458)			—		—		—		(1,068,695)
Prior accident years	98,640			(2,083)			—		—		(234)		96,323
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs	(310,406)			(71,754)			—		—		—		(382,160)
Other underwriting expenses	(191,651)			(14,389)			—		—		(2,165)		(208,205)
Underwriting profit (loss)	187,494			13,283			—		—		(3,744)		197,033
Net investment income	—			—			72,727		7		—		72,734
Net investment losses	—			—			(358,399)		—		—		(358,399)
Products revenues	—			—			—		481,621		—		481,621
Services and other revenues	—			—			—		468,764		181,746		650,510
Products expenses	—			—			—		(447,819)		—		(447,819)
Services and other expenses	—			—			—		(431,903)		(159,873)		(591,776)
Amortization of intangible assets (3)	—			—			—		(20,933)		(25,116)		(46,049)

Segment profit (loss)	$	187,494		$	13,283		$	(285,672)	$	49,737	$	(6,987)	$	(42,145)
Interest expense													(49,692)
Net foreign exchange gains													23,494

Loss before income taxes													$	(68,343)
U.S. GAAP combined ratio (4)	87		%	95		%					NM (5)		89		%

(1) Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $25.0 million for the three months ended March 31, 2022.

(2) Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment. Amortization of intangible assets attributable to the Company's underwriting segments was $9.8 million for the three months ended March 31, 2022, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.

(3) Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.

(4) The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums.

(5) NM - Ratio is not meaningful

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	Three Months Ended March 31, 2021
(dollars in thousands)	Insurance			Reinsurance			Investing		Markel Ventures (1)		Other (2)		Consolidated
Gross premium volume	$	1,638,327		$	532,518		$	—	$	—	$	634,007	$	2,804,852
Net written premiums	1,387,430			494,085			—		—		(445)		1,881,070

Earned premiums	1,244,027			254,087			—		—		(419)		1,497,695
Losses and loss adjustment expenses:
Current accident year	(798,247)			(172,501)			—		—		—		(970,748)
Prior accident years	119,064			(28,655)			—		—		421		90,830
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs	(260,599)			(61,988)			—		—		—		(322,587)
Other underwriting expenses	(187,297)			(14,161)			—		—		(2,698)		(204,156)
Underwriting profit (loss)	116,948			(23,218)			—		—		(2,696)		91,034
Net investment income	—			—			96,567		3		—		96,570
Net investment gains	—			—			526,871		—		—		526,871
Products revenues	—			—			—		328,832		—		328,832
Services and other revenues	—			—			—		377,767		72,459		450,226
Products expenses	—			—			—		(296,526)		—		(296,526)
Services and other expenses	—			—			—		(344,908)		(67,189)		(412,097)
Amortization of intangible assets (3)	—			—			—		(13,705)		(25,848)		(39,553)

Segment profit (loss)	$	116,948		$	(23,218)		$	623,438	$	51,463	$	(23,274)	$	745,357
Interest expense													(42,389)
Net foreign exchange gains													25,084

Income before income taxes													$	728,052
U.S. GAAP combined ratio (4)	91		%	109		%					NM (5)		94		%

(1) Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $16.0 million for the three months ended March 31, 2021.

(2) Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment. Amortization of intangible assets attributable to the Company's underwriting segments was $10.4 million for the three months ended March 31, 2021, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.

(5) NM - Ratio is not meaningful

b) The following table reconciles segment assets to the Company's consolidated balance sheets.


(dollars in thousands)	March 31, 2022		December 31, 2021
Segment assets:
Investing	$	27,594,979	$	28,277,801
Underwriting	8,531,397		8,111,316
Markel Ventures	4,952,446		4,958,279
Total segment assets	41,078,822		41,347,396
Other operations	7,906,435		7,129,700
Total assets	$	48,985,257	$	48,477,096

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3. Acquisitions and Dispositions

Velocity

In February 2022, the Company sold the majority of its controlling interest in its Velocity managing general agent companies (Velocity) for total cash consideration of $181.3 million, which resulted in a gain of $107.3 million that was included in services and other revenues. Velocity provides risk origination services for the Company's Nephila insurance-linked securities fund management operations, as well as for third parties. The Company retained a minority interest in Velocity that was recorded at fair value as of the transaction date ($47.4 million) and is accounted for under the equity method.

Metromont LLC

In December 2021, the Company acquired 51% of Metromont LLC (Metromont), a precast concrete manufacturer and concrete building solutions provider for commercial projects. Under the terms of the acquisition agreement, the Company has the option to acquire the remaining equity interests and the remaining equity holders have the option to sell their interests to the Company in the future. The redemption value of the remaining equity interests is generally based on Metromont's earnings in specified periods preceding the redemption date. Total consideration for the transaction was $282.3 million, all of which was cash.

As of December 31, 2021, the purchase price was preliminarily allocated to the acquired assets and liabilities based on estimated fair value at the acquisition date, which was subsequently updated during the first quarter of 2022. During the three months ended March 31, 2022, the Company decreased the allocation to goodwill by $18.7 million with an offsetting decrease to redeemable noncontrolling interests of $18.7 million, resulting in a preliminary purchase price allocation that reflected goodwill of $200.6 million, intangible assets of $143.9 million and redeemable noncontrolling interests of $251.2 million. Goodwill is primarily attributable to expected future earnings and cash flow potential of Metromont, and it is expected to be deductible for income tax purposes. Results attributable to Metromont are included in the Company's Markel Ventures segment.

The Company has not completed the process of determining the fair value of the assets acquired and liabilities assumed. These valuations are required to be completed within 12 months from the acquisition date. As a result, the fair value recorded for these items is a provisional estimate and is subject to adjustment. Once completed, any adjustments resulting from the valuations may impact the individual amounts recorded for assets acquired and liabilities assumed, as well as the residual goodwill.

Buckner HeavyLift Cranes

In August 2021, the Company acquired 90% of the holding company for the Buckner HeavyLift Cranes companies (Buckner), a provider of crane rental services for large commercial contractors. Under the terms of the acquisition agreement, the Company has the option to acquire the remaining equity interests and the remaining equity holders have the option to sell their interests to the Company in the future. The redemption value of the remaining equity interests is generally based on Buckner's earnings in specified periods preceding the redemption dates. Total consideration for the transaction was $237.9 million, all of which was cash.

The purchase price was preliminarily allocated to the acquired assets and liabilities of Buckner based on estimated fair value at the acquisition date. The Company recognized goodwill of $74.5 million, intangible assets of $60.0 million and fixed assets of $332.6 million, primarily related to cranes. Goodwill is primarily attributable to expected future earnings and cash flow potential of Buckner, and it is not expected to be deductible for income tax purposes. Intangible assets include $50.0 million of customer relationships and $10.0 million of trade names, which are expected to be amortized over 6 years and 15 years, respectively. Additionally, the Company assumed long-term debt of $165.1 million and recognized redeemable noncontrolling interests of $26.4 million. Results attributable to Buckner are included in the Company's Markel Ventures segment.

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4. Investments

a) The following tables summarize the Company's available-for-sale investments. Commercial and residential mortgage-backed securities include securities issued by U.S. government-sponsored enterprises and U.S. government agencies. The net unrealized holding gains (losses) in the tables below are presented before taxes and any reserve deficiency adjustments for life and annuity benefit reserves. See note 9.


	March 31, 2022
(dollars in thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Estimated Fair Value
Fixed maturity securities:
U.S. Treasury securities	$	2,766,915	$	388	$	(98,938)	$	2,668,365
U.S. government-sponsored enterprises	793,813		6,283		(38,666)		761,430
Obligations of states, municipalities and political subdivisions	4,028,816		80,673		(64,217)		4,045,272
Foreign governments	1,395,043		56,437		(29,527)		1,421,953
Commercial mortgage-backed securities	2,020,448		6,441		(50,811)		1,976,078
Residential mortgage-backed securities	654,278		5,241		(3,446)		656,073
Asset-backed securities	2,536		—		(19)		2,517
Corporate bonds	773,421		10,919		(20,730)		763,610
Total fixed maturity securities	12,435,270		166,382		(306,354)		12,295,298
Short-term investments	2,092,665		2,235		(1,685)		2,093,215
Investments, available-for-sale	$	14,527,935	$	168,617	$	(308,039)	$	14,388,513


	December 31, 2021
(dollars in thousands)	Amortized Cost		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses		Estimated Fair Value
Fixed maturity securities:
U.S. Treasury securities	$	2,489,032	$	2,633	$	(21,471)	$	2,470,194
U.S. government-sponsored enterprises	753,029		28,997		(6,439)		775,587
Obligations of states, municipalities and political subdivisions	4,007,211		266,575		(7,862)		4,265,924
Foreign governments	1,394,771		134,071		(9,488)		1,519,354
Commercial mortgage-backed securities	1,928,775		69,810		(8,152)		1,990,433
Residential mortgage-backed securities	699,136		27,084		(170)		726,050
Asset-backed securities	3,035		46		—		3,081
Corporate bonds	786,478		54,475		(4,271)		836,682
Total fixed maturity securities	12,061,467		583,691		(57,853)		12,587,305
Short-term investments	1,805,300		28		(5,340)		1,799,988
Investments, available-for-sale	$	13,866,767	$	583,719	$	(63,193)	$	14,387,293

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b) The following tables summarize gross unrealized investment losses on available-for-sale investments by the length of time that securities have continuously been in an unrealized loss position.


	March 31, 2022
	Less than 12 months				12 months or longer				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Holding Losses		Estimated Fair Value		Gross Unrealized Holding Losses		Estimated Fair Value		Gross Unrealized Holding Losses
Fixed maturity securities:
U.S. Treasury securities	$	2,023,666	$	(77,846)	$	562,656	$	(21,092)	$	2,586,322	$	(98,938)
U.S. government-sponsored enterprises	421,604		(21,869)		165,848		(16,797)		587,452		(38,666)
Obligations of states, municipalities and political subdivisions	863,658		(41,174)		199,452		(23,043)		1,063,110		(64,217)
Foreign governments	546,618		(24,823)		42,698		(4,704)		589,316		(29,527)
Commercial mortgage-backed securities	1,264,402		(44,399)		67,147		(6,412)		1,331,549		(50,811)
Residential mortgage-backed securities	177,446		(3,422)		440		(24)		177,886		(3,446)
Asset-backed securities	2,379		(19)		—		—		2,379		(19)
Corporate bonds	339,961		(13,118)		71,022		(7,612)		410,983		(20,730)
Total fixed maturity securities	5,639,734		(226,670)		1,109,263		(79,684)		6,748,997		(306,354)
Short-term investments	1,670,457		(1,685)		—		—		1,670,457		(1,685)
Total	$	7,310,191	$	(228,355)	$	1,109,263	$	(79,684)	$	8,419,454	$	(308,039)

At March 31, 2022, the Company held 682 available-for-sale securities in an unrealized loss position with a total estimated fair value of $8.4 billion and gross unrealized losses of $308.0 million. Of these 682 securities, 94 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $1.1 billion and gross unrealized losses of $79.7 million. The Company does not intend to sell or believe it will be required to sell these available-for-sale securities before recovery of their amortized cost.


	December 31, 2021
	Less than 12 months				12 months or longer				Total
(dollars in thousands)	Estimated Fair Value		Gross Unrealized Holding Losses		Estimated Fair Value		Gross Unrealized Holding Losses		Estimated Fair Value		Gross Unrealized Holding Losses
Fixed maturity securities:
U.S. Treasury securities	$	2,236,637	$	(18,433)	$	97,173	$	(3,038)	$	2,333,810	$	(21,471)
U.S. government-sponsored enterprises	381,495		(5,640)		14,010		(799)		395,505		(6,439)
Obligations of states, municipalities and political subdivisions	393,249		(6,941)		23,589		(921)		416,838		(7,862)
Foreign governments	322,813		(8,596)		25,564		(892)		348,377		(9,488)
Commercial mortgage-backed securities	345,616		(7,765)		9,189		(387)		354,805		(8,152)
Residential mortgage-backed securities	12,828		(159)		269		(11)		13,097		(170)

Corporate bonds	193,786		(4,271)		—		—		193,786		(4,271)
Total fixed maturity securities	3,886,424		(51,805)		169,794		(6,048)		4,056,218		(57,853)
Short-term investments	228,870		(5,340)		—		—		228,870		(5,340)
Total	$	4,115,294	$	(57,145)	$	169,794	$	(6,048)	$	4,285,088	$	(63,193)

At December 31, 2021, the Company held 277 available-for-sale securities in an unrealized loss position with a total estimated fair value of $4.3 billion and gross unrealized losses of $63.2 million. Of these 277 securities, 13 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $169.8 million and gross unrealized losses of $6.0 million.

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The Company completes a detailed analysis each quarter to assess whether the decline in the fair value of any investment below its cost basis is the result of a credit loss. All available-for-sale securities with unrealized losses are reviewed. The Company considers many factors in completing its quarterly review of securities with unrealized losses for credit-related impairment to determine whether a credit loss exists, including the extent to which fair value is below cost, the implied yield to maturity, rating downgrades of the security and whether or not the issuer has failed to make scheduled principal or interest payments. The Company also takes into consideration information about the financial condition of the issuer and industry factors that could negatively impact the capital markets.

If the decline in fair value of an available-for-sale security below its amortized cost is considered to be the result of a credit loss, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit loss, which is recorded as an allowance and recognized in net income. The allowance is limited to the difference between the fair value and the amortized cost of the security. Any remaining decline in fair value represents the non-credit portion of the impairment, which is recognized in other comprehensive income. The Company did not have an allowance for credit losses as of March 31, 2022 or December 31, 2021.

