The following tables present summary financial data for 2020 and 2019.
Years Ended | |||||||
(in thousands, except per share amounts) | 2020 | 2019 | |||||
Earned premiums | $ | 5,612,205 | $ | 5,049,793 | |||
| $ | 2,794,959 | $ | 2,055,020 | |||
Net investment gains | $ | 617,979 | $ | 1,601,722 | |||
Comprehensive income to shareholders | $ | 1,191,634 | $ | 2,093,888 | |||
Diluted net income per common share | $ | 55.63 | $ | 129.07 | |||
Combined Ratio | 98 | % | 94 | % | |||
(in thousands, except per share amounts) | | | |||||
Book value per common share outstanding | $ | 885.13 | $ | 802.59 | |||
Common shares outstanding | 13,783 | 13,794 |
"Our insurance operations delivered an underwriting profit for 2020 in the face of significant losses attributable to the global pandemic and the unusually high number of natural catastrophes as we benefited from capturing meaningful rate increases and new business in targeted growth areas globally, while exercising strong expense discipline," commented
"We are grateful and amazed by how our employees responded to the global pandemic and continued to serve the needs of our customers, trading partners, shareholders and each other," Gayner and Whitt continued. "Markel enters 2021 well positioned to continue the momentum of our excellent fourth quarter. We will help our customers navigate continued near-term economic uncertainties and cautiously look forward to greater opportunities as economies around the world recover."
We believe our financial performance is most meaningfully measured over longer periods of time, which tends to mitigate the effects of short-term volatility and also aligns with the longer-term perspective we apply to operating our businesses. We generally use five-year periods to measure ourselves. Over the five-year period ended
Results of Operations
A summary of the results of operations attributable to our underwriting, investing,
Underwriting Results
The following table presents selected data from our underwriting operations.
Years Ended | |||||||
(dollars in thousands) | 2020 | 2019 | |||||
Earned premiums | $ | 5,612,205 | $ | 5,049,793 | |||
Losses and loss adjustment expenses | $ | 3,466,961 | $ | 2,891,190 | |||
Underwriting, acquisition and insurance expenses | $ | 2,017,627 | $ | 1,878,093 | |||
Underwriting profit | $ | 127,617 | $ | 280,510 | |||
Consolidated Combined Ratio | 98 | % | 94 | % |
Combined Ratio
Our consolidated combined ratio for 2020 included
Our COVID-19 underwriting losses are primarily attributed to business written within our international insurance operations and are primarily associated with coverages for event cancellation and business interruption losses in policies where no specific pandemic exclusions exist.
Catastrophe losses in 2020 were attributed to Hurricanes Isaias, Laura, Sally, Delta and Zeta, as well as wildfires in the western
Insurance Segment
The combined ratio for the Insurance segment in 2020 was 96% (including six points for underwriting losses attributed to COVID-19 and three points for underwriting losses on the 2020 Catastrophes) compared to 93% in 2019.
The increase in the combined ratio was driven by the impact of losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by a lower attritional loss ratio and a lower expense ratio in 2020 compared to 2019. Higher earned premiums in 2020 compared to 2019 had a favorable impact on our expense ratio while reducing the benefit of the prior accident years' loss ratio.
Reinsurance Segment
The combined ratio for the Reinsurance segment was 104% in both 2020 and 2019. In 2020, the Reinsurance segment combined ratio included seven points for underwriting losses attributed to COVID-19 and five points for underwriting losses on the 2020 Catastrophes. In 2019, the Reinsurance segment combined ratio included 10 points for underwriting losses on the 2019 Catastrophes.
Excluding the impact of COVID-19 and catastrophe losses, the combined ratio decreased in 2020 due to a lower attritional loss ratio, partially offset by the impact of less favorable development on prior accident years' loss reserves.