Quarterly, the Company also considers whether it intends to sell an available-for-sale security or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost. In these instances, a decline in fair value is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security.

c) The amortized cost and estimated fair value of fixed maturity securities at March 31, 2022 are shown below by contractual maturity.


(dollars in thousands)	Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,035,118	$	1,030,162
Due after one year through five years	3,683,769		3,614,482
Due after five years through ten years	2,923,684		2,845,007
Due after ten years	2,115,437		2,170,979
	9,758,008		9,660,630
Commercial mortgage-backed securities	2,020,448		1,976,078
Residential mortgage-backed securities	654,278		656,073
Asset-backed securities	2,536		2,517
Total fixed maturity securities	$	12,435,270	$	12,295,298

d) The following table presents the components of net investment income.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Interest:
Tax-exempt municipal bonds		$	13,575	$	15,236
Taxable municipal bonds		17,507		16,495
Other taxable bonds		40,062		39,395
Short-term investments, including overnight deposits		1,206		672
Dividends on equity securities		24,737		25,385
Income (loss) from equity method investments		(26,246)		3,925
Other		6,246		(195)
		77,087		100,913
Investment expenses		(4,353)		(4,343)
Net investment income		$	72,734	$	96,570

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e) The following table presents the components of net investment gains (losses) and the change in net unrealized gains (losses) included in other comprehensive loss. Gross realized investment gains and losses on fixed maturity securities, short-term investments and other investments were not material to the consolidated financial statements and are presented on a net basis in the following table.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Fixed maturity securities, short-term investments and other investments:
Net realized investment gains		6,228		3,409
Equity securities:
Change in fair value of securities sold during the period		(12,329)		3,117
Change in fair value of securities held at the end of the period		(352,298)		520,345
Total change in fair value		(364,627)		523,462
Net investment gains (losses)		$	(358,399)	$	526,871
Change in net unrealized gains (losses) on available-for-sale investments included in other comprehensive loss:
Fixed maturity securities		$	(665,810)	$	(321,232)
Short-term investments		5,862		684
Reserve deficiency adjustment for life and annuity benefit reserves (see note 9)		56,560		49,333
Net decrease		$	(603,388)	$	(271,215)

f) The Company's equity method investments, which totaled $489.5 million and $459.7 million as of March 31, 2022 and December 31, 2021, respectively, are included in other assets on the consolidated balance sheets.

The Company's most significant equity method investment is 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 automobile enthusiast market. The Company's ownership interest in Hagerty was 23% as of March 31, 2022 and December 31, 2021. The Company's investment 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 the Company's original investment in 2019, that have special voting rights and can be converted on a one-for-one basis into Class A common shares. The Company accounts for its investment under the equity method as it is deemed to have the ability to exercise significant influence over Hagerty's operating and financial policies through a combination of its voting interest, its right to designate a board member and business it conducts with Hagerty. As of March 31, 2022 and December 31, 2021, the carrying value of the Company's investment in Hagerty was $239.0 million and $256.6 million, respectively.

As of March 31, 2022 and December 31, 2021, the estimated value of the Company's investment, based on the closing stock price of Hagerty's Class A common shares, was $841.6 million and $1.1 billion, respectively. See note 12 for further details regarding related party transactions with Hagerty.

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5. Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability.

Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy are defined as follows:

•Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.

•Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

•Level 3 – Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement.

In accordance with ASC 820, the Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods, including the market, income and cost approaches. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The following section describes the valuation methodologies used by the Company to measure assets and liabilities at fair value, including an indication of the level within the fair value hierarchy in which each asset or liability is generally classified.

Available-for-sale investments and equity securities. Available-for-sale investments and equity securities are recorded at fair value on a recurring basis. Available-for-sale investments include fixed maturity securities and short-term investments. Short-term investments include certificates of deposit, commercial paper, discount notes and treasury bills with original maturities of one year or less. Fair value is determined by the Company after considering various sources of information, including information provided by a third-party pricing service. The pricing service provides prices for substantially all of the Company's fixed maturity securities and equity securities. In determining fair value, the Company generally does not adjust the prices obtained from the pricing service. The Company obtains an understanding of the pricing service's valuation methodologies and related inputs, which include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, duration, credit ratings, estimated cash flows and prepayment speeds. The Company validates prices provided by the pricing service by reviewing prices from other pricing sources and analyzing pricing data in certain instances.

The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Level 1 investments include those traded on an active exchange, such as the New York Stock Exchange. Level 2 investments include U.S. Treasury securities, U.S. government-sponsored enterprises, municipal bonds, foreign government bonds, commercial mortgage-backed securities, residential mortgage-backed securities, asset-backed securities and corporate debt securities. Level 3 investments include the Company's investments in insurance-linked securities funds that are not traded on an active exchange and are valued using unobservable inputs.

Fair value for available-for-sale investments and equity securities is measured based upon quoted prices in active markets, if available. Due to variations in trading volumes and the lack of quoted market prices, fixed maturity securities are classified as Level 2 investments. The fair value of fixed maturity securities is normally derived through recent reported trades for identical or similar securities, making adjustments through the reporting date based upon available market observable data previously described. If there are no recent reported trades, the fair value of fixed maturity securities may be derived through the use of matrix pricing or model processes, where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Significant inputs used to determine the fair value of obligations of states, municipalities and political subdivisions, corporate bonds and obligations of foreign governments include reported trades, benchmark yields, issuer spreads, bids, offers, credit information and estimated cash flows. Significant inputs used to determine the fair value of commercial mortgage-backed securities, residential mortgage-backed securities and asset-backed securities include the type of underlying assets, benchmark yields, prepayment speeds, collateral information, tranche type and volatility, estimated cash flows, credit information, default rates, recovery rates, issuer spreads and the year of issue.

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Due to the significance of unobservable inputs required in measuring the fair value of the Company's investments in certain insurance-linked securities funds, these investments are classified as Level 3 within the fair value hierarchy. The fair value of the securities is derived using their reported net asset value (NAV) as the primary input, as well as other observable and unobservable inputs as deemed necessary by management. Management has obtained an understanding of the inputs, assumptions, process and controls used to determine NAV, which is calculated by an independent third party. Unobservable inputs to the NAV calculations include assumptions around premium earnings patterns and loss reserve estimates for the underlying securitized reinsurance contracts. The Company's valuation policies and procedures for Level 3 investments are determined by management. Fair value measurements are analyzed quarterly to ensure the change in fair value from prior periods is reasonable relative to management's understanding of the underlying investments, recent market trends and external market data.

Senior long-term debt and other debt. Senior long-term debt and other debt is carried at amortized cost with the estimated fair value disclosed on the consolidated balance sheets. Senior long-term debt and other debt is classified as Level 2 within the fair value hierarchy due to variations in trading volumes and the lack of quoted market prices. Fair value is generally derived through recent reported trades for identical securities, making adjustments through the reporting date, if necessary, based upon available market observable data including U.S. Treasury securities and implied credit spreads. Significant inputs used to determine the fair value of senior long-term debt and other debt include reported trades, benchmark yields, issuer spreads, bids and offers.

The following tables present the balances of assets measured at fair value on a recurring basis by level within the fair value hierarchy.


	March 31, 2022
(dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Fixed maturity securities, available-for-sale:
U.S. Treasury securities	$	—	$	2,668,365	$	—	$	2,668,365
U.S. government-sponsored enterprises	—		761,430		—		761,430
Obligations of states, municipalities and political subdivisions	—		4,045,272		—		4,045,272
Foreign governments	—		1,421,953		—		1,421,953
Commercial mortgage-backed securities	—		1,976,078		—		1,976,078
Residential mortgage-backed securities	—		656,073		—		656,073
Asset-backed securities	—		2,517		—		2,517
Corporate bonds	—		763,610		—		763,610
Total fixed maturity securities, available-for-sale	—		12,295,298		—		12,295,298
Equity securities:
Insurance, banks and other financial institutions	3,369,107		—		8,468		3,377,575
Industrial, consumer and all other	5,278,182		—		—		5,278,182
Total equity securities	8,647,289		—		8,468		8,655,757
Short-term investments, available-for-sale	1,906,468		186,747		—		2,093,215
Total investments	$	10,553,757	$	12,482,045	$	8,468	$	23,044,270

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	December 31, 2021
(dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets:
Investments:
Fixed maturity securities, available-for-sale:
U.S. Treasury securities	$	—	$	2,470,194	$	—	$	2,470,194
U.S. government-sponsored enterprises	—		775,587		—		775,587
Obligations of states, municipalities and political subdivisions	—		4,265,924		—		4,265,924
Foreign governments	—		1,519,354		—		1,519,354
Commercial mortgage-backed securities	—		1,990,433		—		1,990,433
Residential mortgage-backed securities	—		726,050		—		726,050
Asset-backed securities	—		3,081		—		3,081
Corporate bonds	—		836,682		—		836,682
Total fixed maturity securities, available-for-sale	—		12,587,305		—		12,587,305
Equity securities:
Insurance, banks and other financial institutions	3,307,755		—		56,472		3,364,227
Industrial, consumer and all other	5,659,700		—		—		5,659,700
Total equity securities	8,967,455		—		56,472		9,023,927
Short-term investments, available-for-sale	1,619,496		180,492		—		1,799,988
Total investments	$	10,586,951	$	12,767,797	$	56,472	$	23,411,220

The following table summarizes changes in Level 3 investments measured at fair value on a recurring basis.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Equity securities, beginning of period		$	56,472	$	58,493
Purchases		—		—
Sales		(48,780)		—
Net investment gains (losses)		776		(2,355)


Equity securities, end of period		$	8,468	$	56,138

As of March 31, 2022, the Company's remaining Level 3 investment relates to its investment in Lodgepine Fund Limited (Lodgepine Fund), an insurance-linked securities fund managed through the Company's Lodgepine operations, which are currently in run-off.

Previously, Level 3 investments also included the Company's investment in an insurance-linked securities fund managed by Markel CATCo Investment Management Ltd. (MCIM). During the first quarter of 2022, the Company's remaining investment was redeemed ($41.3 million) in conjunction with a buy-out transaction that provided for an accelerated return of all remaining capital to investors. See note 11 for further details about the Company's Markel CATCo operations and the buy-out transaction.

Except as disclosed in note 3, the Company did not have any assets or liabilities measured at fair value on a non-recurring basis during the three months ended March 31, 2022 and 2021.

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6. Products, Services and Other Revenues

The amount of revenues from contracts with customers was $959.7 million and $719.6 million for the three months ended March 31, 2022 and 2021, respectively.

The following table presents revenues from contracts with customers by segment and type, all of which are included in products revenues and services and other revenues in the consolidated statements of income (loss) and comprehensive income (loss), along with a reconciliation to total products revenues and services and other revenues.


	Three Months Ended March 31,
	2022						2021
(dollars in thousands)	Markel Ventures		Other		Total		Markel Ventures		Other		Total
Products	$	469,456	$	—	$	469,456	$	318,642	$	—	$	318,642
Services	449,449		21,568		471,017		356,688		27,979		384,667
Investment management	—		19,228		19,228		—		16,337		16,337
Total revenues from contracts with customers	918,905		40,796		959,701		675,330		44,316		719,646
Program services and other fronting	—		33,332		33,332		—		27,617		27,617
Disposition gain	—		107,293		107,293		—		—		—
Other	31,480		325		31,805		31,269		526		31,795
Total	$	950,385	$	181,746	$	1,132,131	$	706,599	$	72,459	$	779,058

Receivables from contracts with customers were $526.6 million and $626.1 million as of March 31, 2022 and December 31, 2021, respectively.

7. Unpaid Losses and Loss Adjustment Expenses

The following table presents a reconciliation of consolidated beginning and ending reserves for losses and loss adjustment expenses.


	Three Months Ended March 31,
(dollars in thousands)	2022		2021
Net reserves for losses and loss adjustment expenses, beginning of year	$	11,302,577	$	10,485,717
Effect of foreign currency rate changes on beginning of year balance	(27,505)		(9,485)

Adjusted net reserves for losses and loss adjustment expenses, beginning of year	11,275,072		10,476,232
Incurred losses and loss adjustment expenses:
Current accident year	1,068,695		970,748
Prior accident years	(96,323)		(90,870)
Total incurred losses and loss adjustment expenses	972,372		879,878
Payments:
Current accident year	40,852		52,770
Prior accident years	697,192		633,025
Total payments	738,044		685,795
Effect of foreign currency rate changes on current year activity	(267)		475
Net reserves for losses and loss adjustment expenses of Markel CATCo Re (note 11)	546,760		—

Net reserves for losses and loss adjustment expenses, end of period	12,055,893		10,670,790
Reinsurance recoverables on unpaid losses	6,787,237		5,929,710
Gross reserves for losses and loss adjustment expenses, end of period	$	18,843,130	$	16,600,500

For the three months ended March 31, 2022, current accident year losses and loss adjustment expenses included $35.0 million of net losses and loss adjustment expenses attributed to the Russia-Ukraine conflict. These losses and loss adjustment expenses were net of ceded losses of $70.0 million.

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Both the gross and net loss estimates for incurred losses attributed to the Russia-Ukraine conflict represent the Company's best estimates as of March 31, 2022 based upon information currently available. The Company's estimates for these losses are based on reported claims, detailed underwriting, actuarial and claims reviews of policies and in-force assumed reinsurance contracts for potential exposures, as well as analysis of ceded reinsurance contracts and analysis provided by the Company's brokers and claims counsel. These estimates include various assumptions about what areas within the affected regions have incurred losses, the nature and extent of such losses, which is currently difficult to verify, as well as assumptions about coverage, liability and reinsurance. Due to the inherent uncertainty associated with the assumptions surrounding the Russia-Ukraine conflict, these estimates are subject to a wide range of variability. Additionally, as the Russia-Ukraine conflict is ongoing, the Company believes it is likely that additional losses will be incurred in subsequent periods. Given the significant levels of ceded reinsurance on certain of the Company's impacted policies, a significant portion of any additional incurred losses may be ceded. Additionally, increases in ceded losses may require payment of additional reinstatement premiums. Further, if coverage under the Company's existing ceded reinsurance contracts is exhausted, the Company may need to purchase additional reinsurance to ensure that net retained risks on the impacted product lines are within the Company's corporate risk tolerances.

While the Company believes the gross and net reserves for losses and loss adjustment expenses for the Russia-Ukraine conflict as of March 31, 2022 are adequate based on information currently available, the Company continues to closely monitor reported claims, ceded reinsurance contract attachment, government actions and areas impacted by the conflict and may adjust the estimates of gross and net losses as new information becomes available. Any such adjustments or additional incurred losses may be material to the Company's results of operations, financial condition and cash flows.

For the three months ended March 31, 2021, current accident year losses and loss adjustment expenses included $64.3 million of net losses and loss adjustment expenses attributed to Winter Storm Uri.

For the three months ended March 31, 2022, prior accident years losses and loss adjustment expenses included $96.3 million of favorable development on prior years loss reserves, which included $69.4 million of favorable development on the Company's general liability, marine and energy, workers' compensation and property product lines within the Insurance segment.

For the three months ended March 31, 2021, prior accident years losses and loss adjustment expenses included $90.9 million of favorable development on prior years loss reserves, which included $89.1 million of favorable development on the Company's marine and energy, general liability, workers' compensation and property product lines within the Insurance segment. Favorable development on prior years loss reserves for the three months ended March 31, 2021 was partially offset by $18.6 million of adverse development within the Reinsurance segment related to COVID-19.

The Company's loss estimates for COVID-19 continue to represent the Company's best estimate as of March 31, 2022 based on information currently available, however, the assumptions on which these estimates are based are subject to a wide range of variability. The Company is closely monitoring reported claims, ceded reinsurance contract attachment, government actions and judicial decisions and may adjust the estimates of gross and net losses as new information becomes available. Such adjustments may be material to the Company's results of operations, financial condition and cash flows. For additional details on the Company's COVID-19 loss estimates, readers are urged to review the Company's 2021 Annual Report on Form 10-K.

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8. Reinsurance

The following table summarizes the effect of reinsurance and retrocessional reinsurance on premiums written and earned.


	Three Months Ended March 31,
	2022								2021
(dollars in thousands)	Direct		Assumed		Ceded		Net Premiums		Direct		Assumed		Ceded		Net Premiums
Underwriting:
Written	$	1,823,255	$	696,360	$	(353,382)	$	2,166,233	$	1,549,097	$	621,748	$	(289,313)	$	1,881,532
Earned	1,697,970		403,067		(339,929)		1,761,108		1,431,333		365,898		(299,100)		1,498,131
Program services and other fronting:
Written	696,974		181,698		(880,171)		(1,499)		608,037		25,970		(634,469)		(462)
Earned	699,605		48,860		(749,803)		(1,338)		583,160		14,905		(598,501)		(436)
Consolidated:
Written	2,520,229		878,058		(1,233,553)		2,164,734		2,157,134		647,718		(923,782)		1,881,070
Earned	$	2,397,575	$	451,927	$	(1,089,732)	$	1,759,770	$	2,014,493	$	380,803	$	(897,601)	$	1,497,695

Substantially all of the premiums written and earned in the Company's program services and other fronting operations for the three months ended March 31, 2022 and 2021 were ceded. The percentage of consolidated ceded earned premiums to gross earned premiums was 38% and 37% for the three months ended March 31, 2022 and 2021, respectively. The percentage of consolidated assumed earned premiums to net earned premiums was 26% and 25% for the three months ended March 31, 2022 and 2021, respectively.

Substantially all of the incurred losses and loss adjustment expenses in the Company's program services and other fronting operations, which totaled $415.7 million and $443.0 million for the three months ended March 31, 2022 and 2021, respectively, were ceded.

The following table summarizes the effect of reinsurance and retrocessional reinsurance on losses and loss adjustment expenses in the Company's underwriting operations.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Gross losses and loss adjustment expenses		$	1,150,349	$	1,073,923
Ceded losses and loss adjustment expenses		(177,994)		(191,971)
Net losses and loss adjustment expenses		$	972,355	$	881,952

9. Life and Annuity Benefits

Life and annuity benefits are compiled on a reinsurance contract-by-contract basis and are discounted using standard actuarial techniques and cash flow models. Since the development of the life and annuity reinsurance reserves is based upon cash flow projection models, the Company must make estimates and assumptions based on cedent experience, industry mortality tables, and expense and investment experience, including a provision for adverse deviation. The assumptions used to determine policy benefit reserves are generally locked-in for the life of the contract unless an unlocking event occurs. Loss recognition testing is performed to determine if existing policy benefit reserves, together with the present value of future gross premiums and expected investment income earned thereon, are adequate to cover the present value of future benefits, settlement and maintenance costs. If the existing policy benefit reserves are not sufficient, the locked-in assumptions are revised to current best estimate assumptions and a charge to earnings for life and annuity benefits is recognized at that time.

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Life and annuity benefits are also adjusted to the extent unrealized gains on the investments supporting the policy benefit reserves would result in a reserve deficiency if those gains were realized. As of December 31, 2021, the cumulative increase to life and annuity benefits attributable to unrealized gains on the underlying investment portfolio totaled $56.6 million, all of which reversed during the three months ended March 31, 2022. As a result of an increase in the market yield on the investment securities supporting the policy benefit reserves, the Company decreased life and annuity benefits by $56.6 million and increased the change in net unrealized holding gains (losses) included in other comprehensive loss by a corresponding amount. During the three months ended March 31, 2021, the Company decreased life and annuity benefits by $49.3 million and increased the change in net unrealized holding gains included in other comprehensive loss by a corresponding amount.

10. Credit Facilities

The Company maintains a corporate revolving credit facility which provides up to $300 million of capacity for future acquisitions, investments and stock repurchases, and for other working capital and general corporate purposes. At the Company's discretion, up to $200 million of the total capacity may be used for letters of credit. The Company may increase the capacity of the facility by up to $200 million subject to obtaining commitments for the increase and certain other terms and conditions. At March 31, 2022 and December 31, 2021, the Company had no borrowings outstanding under this revolving credit facility. This facility expires in April 2024.

Various of the Company's Markel Ventures subsidiaries maintain revolving credit facilities or lines of credit, which provide up to $600 million of aggregate capacity for working capital and other general operational purposes. A portion of the capacity on certain of these credit facilities may be used as security for letters of credit and other obligations. At March 31, 2022 and December 31, 2021, the Company had $213.3 million and $94.3 million of borrowings outstanding under these credit facilities.

To the extent that the Company or any of its subsidiaries are not in compliance with the covenants under their respective credit facilities, access to such credit facilities could be restricted. At March 31, 2022, the Company and all of the Company's subsidiaries were in compliance with all covenants contained in their respective credit facilities.

11. Variable Interest Entities

MCIM, a wholly-owned consolidated subsidiary of the Company, is an insurance-linked securities investment fund manager and reinsurance manager headquartered in Bermuda. Results attributable to MCIM are not included in a reportable segment.

MCIM serves as the insurance manager for Markel CATCo Re Ltd. (Markel CATCo Re), a Bermuda Class 3 reinsurance company, and as the investment manager for Markel CATCo Reinsurance Fund Ltd., a Bermuda exempted mutual fund company comprised of multiple segregated accounts (Markel CATCo Funds). Voting shares in Markel CATCo Reinsurance Fund Ltd. and Markel CATCo Re are held by MCIM, which has the power to direct the activities that most significantly impact the economic performance of these entities. The Markel CATCo Funds issued multiple classes of nonvoting, redeemable preference shares to investors, and the Markel CATCo Funds are primarily invested in nonvoting preference shares of Markel CATCo Re. The underwriting results of Markel CATCo Re are attributed to investors through its nonvoting preference shares. Both Markel CATCo Re and the Markel CATCo Funds were placed into run-off in July 2019.

On March 28, 2022, the Company completed a buy-out transaction with Markel CATCo Re and the Markel CATCo Funds that provided for an accelerated return of all remaining capital to investors in the Markel CATCo Funds. Under the terms of the transaction, the Company provided cash funding of $45.1 million to purchase substantially all of the Markel CATCo Funds' interests in Markel CATCo Re. See note 14 for further details regarding the terms of the buy-out transaction. As part of the transaction, substantially all of the preference shares held by investors in the Markel CATCo Funds were redeemed, including preference shares previously held by the Company. See note 5 for details regarding the Company's investment in the Markel CATCo Funds.

The Company now owns 99% of the outstanding preference shares of Markel CATCo Re and through that investment has exposure to adverse loss development on reinsurance contracts previously written by Markel CATCo Re for loss events that occurred from 2014 to 2020. If loss reserves held by Markel CATCo Re are sufficient to settle claims on the remaining open contracts, the Company will receive a full return of the $45.1 million capital provided. Following a full return of the $45.1 million in capital provided, any favorable development on loss reserves held by Markel CATCo Re, less operating expenses, will be distributed to the Markel CATCo Funds, and ultimately to investors in the Markel CATCo Funds.

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Markel CATCo Re is considered a VIE, as the equity at risk does not have the right to receive residual returns that exceed the $45.1 million in capital provided by the Company in the buy-out transaction. The Company consolidates that entity as its primary beneficiary. Results attributed to Markel CATCo Re will be reported separately from the Company's underwriting operations and will not be included in a reportable segment. The Company's consolidated balance sheet includes the following amounts attributable to Markel CATCo Re.


(dollars in thousands)	March 31, 2022
Assets
Cash and cash equivalents (1)	$	186,980
Restricted cash and cash equivalents	489,035
Other assets and receivables due from cedents	87,299
Total Assets	$	763,314

Liabilities and Equity
Unpaid losses and loss adjustment expenses	$	546,760
Other liabilities (1)	170,493
Total Liabilities	717,253
Total Equity	$	46,061

(1) Includes $169.4 million of collateral released from Markel CATCo Re trust accounts that was distributed in connection with the buy-out transaction to investors in the Markel CATCo Funds in April 2022.

In connection with the buy-out transaction, the Company also entered into a tail risk cover with Markel CATCo Re. Through this contract, the Company has $142.7 million of uncollateralized exposure to adverse development on loss reserves held by Markel CATCo Re for loss exposures in excess of limits that the Company believes are unlikely to be exceeded.

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12. Related Party Transactions

The Company engages in certain related party transactions in the normal course of business at arm's length.

Insurance-Linked Securities

Within the Company's insurance-linked securities operations, the Company provides investment and insurance management services through Nephila Holdings Ltd. (together with its consolidated subsidiaries, Nephila). Nephila serves as the investment manager to several Bermuda, Ireland and U.S. based private funds (the Nephila Funds). To provide access for the Nephila Funds to the insurance, reinsurance and weather markets, Nephila also acts as an insurance manager to certain Bermuda Class 3 and 3A reinsurance companies and Lloyd's Syndicate 2357 (Syndicate 2357) (collectively, the Nephila Reinsurers). Nephila receives management fees for investment and insurance management services provided through its insurance-linked securities operations based on the net asset value of the accounts managed, and, for certain funds, incentive fees based on the annual performance of the funds managed. Prior to the disposition of Velocity in February 2022, Nephila also provided managing general agent services to the Nephila Reinsurers in exchange for commissions. For the three months ended March 31, 2022 and 2021, total revenues attributed to unconsolidated entities managed by Nephila were $22.4 million and $28.6 million, respectively.

Through the Company's program services operations and other fronting arrangements, the Company has programs with Nephila through which the Company writes insurance policies that are ceded to Syndicate 2357 and certain other Nephila Reinsurers. Through these programs, Nephila utilizes certain of the Company's licensed insurance companies to write U.S. catastrophe-exposed property risk that is then ceded to Nephila Reinsurers. For the three months ended March 31, 2022 and 2021, gross premiums written through these programs with Nephila were $315.6 million and $117.3 million, respectively, all of which were ceded to Nephila Reinsurers. As of March 31, 2022 and December 31, 2021, reinsurance recoverables on the consolidated balance sheets included $642.3 million and $751.0 million, respectively, due from Nephila Reinsurers. Under these programs, the Company bears underwriting risk for annual aggregate agreement year losses in excess of a limit the Company believes is unlikely to be exceeded. To the extent losses under these programs exceed the prescribed limits, the Company is obligated to pay such losses to the cedents without recourse to the Nephila Reinsurers. While the Company believes losses under these programs are unlikely, those losses, if incurred, could be material to the Company's consolidated results of operations and financial condition.

The Company has also entered into other assumed and ceded reinsurance transactions with the Nephila Reinsurers in the normal course of business, which are not material to the Company's consolidated financial statements.

Hagerty

The Company holds a minority ownership interest in Hagerty, which operates primarily as a managing general agent and also includes Hagerty Re, a Bermuda Class 3 reinsurance company. Essentia Insurance Company (Essentia), one of the Company's insurance subsidiaries, is an underwriter for Hagerty in the U.S., and a portion of this insurance is ceded to Hagerty Re. For the three months ended March 31, 2022 and 2021, gross written premiums attributable to Hagerty written on Essentia were $138.0 million and $119.9 million, respectively, of which $91.4 million and $67.9 million, respectively, were ceded to Hagerty Re.