Premiums
Years Ended | |||||||||||||||
Gross Written Premiums | Earned Premiums | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Insurance | $ | 6,029,024 | $ | 5,320,253 | $ | 4,688,448 | $ | 4,144,073 | |||||||
Reinsurance | 1,130,923 | 1,114,153 | 929,348 | 903,587 | |||||||||||
Other underwriting | 58 | (79) | (170) | 581 | |||||||||||
Total Underwriting | 7,160,005 | 6,434,327 | 5,617,626 | 5,048,241 | |||||||||||
Program services and other | 2,106,660 | 2,345,644 | (5,421) | 1,552 | |||||||||||
Total | $ | 9,266,665 | $ | 8,779,971 | $ | 5,612,205 | $ | 5,049,793 |
Gross Premium Volume
Gross premium volume in our underwriting operations increased 11% in 2020, primarily due to an increase in gross premium volume in our Insurance segment. Also impacting consolidated gross premium volume were gross premiums written through our program services business and other fronting arrangements, which decreased 10% in 2020. The decrease in gross premium volume in our program services business was driven by the run-off of one large program and the cancellation of an in-force book of policies related to another large program. Substantially all gross premiums from our program services business and other fronting arrangements were ceded to third parties in 2020 and 2019. See "Other Operations" for further discussion on gross premiums from our program services operations.
Gross premium volume in our Insurance segment increased 13% in 2020, primarily driven by new business and more favorable rates within our professional liability, general liability, personal lines and marine and energy product lines.
Gross premium volume in our Reinsurance segment increased 2% in 2020, driven by higher gross premiums within our professional liability and general liability product lines, partially offset by lower gross premiums within our credit and surety product lines. Higher gross premiums within our professional liability product lines were primarily due to increased exposures and improved pricing on renewals, as well as new business. Higher gross premiums within our general liability product lines were primarily due to new business, partially offset by decreased exposures on renewals. Lower gross premiums within our credit and surety product lines in 2020 were primarily due to unfavorable premium adjustments. Significant variability in gross premium volume can be expected in our Reinsurance segment due to individually significant contracts and multi-year contracts.
Net Retention
Net retention of gross premium volume for our underwriting operations was 83% in 2020 and 84% in 2019. The decrease in net retention in 2020 was driven by our Insurance segment, due in part to a new quota share agreement to fully cede premiums on a program that was put into run-off in 2020. Within our underwriting operations, we purchase reinsurance and retrocessional reinsurance in order to manage our net retention on individual risks and overall exposure to losses, and enable us to write policies with sufficient limits to meet policyholder needs.
In late 2020, we decided to discontinue writing catastrophe-exposed property reinsurance within our Reinsurance segment on a risk-bearing basis, and beginning
Earned Premiums
Earned premiums increased 11% in 2020, primarily due to the increase in gross premium volume within our Insurance segment on our professional liability and general liability product lines, as described above.
Investing Results
We measure investing results by our net investment income and net investment gains as well as our taxable equivalent total investment return. The following table summarizes our investment performance.
Years Ended | |||||||
(dollars in thousands) | 2020 | 2019 | |||||
Net investment income | $ | 371,830 | $ | 451,888 | |||
Net investment gains | $ | 617,979 | $ | 1,601,722 | |||
Change in net unrealized investment gains on available-for-sale investments (1) | $ | 442,089 | $ | 381,890 | |||
Investment yield (2) | 2.4 | % | 3.0 | % | |||
Taxable equivalent total investment return, before foreign currency effect | 8.6 | % | 14.4 | % | |||
Taxable equivalent total investment return | 9.4 | % | 14.6 | % | |||
Invested assets, end of year | $ | 24,926,592 | $ | 22,258,265 |
(1) | The increase in net unrealized gains on available-for-sale securities was net of an adjustment related to our life and annuity benefit reserves of |
(2) | Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost. |
See Supplemental Financial Information below for a reconciliation of investment yield to taxable equivalent total investment return.
The decrease in net investment income in 2020 was driven primarily by the impact of lower short-term interest rates on short-term investment income. We also earned lower interest income on our fixed maturity investment portfolio due to lower average holdings of fixed maturity securities during 2020 compared to 2019 and a lower yield, as fixed maturity securities purchased in 2020 had lower interest rates than securities that matured or were called or sold in 2020.