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13. Shareholders' Equity

a) The Company has 50,000,000 shares of no par value common stock authorized. The following table presents a rollforward of changes in common shares issued and outstanding.


	Three Months Ended March 31,
(in thousands)		2022	2021
Issued and outstanding common shares, beginning of period		13,632	13,783
Issuance of common shares		1	1
Repurchase of common shares		(63)	(19)
Issued and outstanding common shares, end of period		13,570	13,765

b) The Company also has 10,000,000 shares of no par value preferred stock authorized, of which 600,000 shares were issued and outstanding at March 31, 2022 and December 31, 2021.

c) Net income (loss) per common share was determined by dividing adjusted net income (loss) to common shareholders by the applicable weighted average common shares outstanding. Basic common shares outstanding include restricted stock units that are no longer subject to any contingencies for issuance, but for which corresponding shares have not been issued. Diluted net income (loss) per common share is computed by dividing adjusted net income (loss) to common shareholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period. The following table presents net income (loss) per common share and diluted net income (loss) per common share.


	Three Months Ended March 31,
(in thousands, except per share amounts)		2022		2021
Net income (loss) to common shareholders		$	(52,843)	$	573,694
Adjustment of redeemable noncontrolling interests		(36,940)		7,906
Adjusted net income (loss) to common shareholders		$	(89,783)	$	581,600

Basic common shares outstanding		13,652		13,819

Dilutive potential common shares from restricted stock units and restricted stock (1)		—		22
Diluted common shares outstanding		13,652		13,841
Basic net income (loss) per common share		$	(6.58)	$	42.09
Diluted net income (loss) per common share (1)		$	(6.58)	$	42.02

(1) The impact of 27 thousand shares from restricted stock units and restricted stock was excluded from the computation of diluted earnings per common share for the three months ended March 31, 2022 because the effect would have been anti-dilutive.

14. Commitments and Contingencies

a) On March 28, 2022, the Company completed a buy-out transaction with Markel CATCo Re and the Markel CATCo Funds, which are currently in run-off, that provided for an accelerated return of all remaining capital to investors in the Markel CATCo Funds. Under the terms of the transaction, the Company provided cash funding of $45.1 million to purchase substantially all of the Markel CATCo Funds' investments in Markel CATCo Re and also provided tail risk cover of $142.7 million to Markel CATCo Re to allow for the release of collateral to investors. In order to complete the transaction, the Company also made $101.9 million in additional payments, net of insurance proceeds, to or for the benefit of investors, which were recognized as an expense to the Company and included in services and other expenses for the quarter ended March 31, 2022. In conjunction with the buy-out transaction, all investors holding securities in the Markel CATCo Funds, the Markel CATCo Group Companies (MCIM, the Markel CATCo Funds and Markel CATCo Re), Markel Corporation and each of their related parties, among others, granted mutual releases of all claims related to the transaction, the Markel CATCo Group Companies' businesses and the investors' investments in the Funds, including any pending litigation. On March 11, 2022, the Supreme Court of Bermuda issued orders sanctioning the buy-out transaction, including the associated releases, and on March 16, 2022, the United States Bankruptcy Court for the Southern District of New York entered orders approving the enforcement in the United States of the Supreme Court of Bermuda's orders pursuant to Chapter 15 of the United States Bankruptcy Code. See note 11 for further details about our Markel CATCo operations and the buy-out transaction.

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b) Contingencies arise in the normal course of the Company's operations and are not expected to have a material impact on the Company's financial condition or results of operations.

15. Immaterial Correction to Prior Period Financial Statements for Accounting Policy Change

The Company defers and amortizes costs directly related to the successful acquisition of new or renewal insurance contracts over the related policy period, generally one year. Previously, the Company did not defer salaries and benefits associated with the successful acquisition of insurance contracts, as such amounts were quantified and assessed each period and were deemed not to be material to the consolidated financial statements. Effective January 1, 2022, the Company changed its accounting policy to defer salaries and benefits associated with the successful acquisition of insurance contracts in accordance with the requirements of FASB ASC 944, Financial Services – Insurance.

To reflect the change in accounting policy, the Company made a cumulative adjustment to increase deferred policy acquisition costs by $28.2 million, increase deferred tax liabilities by $5.9 million and increase retained earnings by $22.3 million as of January 1, 2020, which is the beginning of the earliest year that will be presented in the consolidated financial statements included in the Company's 2022 Annual Report on Form 10-K. These increases in deferred policy acquisition costs, deferred tax assets and retained earnings are also reflected as increases to the previously reported amounts in the Company's consolidated balance sheets as of December 31, 2021 and as an adjustment to retained earnings as of January 1, 2021 in the accompanying consolidated statement of changes in equity for the three months ended March 31, 2021. The Company considered both the quantitative and qualitative factors within the provisions of U.S. Securities and Exchange Commission Staff Accounting Bulletin (SAB) No. 99, Materiality, and SAB No. 108, Considering the Effect of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements and determined that the impact of the change in accounting policy was not material to our previously issued consolidated financial statements. The Company did not adjust the amounts previously presented in the consolidated statements of income and comprehensive income for the years ended December 31, 2020 and 2021 for the change in accounting policy as the effects were not material. The cumulative income statement effect for those periods was included in the consolidated statement of loss and comprehensive loss for the three months ended March 31, 2022.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included under Item 1 Financial Statements and our 2021 Annual Report on Form 10-K. The accompanying consolidated financial statements and related notes have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and include the accounts of Markel Corporation and its consolidated subsidiaries, as well as any variable interest entities that meet the requirements for consolidation. See note 1(b) of the notes to consolidated financial statements for details of recently issued accounting pronouncements that we have not yet adopted and the expected effects on our consolidated financial position, results of operations and cash flows. This section is divided into the following sections:

•Our Business

•Results of Operations

•Financial Condition

•Critical Accounting Estimates

•Safe Harbor and Cautionary Statement

In February 2022, military conflict escalated between Russia and Ukraine following Russia's invasion of Ukraine. The ongoing conflict that has followed, and related financial and economic sanctions imposed by governments in the U.S., United Kingdom and European Union, among others, in response, have caused disruption in the global economy and have increased global economic and political uncertainty. Our underwriting results for the quarter included $35.0 million of net losses and loss adjustment expenses and $12.3 million of additional reinsurance costs attributed to the Russia-Ukraine conflict. Assumptions used to develop our loss estimate are inherently uncertain and subject to a wide range of variability. See "Results of Operations - Underwriting Results" for further details regarding our underwriting exposures and loss estimates related to this ongoing conflict. For further discussion regarding the Russia-Ukraine conflict and risks related to our businesses, see Item 1A Risk Factors.

Our Business

We are a diverse financial holding company serving a variety of niche markets. We aspire to build one of the world's great companies and deploy three financial engines in pursuit of this goal.

Insurance - Our principal business markets and underwrites specialty insurance products using multiple platforms that enable us to best match risk and capital.

Investments - Our investing activities are primarily related to our underwriting operations. The majority of our investable assets come from premiums paid by policyholders and the remainder is comprised of shareholder funds.

Markel Ventures - Through our Markel Ventures operations, we own controlling interests in a diverse portfolio of businesses that operate outside of the specialty insurance marketplace.

Our financial goals are to earn consistent underwriting and operating profits and superior investment returns to build shareholder value. We measure financial success by our ability to grow book value per common share and the market price per common share of our stock, or total shareholder return, at high rates of return over a long period of time. To mitigate effects of short-term volatility and align with the longer-term perspective we apply to operating our businesses, we generally use five-year time periods to measure our performance. Growth in book value per common share is an important measure of our success because it includes all underwriting, operating and investing results. Over the five-year period ended March 31, 2022, the compound annual growth in book value per common share was 10%. Growth in total shareholder value is also an important measure of our success, as a significant portion of our operations are not recorded at fair value or otherwise captured in book value. Over the five-year period ended March 31, 2022, our common share price increased at a compound annual rate of 9%.

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Insurance

Our insurance engine is comprised of the following types of operations:

•Underwriting - Our underwriting operations are comprised of our risk-bearing insurance and reinsurance operations.

•Insurance-linked securities - Our insurance-linked securities (ILS) operations include investment fund managers that offer a variety of investment products, including insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives.

•Program services - Our program services business serves as a fronting platform that provides other insurance entities access to the U.S. property and casualty insurance market.

Through our underwriting, ILS and program services operations, we have a suite of capabilities through which we can access capital to support our customers' risks, which includes our own capital through our underwriting operations, as well as third-party capital through our ILS and program services operations. Within each of these platforms, we believe that our specialty product focus and niche market strategy enable us to develop expertise and specialized market knowledge. We seek to differentiate ourselves from competitors by our expertise, service, continuity and other value-based considerations, including the multiple platforms through which we can manage risk and deploy capital. For example, we may leverage the strength of our underwriting platform to write certain risks on behalf of our ILS operations in accordance with their desired return objectives. We may also cede certain risks written through our underwriting operations to our ILS operations to the extent those risks are more aligned with the risk profile of our ILS investors than our own capital risk tolerance. Our ability to access multiple insurance platforms allows us to achieve income streams from our insurance operations beyond the traditional underwriting model.

Underwriting

Our chief operating decision maker reviews our ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance. In determining how to allocate resources and assess the performance of our underwriting results, we consider many factors, including the nature of the insurance product sold, the type of account written and the type of customer served. The Insurance segment includes all direct business and facultative placements written on a risk-bearing basis within our underwriting operations. The Reinsurance segment includes all treaty reinsurance written on a risk-bearing basis within our underwriting operations.

Our Insurance segment includes both hard-to-place risks written outside of the standard market on an excess and surplus lines basis and unique and hard-to-place risks that must be written on an admitted basis due to marketing and regulatory reasons. Risks written in our Insurance segment are written on either a direct basis or a subscription basis, the latter of which means that the loss exposures brought into the market are typically insured by more than one insurance company or Lloyd's of London (Lloyd's) syndicate. When we write business in the subscription market, we prefer to participate as lead underwriter in order to control underwriting terms, policy conditions and claims handling. The following products are included in this segment: professional liability, general liability, personal lines, marine and energy, primary and excess of loss property, workers' compensation, credit and surety coverages, specialty program insurance for well-defined niche markets and liability and other coverages tailored for unique exposures. Business in this segment is primarily written through our Markel Specialty and Markel International divisions. The Markel Specialty division writes business on both an excess and surplus lines and admitted basis, primarily based in the United States, as well as Bermuda, London, and Europe. The Markel International division writes business worldwide from our London and Munich-based platforms, which include branch offices around the world. The Insurance segment also includes collateral protection insurance written on an admitted basis through our State National division.

Our Reinsurance segment includes casualty and specialty treaty reinsurance products offered to other insurance and reinsurance companies globally through the broker market. Our treaty reinsurance offerings include both quota share and excess of loss reinsurance and are typically written on a participation basis, which means each reinsurer shares proportionally in the business ceded under the reinsurance treaty written. Business in this segment is primarily written by our Global Reinsurance division. Principal lines of business include: professional liability, general liability, workers' compensation and credit and surety. Previously, we also wrote property reinsurance and retrocessional reinsurance business, however, effective January 1, 2022, we were off-risk for substantially all property loss exposures, including catastrophe exposures, previously written within our Reinsurance segment.

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Insurance-Linked Securities

Our insurance-linked securities operations are primarily comprised of our Nephila operations and are not included in a reportable segment. Nephila Holdings Ltd. (together with its subsidiaries, Nephila) serves as an insurance and investment fund manager and managing general agent that offers a broad range of investment products, including insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives. Nephila serves as the investment manager to several Bermuda, Ireland and U.S. based private funds (the Nephila Funds). To provide access for the Nephila Funds to the insurance, reinsurance and weather markets, Nephila acts as an insurance manager to certain Bermuda Class 3 and 3A reinsurance companies and Lloyd's Syndicate 2357 (Syndicate 2357) (collectively, the Nephila Reinsurers). The results of the Nephila Reinsurers are attributed to the Nephila Funds primarily through derivative transactions between these entities. Neither the Nephila Funds nor the Nephila Reinsurers are subsidiaries of Markel Corporation, and as such, these entities are not included in our consolidated financial statements. The Nephila Reinsurers subscribe to various reinsurance contracts based on their investors' risk profiles, including property reinsurance business fronted through our underwriting platform. Nephila also serves as a managing general agent that underwrites and administers property insurance policies and provides delegated underwriting services to providers of insurance capital. In the first quarter of 2022, we completed the sale of our Velocity managing general agent operations, and we have entered into an agreement to to sell our remaining managing general agent operations later in 2022. See "Results of Operations - Other Operations" for further details regarding these transactions. See note 12 of the notes to consolidated financial statements for further details regarding our Nephila operations.

Our insurance-linked securities operations also include our run-off Markel CATCo operations, the results of which are reported separately from our ongoing insurance-linked securities operations. Our Markel CATCo operations are conducted through Markel CATCo Investment Management Ltd. (MCIM), an ILS investment fund manager headquartered in Bermuda. MCIM serves as the insurance manager for Markel CATCo Re Ltd. (Markel CATCo Re), a Bermuda Class 3 reinsurance company, and as the investment manager for Markel CATCo Reinsurance Fund Ltd., a Bermuda exempted mutual fund company comprised of multiple segregated accounts (Markel CATCo Funds). In July 2019, these operations were placed into run-off. In March 2022, we completed a buy-out transaction that provided for an accelerated return of all remaining capital to investors in the Markel CATCo Funds. See note 11 of the notes to consolidated financial statements for further details regarding our Markel CATCo operations and the buy-out transaction.

Program Services

Our program services business generates fee income in the form of ceding fees in exchange for fronting insurance business to other insurance carriers (capacity providers). In general, fronting refers to business in which we write insurance on behalf of a general agent or capacity provider and then cede all, or substantially all, of the risk under these policies to the capacity provider in exchange for ceding fees. The results of our program services operations are not included in a reportable segment.

Our program services business, which is provided through our State National division, offers issuing carrier capacity to both specialty managing general agents and other producers who sell, control and administer books of insurance business that are supported by third parties that assume reinsurance risk, including Syndicate 2357 and other Nephila Reinsurers. These reinsurers are domestic and foreign insurers and institutional risk investors that want to access specific lines of U.S. property and casualty insurance business but may not have the required licenses and filings to do so.

Through our program services business, we write a wide variety of insurance products, principally including general liability, commercial liability, commercial multi-peril, property and workers' compensation. Program services business written through our State National division is separately managed from our underwriting divisions, which write similar products, in order to protect our program services customers.

In certain instances, we also leverage the strength of our underwriting platform to write business on behalf of our ILS operations in exchange for ceding fees to support their business plans and assist in meeting their desired return objectives. This business is conducted separately from our program services business and primarily consists of catastrophe-exposed property reinsurance business, which we no longer write on a risk-bearing basis.

Although we reinsure substantially all of the risks inherent in our program services business and ILS fronting arrangements, we have certain programs that contain limits on our reinsurers' obligations to us that expose us to underwriting risk, including loss ratio caps, aggregate reinsurance limits or exclusion of the credit risk of producers. Under certain programs, including programs and contracts with Nephila Reinsurers, we also bear underwriting risk for annual aggregate agreement year losses in excess of a limit that we believe is unlikely to be exceeded. See note 12 of the notes to consolidated financial statements for further details regarding our programs with Nephila Reinsurers.

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Investments

Our business strategy recognizes the importance of both consistent underwriting and operating profits and superior investment returns to build shareholder value. We rely on sound underwriting practices to produce investable funds. The majority of our investable assets come from premiums paid by policyholders. Policyholder funds are invested predominantly in high-quality government, municipal and corporate bonds that generally match the duration and currency of our loss reserves. The balance, comprised of shareholder funds, is available to be invested in equity securities, which over the long run, have produced higher returns relative to fixed maturity investments. When purchasing equity securities, we seek to invest in profitable companies, with honest and talented management, that exhibit reinvestment opportunities and capital discipline, at reasonable prices. We intend to hold these investments over the long-term. Substantially all of our investment portfolio is managed by company employees.

Markel Ventures

Through our wholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures), we own controlling interests in various high-quality businesses that operate outside of the specialty insurance marketplace but have the shared goal of positively contributing to the long-term financial performance of Markel Corporation. Management views these businesses as separate and distinct from our insurance operations. Management teams for each business operate autonomously and are responsible for developing strategic initiatives, managing day-to-day operations and making investment and capital allocation decisions for their respective companies.

Our senior management team is responsible for decisions regarding allocation of capital for acquisitions and new investments. Our strategy in making these investments is similar to our strategy for purchasing equity securities. We seek to invest in profitable companies, with honest and talented management, that exhibit reinvestment opportunities and capital discipline, at reasonable prices. We intend to own the businesses acquired for a long period of time.

Our chief operating decision maker allocates resources to and assesses the performance of these various businesses in the aggregate as the Markel Ventures segment. This segment includes a diverse portfolio of specialized businesses from different industries that offer various types of products and services to businesses and consumers across many markets. The following types of businesses are included in this segment: construction services, consumer and building products, transportation-related products, equipment manufacturing products and consulting services. In December 2021, we acquired a controlling interest in Metromont LLC (Metromont), a precast concrete manufacturer and concrete building solutions provider for commercial projects. In August 2021, we acquired a controlling interest in Buckner HeavyLift Cranes (Buckner), a provider of crane rental services for large commercial contractors. See note 3 of the notes to consolidated financial statements for additional details related to these acquisitions.

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Results of Operations

The following table presents the components of net income (loss) to shareholders, net income (loss) to common shareholders and comprehensive income (loss) to shareholders.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Insurance segment profit		$	187,494	$	116,948
Reinsurance segment profit (loss)		13,283		(23,218)
Investing segment profit (loss) (1)		(285,672)		623,438
Markel Ventures segment profit (2)		49,737		51,463
Other operations (3)		(6,987)		(23,274)
Interest expense		(49,692)		(42,389)
Net foreign exchange gains		23,494		25,084

Income tax (expense) benefit		18,429		(148,371)
Net income attributable to noncontrolling interests		(2,929)		(5,987)
Net income (loss) to shareholders		(52,843)		573,694

Net income (loss) to common shareholders		(52,843)		573,694
Other comprehensive loss to shareholders		(476,184)		(214,697)
Comprehensive income (loss) to shareholders		$	(529,027)	$	358,997

(1) Net investment income and net investment gains (losses), if any, attributable to Markel Ventures are included in segment profit for Markel Ventures. All other net investment income and net investment gains (losses) are included in Investing segment profit (loss).

(2) Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures.

(3) Other operations include the results 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 reportable segment. Amortization of intangible assets attributable to our underwriting segments was $9.8 million and $10.4 million for the three months ended March 31, 2022 and 2021, respectively; however, we do not allocate amortization of intangible assets between the Insurance and Reinsurance segments.

The change in comprehensive income (loss) to shareholders for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to pre-tax net investment losses of $358.4 million in 2022 compared to pre-tax net investment gains of $526.9 million in 2021, as well as pre-tax net unrealized losses on our fixed maturity securities of $665.8 million in 2022 compared to $321.2 million in 2021.

The components of net income (loss) to shareholders and comprehensive income (loss) to shareholders are discussed in further detail under "Underwriting Results," "Investing Results," "Markel Ventures," "Other Operations," "Interest Expense and Income Taxes" and "Comprehensive Income (Loss) to Shareholders and Book Value per Common Share."

Underwriting Results

Underwriting profits are a key component of our strategy to build shareholder value. We believe that the ability to achieve consistent underwriting profits demonstrates knowledge and expertise, commitment to superior customer service and the ability to manage insurance risk. The property and casualty insurance industry commonly defines underwriting profit or loss as earned premiums net of losses and loss adjustment expenses and underwriting, acquisition and insurance expenses. We use underwriting profit or loss and the combined ratio as a basis for evaluating our underwriting performance. The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of incurred losses, loss adjustment expenses and underwriting, acquisition and insurance expenses to earned premiums. The combined ratio is the sum of the loss ratio and the expense ratio. The loss ratio represents the relationship of incurred losses and loss adjustment expenses to earned premiums. The expense ratio represents the relationship of underwriting, acquisition and insurance expenses to earned premiums. A combined ratio less than 100% indicates an underwriting profit, while a combined ratio greater than 100% reflects an underwriting loss.

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.

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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 and the Russia-Ukraine conflict. Due to the unique characteristics of a catastrophe loss and other significant, infrequent events, there is inherent variability as to the timing or loss amount, which cannot be predicted in advance. We believe measures that exclude the effects of catastrophe events, the Russia-Ukraine conflict 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 2022, the Russia-Ukraine conflict. The current accident year loss ratio excluding the impact of catastrophes and other significant, infrequent loss events is also commonly referred to as an attritional loss ratio within the property and casualty insurance industry.

Consolidated


	Three Months Ended March 31,
(dollars in thousands)		2022			2021			% Change
Gross premium volume (1)		$	2,518,116		$	2,170,383		16	%
Net written premiums		$	2,164,734		$	1,881,070		15	%
Earned premiums		$	1,759,770		$	1,497,695		17	%
Underwriting profit		$	197,033		$	91,034		116	%

Underwriting Ratios (2)								Point Change
Loss ratio
Current accident year loss ratio		60.7		%	64.8		%	(4.1)
Prior accident years loss ratio		(5.5)		%	(6.1)		%	0.6
Loss ratio		55.3		%	58.8		%	(3.5)
Expense ratio		33.5		%	35.2		%	(1.7)
Combined ratio		88.8		%	93.9		%	(5.1)

Current accident year loss ratio catastrophe impact (3)		—		%	4.3		%	(4.3)
Current accident year loss ratio Russia-Ukraine conflict impact (3)		2.0		%	—		%	2.0
Prior accident years loss ratio COVID-19 impact (3)		—		%	1.2		%	(1.2)

Current accident year loss ratio, excluding catastrophes and Russia-Ukraine conflict		58.7		%	60.5		%	(1.8)
Combined ratio, excluding current year catastrophes, Russia-Ukraine conflict and COVID-19		86.8		%	88.4		%	(1.6)

(1) Gross premium volume excludes $880.2 million and $634.5 million for the three months ended March 31, 2022 and 2021, respectively, of written premiums attributable to our program services business and other fronting arrangements that were ceded.

(2) Amounts may not reconcile due to rounding.

(3) The point impact of catastrophes, the Russia-Ukraine conflict and COVID-19 is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums.

Premiums

The increase in gross premium volume in our underwriting operations for the three months ended March 31, 2022 was driven by growth in our professional liability and general liability product lines across both of our underwriting segments.

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We continue to see more favorable rates across most of our product lines, particularly within our professional liability and general liability product lines, based on general market conditions and the impacts of economic and social inflation, including increased litigation, on claims costs. Additionally, recent increases in economic inflation, and an expectation that this trend will continue, have created more uncertainty around the ultimate losses that will be incurred to settle claims on these longer-tail product lines. These factors, as well as the impacts of the sustained low interest rate environment on net investment income, have resulted in higher rates. Additionally, following the high level of catastrophes that have occurred in recent years, we are also seeing more favorable rates on catastrophe-exposed lines of business. The primary exception to the favorable rate environment is workers' compensation, where we continue to see low single digit rate decreases given generally favorable loss experience in recent years. When we believe the prevailing market price will not support our underwriting profit targets, the business is not written. As a result of our underwriting discipline, gross premium volume may vary when we alter our product offerings to maintain or improve underwriting profitability.

Net retention of gross premium volume in our underwriting operations for the three months ended March 31, 2022 was 86% compared to 87% for the same period of 2021. The decrease in net retention was driven by lower retention within our Insurance segment, partially offset by higher retention in our Reinsurance segment. Within our underwriting operations, we purchase reinsurance and retrocessional reinsurance to manage our net retention on individual risks and overall exposure to losses and to enable us to write policies with sufficient limits to meet policyholder needs.

The increase in earned premiums in our underwriting operations for the three months ended March 31, 2022 was primarily attributable to continued growth in gross premium volume within our professional liability and general liability product lines across both our underwriting segments.

Combined Ratio

Underwriting results for the three months ended March 31, 2022 included $35.0 million of net losses and loss adjustment expenses attributed to the Russia-Ukraine conflict. Underwriting results for the three months ended March 31, 2021 included $64.3 million of net losses and loss adjustment expenses from Winter Storm Uri as well as $18.6 million of net losses and loss adjustment expenses resulting from an increase in our estimate of ultimate losses and loss adjustment expenses attributed to COVID-19. Excluding these losses from the respective periods, the decrease in our consolidated combined ratio for the three months ended March 31, 2022 compared to the same period of 2021 was driven by a lower current accident year loss ratio within our Insurance segment. Higher earned premiums in 2022 compared to 2021 had a favorable impact on our expense ratio and an unfavorable impact on the prior accident years loss ratio.

Russia-Ukraine Conflict

Our losses and loss adjustment expenses from the Russia-Ukraine conflict are primarily attributed to business written within our international insurance and reinsurance operations and are primarily associated with war and terrorism coverages within our marine and energy product lines, as well as our trade credit and surety product lines. Although premiums written in the impacted regions were not significant, many of our impacted policies have high exposure limits. Additionally, our marine war and trade credit products provide coverage for vessels and cargo that travel worldwide, including areas impacted by the conflict. We purchase significant excess of loss reinsurance on the impacted product lines to reduce our net exposures, resulting in significant ceded losses.

The following table summarizes the losses and loss adjustment expenses and related reinstatement premiums attributed to the Russia-Ukraine conflict.


	Quarter Ended March 31, 2022
(dollars in thousands)
Gross losses and loss adjustment expenses	$	105,000
Ceded losses and loss adjustment expenses	(70,000)
Net losses and loss adjustment expenses	$	35,000

Net ceded reinstatement premiums	$	12,253
Underwriting loss	$	47,253

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Both the gross and net loss estimates for incurred losses attributed to the Russia-Ukraine conflict represent our best estimates as of March 31, 2022 based upon information currently available. Our estimates for these losses are based on reported claims, detailed underwriting, actuarial and claims reviews of policies and in-force assumed reinsurance contracts for potential exposures, as well as analysis of our ceded reinsurance contracts and analysis provided by our brokers and claims counsel. These estimates include various assumptions about what areas within the affected regions have incurred losses, the nature and extent of such losses, which is currently difficult to verify, as well as assumptions about coverage, liability and reinsurance. Due to the inherent uncertainty associated with the assumptions surrounding the Russia-Ukraine conflict, these estimates are subject to a wide range of variability. Additionally, as the Russia-Ukraine conflict is ongoing, we believe it is likely that additional losses will be incurred in subsequent periods. Given the significant levels of ceded reinsurance on certain of our impacted policies, a significant portion of any additional incurred losses may be ceded. Additionally, increases in ceded losses may require payment of additional reinstatement premiums. Further, if coverage under our existing ceded reinsurance contracts is exhausted, we may need to purchase additional reinsurance to ensure that our net retained risks on the impacted product lines are within our corporate risk tolerances.