Net investment gains in both 2020 and 2019 were primarily attributable to an increase in the fair value of equity securities. Net investment gains for 2020 reflected significant market volatility experienced during the year. The impact of significant declines in the fair value of our equity portfolio in the first quarter of 2020, driven by unfavorable market value movements resulting from the onset of the COVID-19 pandemic, were more than offset by increases in the fair value of our equity portfolio over the last three quarters.
Our
Years Ended December 31, | |||||||
(dollars in thousands) | 2020 | 2019 | |||||
Operating revenues | $ | 2,794,959 | $ | 2,055,020 | |||
Operating income | $ | 254,078 | $ | 168,417 | |||
EBITDA | $ | 366,934 | $ | 263,944 | |||
Net income to shareholders | $ | 145,449 | $ | 92,901 |
See Supplemental Financial Information below for a reconciliation of
Operating revenues from our
Operating income and EBITDA from our
Net income to shareholders from our
Other Operations
The following table presents the components of operating revenues and operating expenses that are not included in a reportable segment.
Years Ended | |||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
(dollars in thousands) | Services and | Services and | Amortization of | Services and | Services and | Amortization of | |||||||||||||||||
Other operations: | |||||||||||||||||||||||
Insurance-linked securities | $ | 212,307 | $ | 231,473 | $ | 38,447 | $ | 225,604 | $ | 217,412 | $ | 43,360 | |||||||||||
Program services | 104,171 | 20,427 | 20,937 | 108,813 | 19,556 | 20,938 | |||||||||||||||||
Life and annuity | 1,233 | 17,713 |
| 1,507 | 21,062 |
| |||||||||||||||||
Other | 20,627 | 17,896 | 5,453 | 32,580 | 28,264 | 2,700 | |||||||||||||||||
338,338 | 287,509 | 64,837 | 368,504 | 286,294 | 66,998 | ||||||||||||||||||
Underwriting operations | 41,906 | 39,667 | |||||||||||||||||||||
Total | $ | 338,338 | $ | 287,509 | $ | 106,743 | $ | 368,504 | $ | 286,294 | $ | 106,665 |
The decrease in operating revenues in our insurance-linked securities operations in 2020 was driven by lower revenues from our
The increase in services and other expenses in our insurance-linked securities operations in 2020 was primarily due to an increase in expenses at our
Program Services
The decrease in operating revenues in our program services operations in 2020 compared to 2019 was primarily due to lower gross premium volume. Gross premiums in our program services operations were
Income Taxes
The effective tax rate was 17% in 2020 compared to 21% in 2019. The effective tax rate for 2020 differs from the effective tax rate for 2019 and the statutory rate of 21% primarily due to a tax benefit that was recognized in 2020 for accumulated losses on certain investments we sold that were not previously deductible.
Financial Condition
Investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) were
At
Cautionary Disclosures about COVID-19 and Catastrophe Loss Reserves
Our losses and loss adjustment expenses attributed to COVID-19 were primarily attributed to business written within our international insurance operations and were primarily associated with coverages for event cancellation and business interruption losses in policies where no specific pandemic exclusions exist. There are no recent historical events with similar characteristics to COVID-19, and therefore we have no past loss experience on which to base our estimates. Additionally, the economic and social impacts of the pandemic continue to evolve. Due to the inherent uncertainty associated with the assumptions surrounding the COVID-19 pandemic, these estimates are subject to a wide range of variability.
Our estimates for these losses and loss adjustment expenses represent our best estimates as of
We are also exposed to losses indirectly related to the COVID-19 pandemic and associated with a broader range of coverages, including coverages within our trade credit, professional liability and workers' compensation product lines, among others, as well as our reinsurance product lines. Our net losses and loss adjustment expenses in 2020 included
The net losses and loss adjustment expenses on the 2020 Catastrophes as of
Safe Harbor and Cautionary Statement
This release contains statements concerning or incorporating our expectations, assumptions, plans, objectives, future financial or operating performance and other statements that are not historical facts. These statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may use words such as "anticipate," "believe," "estimate," "expect," "intend," "predict," "project" and similar expressions as they relate to us or our management.