While we believe our gross and net reserves for losses and loss adjustment expenses for the Russia-Ukraine conflict as of March 31, 2022 are adequate based on information currently available, we continue to closely monitor reported claims, ceded reinsurance contract attachment, government actions and areas impacted by the conflict and may adjust our estimates of gross and net losses as new information becomes available. Any such adjustments or additional incurred losses may be material to our results of operations, financial condition and cash flows.

Insurance Segment


	Three Months Ended March 31,
(dollars in thousands)		2022			2021			% Change
Gross premium volume		$	1,943,306		$	1,638,327		19	%
Net written premiums		$	1,611,020		$	1,387,430		16	%
Earned premiums		$	1,477,148		$	1,244,027		19	%
Underwriting profit		$	187,494		$	116,948		60	%

Underwriting Ratios (1)								Point Change
Loss ratio
Current accident year loss ratio		60.0		%	64.2		%	(4.2)
Prior accident years loss ratio		(6.7)		%	(9.6)		%	2.9
Loss ratio		53.3		%	54.6		%	(1.3)
Expense ratio		34.0		%	36.0		%	(2.0)
Combined ratio		87.3		%	90.6		%	(3.3)

Current accident year loss ratio catastrophe impact (2)		—		%	3.2		%	(3.2)
Current accident year loss ratio Russia-Ukraine conflict impact (2)		1.4		%	—		%	1.4


Current accident year loss ratio, excluding catastrophes and Russia-Ukraine conflict		58.6		%	61.0		%	(2.4)
Combined ratio, excluding current year catastrophes and Russia-Ukraine conflict		86.0		%	87.4		%	(1.4)

(1) Amounts may not reconcile due to rounding.

(2) The point impact of catastrophes and the Russia-Ukraine conflict is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums.

Premiums

The increase in gross premium volume in our Insurance segment for the three months ended March 31, 2022 was driven by new business volume, more favorable rates and expanded product offerings, resulting in growth across all of our product lines, most notably our professional liability and general liability product lines. Net retention of gross premium volume was 83% for the three months ended March 31, 2022 and 85% for the three months ended March 31, 2021. The decrease in net retention was primarily due to higher cession rates on certain product lines, as well as the impact of ceded reinstatement premiums within our marine and energy product lines associated with the Russia-Ukraine conflict. The increase in earned premiums for the three months ended March 31, 2022 was primarily due to higher gross premium volume.

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Combined Ratio

The Insurance segment's current accident year losses and loss adjustment expenses for the three months ended March 31, 2022 included $20.0 million of net losses and loss adjustment expenses attributed to the Russia-Ukraine conflict. Current accident year losses for the three months ended March 31, 2021 included $39.3 million of net losses and loss adjustment expenses attributed to Winter Storm Uri. Excluding these losses from the respective periods, the decrease in the current accident year loss ratio for the three months ended March 31, 2022 compared to the same period of 2021 was primarily attributable to lower attritional loss ratios within our professional liability and general liability product lines, primarily due to the benefit of achieving higher premium rates.

The Insurance segment's combined ratio for the three months ended March 31, 2022 included $98.6 million of favorable development on prior accident years loss reserves compared to $119.1 million for the same period of 2021. The decrease in favorable development was primarily due to less favorable development on multiple product lines in 2022 compared to 2021. Additionally, higher earned premiums in 2022 compared to 2021 had an unfavorable impact on the prior accident years loss ratio. For the three months ended March 31, 2022, favorable development was most significant on our general liability and marine and energy product lines across several accident years, workers' compensation product lines, primarily on the 2019 and 2020 accident years, and property product lines, primarily on the 2020 and 2021 accident years. The favorable development on prior years loss reserves in 2021 was most significant on our marine and energy, general liability, workers' compensation and property product lines.

The decrease in the Insurance segment's expense ratio for the three months ended March 31, 2022 compared to the same period of 2021 was primarily due to the favorable impact of higher earned premiums.

Reinsurance Segment


	Three Months Ended March 31,
(dollars in thousands)		2022			2021			% Change
Gross premium volume		$	576,316		$	532,518		8	%
Net written premiums		$	555,220		$	494,085		12	%
Earned premiums		$	283,967		$	254,087		12	%
Underwriting profit (loss)		$	13,283		$	(23,218)		NM (1)

Underwriting Ratios (2)								Point Change
Loss ratio
Current accident year loss ratio		64.3		%	67.9		%	(3.6)
Prior accident years loss ratio		0.7		%	11.3		%	(10.6)
Loss ratio		65.0		%	79.2		%	(14.2)
Expense ratio		30.3		%	30.0		%	0.3
Combined ratio		95.3		%	109.1		%	(13.8)

Current accident year loss ratio catastrophe impact (3)		—		%	9.8		%	(9.8)
Current accident year loss ratio Russia-Ukraine conflict impact (3)		5.3		%	—		%	5.3
Prior accident years loss ratio COVID-19 impact (3)		—		%	7.3		%	(7.3)

Current accident year loss ratio, excluding catastrophes and Russia-Ukraine conflict		59.0		%	58.1		%	0.9
Combined ratio, excluding current year catastrophes, Russia-Ukraine conflict and COVID-19		90.0		%	92.0		%	(2.0)

(1) NM - Ratio is not meaningful

(2) Amounts may not reconcile due to rounding.

(3) The point impact of catastrophes, the Russia-Ukraine conflict and COVID-19 is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums.

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Premiums

The increase in gross premium volume in our Reinsurance segment for the three months ended March 31, 2022 was primarily attributable to increases on renewals and new business within our professional liability and general liability product lines, as well as more favorable premium adjustments within our credit and surety, professional liability and general liability product lines, partially offset by lower gross premiums within our workers' compensation and 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. Lower gross premiums within our workers' compensation and property product lines were primarily attributable to non-renewals, as we did not renew a large treaty within our workers' compensation product line and have discontinued writing property reinsurance and retrocessional reinsurance business on a risk-bearing basis. Significant variability in gross premium volume can be expected in our Reinsurance segment due to individually significant contracts and multi-year contracts.

Net retention of gross premium volume for the three months ended March 31, 2022 was 96% compared to 93% for the same period of 2021. The increase in net retention for the three months ended March 31, 2022 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 for the three months ended March 31, 2022 was primarily attributable to changes in gross premium volume, as previously discussed.

Combined Ratio

The Reinsurance segment's current accident year losses and loss adjustment expenses for the three months ended March 31, 2022 included $15.0 million of net losses and loss adjustment expenses attributed to the Russia-Ukraine conflict. Current accident year losses for the three months ended March 31, 2021 included $25.0 million of net losses and loss adjustment expenses attributed to Winter Storm Uri. Excluding these losses from the respective periods, the increase in the current accident year loss ratio was driven 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 unfavorable impact from the change in mix of business was largely offset by lower attritional loss ratios within our professional liability, general liability and credit and surety product lines in 2022 compared to 2021, primarily due to more favorable premium adjustments in 2022 compared to 2021. Additionally, the attritional loss ratios within our professional liability and general liability 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 Reinsurance segment's combined ratio for the three months ended March 31, 2022 included $2.1 million of adverse development on prior accident years loss reserves, which was primarily attributable to additional exposures recognized on prior accident years related to net favorable premium adjustments on our general liability, credit and surety and professional liability product lines. This increase in prior years loss reserves was largely offset by modest favorable development across several of our other product lines, including our property product lines. For the three months ended March 31, 2021, the combined ratio included $28.7 million of adverse development on prior accident years loss reserves, of which $18.6 million, or seven points on the segment combined ratio, was attributed to COVID-19.

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Investing Results

Our business strategy recognizes the importance of both consistent underwriting and operating profits and superior investment returns to build shareholder value. We rely on sound underwriting practices to produce investable funds. 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.


	Three Months Ended March 31,
(dollars in thousands)		2022			2021			Change
Net investment income		$	72,734		$	96,570		(25)		%
Net investment gains (losses)		$	(358,399)		$	526,871		$	(885,270)
Change in net unrealized gains (losses) on available-for-sale investments (1)		$	(603,388)		$	(271,215)		$	(332,173)

Investment Ratios
Investment yield (2)		0.4		%	0.5		%	(0.1)
Taxable equivalent total investment return		(3.5)		%	1.4		%	(4.9)

(1) The change in net unrealized gains (losses) on available-for-sale investments included an increase related to an adjustment to our life and annuity benefit reserves of $56.6 million and $49.3 million for the three months ended March 31, 2022 and 2021, respectively. See note 9 of the notes to consolidated financial statements for details on our life and annuity benefit reserve adjustments.

(2) Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost.

The decrease in net investment income for the three months ended March 31, 2022 compared to the same period of 2021 was driven by losses on our equity method investments in 2022 compared to income in 2021. Net investment income on our fixed maturity securities in 2022 was consistent with 2021, as the impact of higher average holdings of fixed maturity securities during the three months ended March 31, 2022 compared to the same period of 2021 was largely offset by lower yields in 2022 compared to 2021. See note 4(d) of the notes to consolidated financial statements for details regarding the components of net investment income.

Net investment losses for the three months ended March 31, 2022 were primarily attributable to a decrease in the fair value of our equity portfolio driven by unfavorable market value movements. Net investment gains for the three months ended March 31, 2021 were primarily attributable to an increase in the fair value of our equity portfolio driven by favorable market value movements. See note 4(e) of the notes to consolidated financial statements for further details on the components of net investment gains (losses).

The decrease in net unrealized gains (losses) on available-for-sale investments for both the three months ended March 31, 2022 and 2021 was primarily attributable to decreases in the fair value of our fixed maturity investment portfolio as a result of increases in interest rates during both periods.

We also 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.

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The following table reconciles investment yield to taxable equivalent total investment return.


	Three Months Ended March 31,
	2022		2021
Investment yield (1)	0.4	%	0.5	%
Adjustment of investment yield from amortized cost to fair value	(0.1)	%	(0.1)	%
Net amortization of net premium on fixed maturity securities	0.1	%	0.1	%
Net investment gains (losses) and change in net unrealized investment gains (losses) on available-for-sale securities	(3.9)	%	0.9	%
Taxable equivalent effect for interest and dividends (2)	—	%	—	%

Taxable equivalent total investment return	(3.5)	%	1.4	%

(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.

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, predominantly in the United States. We measure Markel Ventures' results by its operating income and net income, as well as earnings before interest, income taxes, depreciation and amortization (EBITDA). We consolidate the results of our Markel Ventures subsidiaries on a one-month lag, with the exception of significant transactions or events that occur during the intervening period.

The following table summarizes the operating revenues, operating income, EBITDA and net income to shareholders from our Markel Ventures segment.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021		% Change
Operating revenues		$	950,392	$	706,602	35	%
Operating income		$	49,737	$	51,463	(3)	%
EBITDA		$	95,705	$	81,178	18	%
Net income to shareholders		$	25,779	$	32,683	(21)	%

The increase in operating revenues for the three months ended March 31, 2022 compared to the same period of 2021 was driven by a $108.9 million contribution from Metromont and Buckner, which were acquired in December 2021 and August 2021, respectively, and the impact of increased demand and higher prices at many of our other businesses.

The benefit of increases in operating revenues to operating income, EBITDA and net income to shareholders was reduced by increased costs of materials and labor across many of our businesses, which are reflective of current economic conditions. The higher cost of materials is due in part to a shortage in the availability of certain products, the higher costs of shipping and inflation. We try to mitigate the impact of these cost increases through a variety of actions, such as increasing the prices of our products and services, pre-purchasing materials, locking in prices in advance or utilizing alternative sources of materials. However, we may not be successful at these efforts and even when we are successful, there may be a time lag before the impacts of these changes are reflected in our margins.

The increase in EBITDA for the three months ended March 31, 2022 compared to the same period of 2021 was driven by the impact of higher revenues and improved operating results at our construction services businesses and consulting services businesses, as well as the contribution of Metromont. These increases in EBITDA were partially offset by the impact of a pre-tax disposition gain of $22.0 million in the first quarter of 2021, which was included in services and other expenses.

The decrease in operating income and net income to shareholders was primarily attributable to depreciation and amortization related to our recent acquisitions, which more than offset the impact of higher revenues and improved operating results at our construction services businesses and consulting services businesses, as previously discussed.

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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.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Markel Ventures operating income		$	49,737	$	51,463
Depreciation expense		25,035		16,010
Amortization of intangible assets		20,933		13,705
Markel Ventures EBITDA		$	95,705	$	81,178

Other Operations

The following table presents the components of operating revenues and operating expenses that are not included in a reportable segment.


	Three Months Ended March 31,
	2022						2021
(dollars in thousands)	Services and other revenues		Services and other expenses		Amortization of intangible assets		Services and other revenues		Services and other expenses		Amortization of intangible assets
Other operations:
Insurance-linked securities	$	37,009	$	37,746	$	9,545	$	36,987	$	44,627	$	9,612
Insurance-linked securities - disposition gain	107,293		—		—		—		—		—
Program services and other fronting	34,071		7,383		5,234		28,163		6,328		5,234
Life and annuity	325		5,281		—		526		6,414		—
Markel CATCo buy-out	—		101,904		—		—		—		—
Other (1)	3,048		7,559		586		6,783		9,820		599
	181,746		159,873		15,365		72,459		67,189		15,445
Underwriting operations (2)					9,751						10,403
Total	$	181,746	$	159,873	$	25,116	$	72,459	$	67,189	$	25,848

(1) Other includes the results of our run-off Lodgepine and Markel CATCo operations for both periods presented.

(2) Amortization of intangible assets attributable to our underwriting operations is not allocated between the Insurance and Reinsurance segments.

Insurance-Linked Securities

Operating revenues in our Nephila ILS operations for the three months ended March 31, 2021 were consistent with operating revenues for the same period of 2021. Higher operating revenues at our Volante managing general agent operations were offset by lower operating revenues at our Velocity managing general agent operations due to its disposition in February 2022.

In February 2022, we sold the majority of our controlling interest in our Velocity managing general agent operations for total cash consideration of $181.3 million, which resulted in a gain of $107.3 million. Velocity provides risk origination services for our Nephila fund management operations, as well as for third parties, and was a source of growth within our ILS operations since we acquired Nephila in 2018. We continue to have a minority interest in Velocity after the sale, and Velocity will continue to be a source for risk origination for our Nephila fund management operations.

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In March 2022, we entered into a definitive agreement to sell our controlling interest in our Volante managing general agent operations, which underwrite and administer specialty insurance and reinsurance policies and provide delegated underwriting services to third-party providers of insurance capital. Volante has also been a source of growth within our ILS operations since we acquired Nephila in 2018. Estimated consideration from the sale is expected to be $155 million. The transaction is expected to close in the third quarter of 2022 and is subject to regulatory approvals and customary closing conditions.

Following the disposition of our Volante managing general agent operations, our Nephila ILS operations will be solely comprised of its fund management operations. As of March 31, 2022, Nephila's net assets under management were $8.6 billion.

Program Services and Other Fronting

For the three months ended March 31, 2022, the increase in operating revenues in our program services and other fronting operations was primarily due to higher gross premium volume at our program services operations driven by the expansion of existing programs. Gross written premiums in our program services operations were $705.6 million and $611.8 million for the three months ended March 31, 2022 and 2021, respectively. Additionally, gross written premiums from our other fronting operations, which consist of business written by our underwriting platform on behalf of our ILS operations, were $173.1 million and $22.2 million for the three months ended March 31, 2022 and 2021, respectively.

Markel CATCo Buy-Out

In March 2022, we completed a buy-out transaction with Markel CATCo Re and the Markel CATCo Funds that provided for an accelerated return of all remaining capital to investors in the Markel CATCo Funds. Under the terms of the transaction, we provided cash funding of $45.1 million to purchase substantially all of the Markel CATCo Funds' investments in Markel CATCo Re and also provided tail risk cover of $142.7 million to Markel CATCo Re to allow for the release of collateral to investors. In order to complete the transaction, we also made $101.9 million in additional payments, net of insurance proceeds, to or for the benefit of investors, which were recognized as an expense during the first quarter of 2022. See note 11 of the notes to consolidated financial statements for further details regarding the buy-out transaction.

Interest Expense and Income Taxes

Interest Expense

Interest expense was $49.7 million for the three months ended March 31, 2022, compared to $42.4 million for the same period of 2021. The increase in interest expense for the three months ended March 31, 2022 was primarily attributable to interest expense associated with our 3.45% unsecured senior notes issued in May 2021.

Income Taxes

The effective tax rate was 27% and 20% for the three months ended March 31, 2022 and 2021, respectively. The effective tax rate for the three months ended March 31, 2022 is not meaningful due to the relatively small pre-tax loss during the period. The estimated annual effective tax rate was 21% for both the three months ended March 31, 2022 and 2021. We use the estimated annual effective tax rate method for calculating our tax provision in interim periods. This method applies our best estimate of the effective tax rate expected for the full year to year-to-date earnings before income taxes. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated (discrete items), are excluded from the estimated annual effective tax rate, and the related tax expense or benefit is reported in the same period as the related item. The difference between the estimated annual effective tax rate and the effective tax rate for both periods was attributed to discrete items during the respective periods, however, the impact of the discrete items on the effective tax rate for the three months ended March 31, 2022 was magnified due to the relatively small pre-tax loss during the period.

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Comprehensive Income (Loss) to Shareholders and Book Value per Common Share

The following table summarizes the components of comprehensive income (loss) to shareholders.


	Three Months Ended March 31,
(dollars in thousands)		2022		2021
Net income (loss) to shareholders		$	(52,843)	$	573,694
Other comprehensive loss:
Change in net unrealized gains (losses) on available-for-sale investments, net of taxes		(476,081)		(214,464)
Other, net of taxes		(116)		(216)
Other comprehensive (income) loss attributable to noncontrolling interest		13		(17)
Other comprehensive loss to shareholders		(476,184)		(214,697)
Comprehensive income (loss) to shareholders		$	(529,027)	$	358,997

Book value per common share decreased 4% from $1,036.20 at December 31, 2021 to $995.53 as of March 31, 2022, primarily due to other comprehensive loss to shareholders for the three months ended March 31, 2022.

Financial Condition

Liquidity and Capital Resources

We seek to maintain prudent levels of liquidity and financial leverage for the protection of our policyholders, creditors and shareholders. Our consolidated debt to capital ratio was 24% at March 31, 2022 and 23% at December 31, 2021. The increase reflects a decrease in shareholders' equity, primarily attributable to other comprehensive loss to shareholders for the three months ended March 31, 2022.

Investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) were $28.3 billion at both March 31, 2022 and December 31, 2021. The following table presents the composition of our invested assets.


	March 31, 2022		December 31, 2021
Fixed maturity securities	43	%	44	%
Equity securities	31	%	32	%
Short-term investments, cash and cash equivalents and restricted cash and cash equivalents	26	%	24	%
Total	100	%	100	%

Our holding company had $5.0 billion and $5.3 billion of invested assets at March 31, 2022 and December 31, 2021, respectively. The decrease was primarily due to cash payments for consideration in the buy-out transaction with Markel CATCo Re and the Markel CATCo Funds, profit sharing and repurchases of common stock, partially offset by cash consideration received in connection with the sale of Velocity. See note 11 of the notes to consolidated financial statements for details regarding the buy-out transaction and "Results of Operations - Other Operations" for details on the sale of Velocity. The following table presents the composition of our holding company's invested assets.


	March 31, 2022		December 31, 2021
Fixed maturity securities	4	%	4	%
Equity securities	54	%	53	%
Short-term investments, cash and cash equivalents and restricted cash and cash equivalents	42	%	43	%
Total	100	%	100	%

In February 2022, our Board of Directors approved a new share repurchase program that replaced the previous share repurchase program. The program provides for the repurchase of up to $750 million of common stock and has no expiration date but may be terminated by the Board of Directors at any time.

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We have access to various capital sources, including dividends from certain of our subsidiaries, holding company invested assets, undrawn capacity under our revolving credit facility and access to the debt and equity capital markets. We believe we have adequate liquidity to meet our capital and operating needs, including that which may be required to support the operating needs of our subsidiaries. However, the availability of these sources of capital and the availability and terms of future financings will depend on a variety of factors.

Cash Flows

Net cash provided by operating activities was $414.9 million for the three months ended March 31, 2022 compared to $318.1 million for the same period of 2021. The increase in net cash flows from operating activities for the three months ended March 31, 2022 was primarily driven by higher net premium volumes across both of our underwriting segments, partially offset by higher claims settlement activity in our Insurance segment and $101.9 million of payments made in connection with the Markel CATCo buy-out transaction.

Net cash used by investing activities was $50.0 million for the three months ended March 31, 2022 compared to $1.1 billion for the same period of 2021. During the three months ended March 31, 2022, net cash used by investing activities included purchases of fixed maturity securities, net of maturities and sales, of $397.9 million, as well as an increase in our holdings of short-term investments of $287.0 million. Net cash used by investing activities was net of $630.0 million of net cash acquired as part of our consolidation of Markel CATCo Re, a significant portion of which is restricted. During the three months ended March 31, 2021, net cash provided by investing activities included an increase in our holdings of short-term investments of $663.1 million and purchases of fixed maturity securities, net of maturities and sales, of $452.1 million. Cash flow from investing activities is affected by various factors such as anticipated payment of claims, financing activity, acquisition opportunities and individual buy and sell decisions made in the normal course of our investment portfolio management.

Net cash used by financing activities was $18.9 million for the three months ended March 31, 2022 compared to net cash provided by financing activities of $53.7 million for the same period of 2021. During the three months ended March 31, 2022 and 2021, we had net increases in borrowings, primarily on a revolving line of credit at one of our Markel Ventures businesses. Cash of $79.3 million and $22.0 million was used to repurchase shares of our common stock during the first three months of 2022 and 2021, respectively.

Critical Accounting Estimates

Critical accounting estimates are those estimates that both are important to the portrayal of our financial condition and results of operations and require us to exercise significant judgment. The preparation of financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of material contingent assets and liabilities. These estimates, by necessity, are based on assumptions about numerous factors.

Our critical accounting estimates consist of estimates and assumptions used in determining the reserves for unpaid losses and loss adjustment expenses as well as estimates and assumptions used in the valuation of goodwill and intangible assets. We review the adequacy of reserves for unpaid losses and loss adjustment expenses quarterly. Estimates and assumptions for goodwill and intangible assets are reviewed in conjunction with acquisitions and impairment assessments. Goodwill and indefinite-lived intangible assets are reassessed for impairment at least annually. All intangible assets, including goodwill, are also reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements.

Readers are urged to review our 2021 Annual Report on Form 10-K for a more complete description of our critical accounting estimates.

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Safe Harbor and Cautionary Statement

This report 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 2021 Annual Report on Form 10-K, or are included in the items listed below:

•our expectations about future results of our underwriting, investing, Markel Ventures and other operations are based on current knowledge and assume no significant man-made or natural catastrophes, no significant changes in products or personnel and no adverse changes in market conditions;

•the effect of cyclical trends on our underwriting, investing, Markel Ventures and other operations, including demand and pricing in the insurance, reinsurance and other markets in which we operate;

•actions by competitors, including the use of technology and innovation to simplify the customer experience, increase efficiencies, redesign products, alter models and effect other potentially disruptive changes in the insurance industry, and the effect of competition on market trends and pricing;

•our efforts to develop new products, expand in targeted markets or improve business processes and workflows may not be successful and may increase or create new risks (e.g., insufficient demand, change to risk exposures, distribution channel conflicts, execution risk, increased expenditures);

•the frequency and severity of man-made and natural catastrophes (including earthquakes, wildfires and weather-related catastrophes) may exceed expectations, are unpredictable and, in the case of wildfires and weather-related catastrophes, may be exacerbated if, as many forecast, changing conditions in the climate, oceans and atmosphere result in increased hurricane, flood, drought or other adverse weather-related activity;

•we offer insurance and reinsurance coverage against terrorist acts in connection with some of our programs, and in other instances we are legally required to offer terrorism insurance; in both circumstances, we actively manage our exposure, but if there is a covered terrorist attack, we could sustain material losses;

•emerging claim and coverage issues, changing industry practices and evolving legal, judicial, social and other environmental trends or conditions, can increase the scope of coverage, the frequency and severity of claims and the period over which claims may be reported; these factors, as well as uncertainties in the loss estimation process, can adversely impact the adequacy of our loss reserves and our allowance for reinsurance recoverables;

•reinsurance reserves are subject to greater uncertainty than insurance reserves, primarily because of reliance upon the original underwriting decisions made by ceding companies and the longer lapse of time from the occurrence of loss events to their reporting to the reinsurer for ultimate resolution;

•inaccuracies (whether due to data error, human error or otherwise) in the various modeling techniques and data analytics (e.g., scenarios, predictive and stochastic modeling, and forecasting) we use to analyze and estimate exposures, loss trends and other risks associated with our insurance and insurance-linked securities businesses could cause us to misprice our products or fail to appropriately estimate the risks to which we are exposed;

•changes in the assumptions and estimates used in establishing reserves for our life and annuity reinsurance book (which is in runoff), for example, changes in assumptions and estimates of mortality, longevity, morbidity and interest rates, could result in material increases in our estimated loss reserves for such business;

•adverse developments in insurance coverage litigation or other legal or administrative proceedings could result in material increases in our estimates of loss reserves;

•initial estimates for catastrophe losses and other significant, infrequent events (such as the COVID-19 pandemic and the Russia-Ukraine conflict), are often based on limited information, are dependent on broad assumptions about the nature and extent of losses, coverage, liability and reinsurance, and those losses may ultimately differ materially from our expectations;

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•changes in the availability, costs, quality and providers of reinsurance coverage, which may impact our ability to write or continue to write certain lines of business or to mitigate the volatility of losses on our results of operations and financial condition;

•the ability or willingness of reinsurers to pay balances due may be adversely affected by industry and economic conditions, deterioration in reinsurer credit quality and coverage disputes, and collateral we hold, if any, may not be sufficient to cover a reinsurer's obligation to us;

•after the commutation of ceded reinsurance contracts, any subsequent adverse development in the re-assumed loss reserves will result in a charge to earnings;

•regulatory actions can impede our ability to charge adequate rates and efficiently allocate capital;

•general economic and market conditions and industry specific conditions, including extended economic recessions or expansions; prolonged periods of slow economic growth; inflation or deflation; fluctuations in foreign currency exchange rates, commodity and energy prices and interest rates; volatility in the credit and capital markets; and other factors;

•economic conditions, actual or potential defaults in corporate bonds, municipal bonds, mortgage-backed securities or sovereign debt obligations, volatility in interest and foreign currency exchange rates and changes in market value of concentrated investments can have a significant impact on the fair value of our fixed maturity securities and equity securities, as well as the carrying value of our other assets and liabilities, and this impact may be heightened by market volatility and our ability to mitigate our sensitivity to these changing conditions;

•economic conditions may adversely affect our access to capital and credit markets;

•the effects of government intervention, including material changes in the monetary policies of central banks, to address financial downturns and economic and currency concerns;

•the impacts that political and civil unrest and regional conflicts, such as the conflict between Russia and Ukraine, may have on our businesses and the markets they serve or that any disruptions in regional or worldwide economic conditions generally arising from these situations may have on our businesses, industries or investments;

•the significant volatility, uncertainty and disruption caused by health epidemics and pandemics, including the COVID-19 pandemic and its variants, as well as governmental, legislative, judicial or regulatory actions or developments in response thereto;

•changes in U.S. tax laws, regulations or interpretations, or in the tax laws, regulations or interpretations of other jurisdictions in which we operate, and adjustments we may make in our operations or tax strategies in response to those changes;

•a failure or security breach of, or cyber-attack on, enterprise information technology systems that we use or a failure to comply with data protection or privacy regulations;

•third-party providers may perform poorly, breach their obligations to us or expose us to enhanced risks;

•our acquisitions may increase our operational and internal control risks for a period of time;

•we may not realize the contemplated benefits, including cost savings and synergies, of our acquisitions;

•any determination requiring the write-off of a significant portion of our goodwill and intangible assets;

•the failure or inadequacy of any methods we employ to manage our loss exposures;

•the loss of services of any executive officer or other key personnel could adversely impact one or more of our operations;

•the manner in which we manage our global operations through a network of business entities could result in inconsistent management, governance and oversight practices and make it difficult for us to implement strategic decisions and coordinate procedures;

•our substantial international operations and investments expose us to increased political, civil, operational and economic risks, including foreign currency exchange rate and credit risk;

•the political, legal, regulatory, financial, tax and general economic impacts, and other impacts we cannot anticipate, related to the United Kingdom's withdrawal from the European Union (Brexit), which could have adverse consequences for our businesses, particularly our London-based international insurance operations;

•our ability to obtain additional capital for our operations on terms favorable to us;

•our compliance, or failure to comply, with covenants and other requirements under our revolving credit facility, senior debt and other indebtedness and our preferred shares;

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•our ability to maintain or raise third-party capital for existing or new investment vehicles and risks related to our management of third-party capital;

•the effectiveness of our procedures for compliance with existing and future guidelines, policies and legal and regulatory standards, rules, laws and regulations;

•the impact of economic and trade sanctions and embargo programs on our businesses, including instances in which the requirements and limitations applicable to the global operations of U.S. companies and their affiliates are more restrictive than, or conflict with, those applicable to non-U.S. companies and their affiliates;

•regulatory changes, or challenges by regulators, regarding the use of certain issuing carrier or fronting arrangements;

•our dependence on a limited number of brokers for a large portion of our revenues and third-party capital;

•adverse changes in our assigned financial strength, debt or preferred share ratings or outlook could adversely impact us, including our ability to attract and retain business, the amount of capital our insurance subsidiaries must hold and the availability and cost of capital;

•changes in the amount of statutory capital our insurance subsidiaries are required to hold, which can vary significantly and is based on many factors, some of which are outside our control;

•losses from litigation and regulatory investigations and actions;

•investor litigation or disputes, as well as regulatory inquiries, investigations or proceedings related to our Markel CATCo operations; delays or disruptions in the run-off of those operations; or the failure to realize the benefits of the transaction that permitted the accelerated return of capital to our Markel CATCo investors; and

•a number of additional factors may adversely affect our Markel Ventures operations, and the markets they serve, and negatively impact their revenues and profitability, including, among others: adverse weather conditions, plant disease and other contaminants; changes in government support for education, healthcare and infrastructure projects; changes in capital spending levels; changes in the housing, commercial and industrial construction markets; liability for environmental matters; supply chain and shipping issues, including increases in freight costs; volatility in the market prices for their products; and volatility in commodity, wholesale and raw materials prices and interest and foreign currency exchange rates.

Results from our underwriting, investing, Markel Ventures and other operations have been and will continue to be potentially materially affected by these factors.

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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in equity prices, interest rates, foreign currency exchange rates and commodity prices. Our consolidated balance sheets include assets and liabilities with estimated fair values that are subject to market risk. Our primary market risks are equity price risk associated with investments in equity securities, interest rate risk associated with investments in fixed maturity securities and foreign currency exchange rate risk associated with our international operations. Some businesses within our Markel Ventures operations are exposed to commodity price risk resulting from changes in the price of raw materials, parts and other components necessary to manufacture products, however, this risk is not material to the Company. The operating results of these businesses could be adversely impacted should they be unable to obtain price increases from customers in response to significant increases in raw material, parts and other component prices. During the three months ended March 31, 2022, there were no material changes to the market risk components described in our Annual Report on Form 10-K for the year ended December 31, 2021.

Our fixed maturity portfolio includes corporate bonds, mortgage-backed securities and securities issued by municipalities, foreign governments and non-sovereign foreign institutions. Credit risk exists within our fixed maturity portfolio from the potential for loss resulting from adverse changes in an issuer's ability to repay its debt obligations. During the three months ended March 31, 2022, there were no material changes in our corporate bond, mortgage-backed security, municipal bond or foreign government fixed maturity holdings.

We believe that our fixed maturity portfolio is highly diversified and comprised of high quality securities. Our fixed maturity portfolio has an average rating of "AAA," with 99% rated "A" or better by at least one nationally recognized rating organization. Our policy is to invest in investment grade securities and to minimize investments in fixed maturity securities that are unrated or rated below investment grade. Our fixed maturity portfolio includes securities issued with financial guaranty insurance. We purchase fixed maturity securities based on our assessment of the credit quality of the underlying assets without regard to insurance.

We also have credit risk to the extent any of our reinsurers are unwilling or unable to meet their obligations under our ceded reinsurance agreements. As of December 31, 2021, all of our ten largest reinsurers within our underwriting operations were rated "A" or better by A.M. Best Company (Best) and within our program services business, four of our ten largest reinsurers were rated "A" or better by Best. For reinsurers within our program services business with a credit rating of lower than "A" we employ a stringent collateral monitoring program, under which the majority of the reinsurance recoverable balances are fully collateralized. During the three months ended March 31, 2022, there were no material changes to the credit ratings of our top ten reinsurers within our underwriting and program services operations as reported in our Annual Report on Form 10-K for the year ended December 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (Disclosure Controls), as defined under Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (Exchange Act). This evaluation was conducted under the supervision and with the participation of our management, including the Co-Principal Executive Officers (Co-PEOs) and the Principal Financial Officer (PFO).

Based upon this evaluation, the Co-PEOs and PFO concluded that effective Disclosure Controls were in place to ensure that the information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the first quarter of 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Thomas Yeransian v. Markel Corporation

We previously reported that Thomas Yeransian, in his capacity as the representative of holders of certain contingent value rights, has filed three suits against the Company:

•Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), filed September 15, 2016;

•Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), filed November 13, 2018; and

•Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), filed June 5, 2020.

The three suits have been consolidated. We have asked the court to dismiss, or grant us summary judgment on, all counts. For additional information regarding these three suits, see Item 3 Legal Proceedings in our 2021 Annual Report on Form 10-K. We believe Mr. Yeransian's suits to be without merit. We further believe that any material loss resulting from the suits to be remote.

Item 1A. Risk Factors

The disclosure below supplements risk factors previously disclosed in our 2021 Annual Report on Form 10-K. These risks and uncertainties, along with those previously disclosed, could materially adversely affect our businesses, results of operations or financial condition.

Our businesses, results of operations and financial condition could be adversely affected by the ongoing conflict between Russia and Ukraine and related disruptions in the global economy. The global economy has been negatively impacted by the military conflict between Russia and Ukraine. While we have no operations in Russia or Ukraine, some of our businesses have been, and may continue to be, adversely affected by this conflict and its effects. Within our underwriting operations, we have insurance contracts with exposure to losses attributed to the Russia-Ukraine conflict, which we discuss under Item 2 Management's Discussion & Analysis of Financial Condition and Results of Operations. Our other operations do not have significant direct exposure to customers and vendors in Russia or Ukraine. However, certain of our businesses have experienced, and may continue to experience, shortages in materials and increased costs for transportation, energy, and raw materials due in part to the negative impact of the Russia-Ukraine conflict on the global economy.

Furthermore, governments in the U.S., United Kingdom, and European Union, among others, have each imposed export controls on certain products and financial and economic sanctions on certain industry sectors and parties in Russia. These export controls and sanctions, or our failure to comply with them, could result in restrictions on our ability to do business in one or more of the jurisdictions in which we conduct business or have the other adverse effects discussed in our 2021 Annual Report on Form 10-K in Item 1A Risk Factors under "We are subject to laws and regulations relating to economic and trade sanctions and bribery and corruption, the violation of which could have a material adverse effect on us."

We are unable to predict the impact the ongoing conflict will have on our businesses or the global economy. The impact of further escalation of geopolitical tensions related to this conflict, including increased trade barriers or restrictions on global trade, is unknown and could result in, among other things, heightened cybersecurity threats, supply disruptions, protracted or increased inflation, lower consumer demand, fluctuations in interest and foreign exchange rates and increased volatility in financial markets, any of which could adversely affect our businesses, results of operations and financial condition. In addition, the ongoing conflict may have the effect of triggering or intensifying many of the risks described under Item 1A Risk Factors in our 2021 Annual Report on Form 10-K.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our common share repurchases for the quarter ended March 31, 2022.


Issuer Purchases of Equity Securities
	(a)	(b)		(c)	(d)
Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands)
January 1, 2022 through January 31, 2022	24,619	$	1,233.50	24,619	$	425,590
February 1, 2022 through February 28, 2022	24,127	$	1,249.57	24,127	$	735,288
March 1, 2022 through March 31, 2022	14,355	$	1,311.40	14,355	$	716,463
Total	63,101	$	1,257.36	63,101	$	716,463

(1) The Board of Directors approved the repurchase of up to $750 million of our common shares pursuant to a share repurchase program publicly announced on February 16, 2022. The new program terminated and replaced a similar $500 million share repurchase program authorized in November 2021. Under our share repurchase programs, we may repurchase outstanding common shares of our stock from time to time in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 and Rule 10b-18 under the Securities Exchange Act of 1934. The new program has no expiration date but may be terminated by the Board at any time.

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Item 6. Exhibits


Exhibit No.			Document Description

3.1(a)			Amended and Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 in the Registrant's report on Form 8-K filed with the Commission May 13, 2011)

3.1(b)			Articles of Amendment to the Amended and Restated Articles of Incorporation (incorporated by reference from Exhibit 3.1 in the Registrant's report on Form 8-K filed with the Commission May 27, 2020)

3.2			Bylaws, as amended and restated May 11, 2020 (incorporated by reference from Exhibit 3.2 in the Registrant's report on Form 10-Q filed with the Commission for the quarter ended June 30, 2020)

4.1(a)			Indenture dated as of June 5, 2001, between Markel Corporation and The Chase Manhattan Bank, as Trustee (incorporated by reference from Exhibit 4.1 in the Registrant's report on Form 8-K filed with the Commission June 5, 2001)

4.1(b)			Form of Third Supplemental Indenture dated as of August 13, 2004 between Markel Corporation and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission August 11, 2004)

4.1(c)			Form of Seventh Supplemental Indenture dated as of July 2, 2012 between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission June 29, 2012)

4.1(d)			Form of Eighth Supplemental Indenture dated as of March 8, 2013 between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission March 7, 2013)

4.1(e)			Form of Ninth Supplemental Indenture dated as of March 8, 2013 between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.3 in the Registrant's report on Form 8-K filed with the Commission March 7, 2013)

4.1(f)			Form of Tenth Supplemental Indenture dated as of April 5, 2016 between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission March 31, 2016)

4.1(g)			Eleventh Supplemental Indenture dated as of November 2, 2017 between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission November 2, 2017)

4.1(h)			Twelfth Supplemental Indenture dated as of November 2, 2017 between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.3 in the Registrant's report on Form 8-K filed with the Commission November 2, 2017)

4.1(i)			Thirteenth Supplemental Indenture, dated as of May 20, 2019, between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission May 20, 2019)

4.1(j)			Fourteenth Supplemental Indenture, dated as of September 17, 2019, between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission September 17, 2019)

4.1(k)			Fifteenth Supplemental Indenture, dated as of September 17, 2019, between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.3 in the Registrant's report on Form 8-K filed with the Commission September 17, 2019)

4.1(l)			Sixteenth Supplemental Indenture, dated as of May 7, 2021, between Markel Corporation and The Bank of New York Mellon (as successor to The Chase Manhattan Bank), as Trustee, including form of the securities as Exhibit A (incorporated by reference from Exhibit 4.2 in the Registrant's report on Form 8-K filed with the Commission May 7, 2021)

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The registrant hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of all other instruments defining the rights of holders of long-term debt of the registrant and its subsidiaries.


31.1			Certification of Co-Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)*

31.2			Certification of Co-Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a)*

31.3			Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a)*

32.1			Certification furnished Pursuant to 18 U.S.C. Section 1350*

101			The following consolidated financial statements from Markel Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, filed on April 26, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income (Loss) and Comprehensive Income (Loss), (iii) Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.*
104			Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Filed with this report

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 26th day of April 2022.


			Markel Corporation

			By:			/s/ Thomas S. Gayner
						Thomas S. Gayner
						Co-Chief Executive Officer
						(Co-Principal Executive Officer)

			By:			/s/ Richard R. Whitt, III
						Richard R. Whitt, III
						Co-Chief Executive Officer
						(Co-Principal Executive Officer)

			By:			/s/ Jeremy A. Noble
						Jeremy A. Noble
						Senior Vice President and Chief Financial Officer
						(Principal Financial Officer)

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Markel (MKL) 10-Q2022 Q1 Quarterly report

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