There are risks and uncertainties that may cause actual results to differ materially from predicted results in forward-looking statements. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additional factors that could cause actual results to differ from those predicted are set forth under "Business Overview," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Annual Report on Form 10-K, and under "Risk Factors" and Management's Discussion and Analysis of Financial Condition and Results of Operations-Recent Developments Related to COVID-19" in our most recent Quarterly Report on Form 10-Q or are included in the items listed below:
Results from our underwriting, investing,
By making forward-looking statements, we do not intend to become obligated to publicly update or revise any such statements whether as a result of new information, future events or other changes. Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as at their dates.
Our previously announced conference call, which will involve discussion of our financial results and business developments and may include forward-looking information, will be held
About
Consolidated Statements of Income and Comprehensive Income | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands, except per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||
OPERATING REVENUES | |||||||||||||||
Earned premiums | $ | 1,526,894 | $ | 1,346,323 | $ | 5,612,205 | $ | 5,049,793 | |||||||
Net investment income | 97,588 | 112,493 | 371,830 | 451,888 | |||||||||||
Net investment gains | 848,875 | 531,734 | 617,979 | 1,601,722 | |||||||||||
Products revenues | 321,734 | 372,408 | 1,439,515 | 1,609,586 | |||||||||||
Services and other revenues | 560,559 | 218,571 | 1,693,537 | 813,202 | |||||||||||
Total Operating Revenues | 3,355,650 | 2,581,529 | 9,735,066 | 9,526,191 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Losses and loss adjustment expenses | 814,150 | 773,190 | 3,466,961 | 2,891,190 | |||||||||||
Underwriting, acquisition and insurance expenses | 540,278 | 485,346 | 2,017,627 | 1,878,093 | |||||||||||
Products expenses | 281,234 | 356,277 | 1,256,159 | 1,455,245 | |||||||||||
Services and other expenses | 536,387 | 176,919 | 1,561,120 | 675,679 | |||||||||||
Amortization of intangible assets | 39,039 | 35,975 | 159,315 | 148,638 | |||||||||||
Total Operating Expenses | 2,211,088 | 1,827,707 | 8,461,182 | 7,048,845 | |||||||||||
Operating Income | 1,144,562 | 753,822 | 1,273,884 | 2,477,346 | |||||||||||
Interest expense | (44,381) | (42,665) | (177,582) | (171,687) | |||||||||||
Net foreign exchange losses | (87,117) | (59,266) | (95,853) | (2,265) | |||||||||||
Loss on early extinguishment of debt |
| (10,881) |
| (17,586) | |||||||||||
Income Before Income Taxes | 1,013,064 | 641,010 | 1,000,449 | 2,285,808 | |||||||||||
Income tax expense | (165,635) | (129,497) | (168,682) | (486,346) | |||||||||||
Net Income | 847,429 | 511,513 | 831,767 | 1,799,462 | |||||||||||
Net income attributable to noncontrolling interests | (130) | (409) | (15,737) | (8,996) | |||||||||||
Net Income to Shareholders | 847,299 | 511,104 | 816,030 | 1,790,466 | |||||||||||
Preferred stock dividends | (18,400) |
| (18,400) |
| |||||||||||
Net Income to Common Shareholders | $ | 828,899 | $ | 511,104 | $ | 797,630 | $ | 1,790,466 | |||||||
OTHER COMPREHENSIVE INCOME | |||||||||||||||
Change in net unrealized gains on available-for-sale investments, net of taxes: | |||||||||||||||
Net holding gains (losses) arising during the period | $ | 54,672 | $ | (29,988) | $ | 356,159 | $ | 299,125 | |||||||
Reclassification adjustments for net gains (losses) included in net income | 174 | (1,908) | (3,386) | (1,148) | |||||||||||
Change in net unrealized gains on available-for-sale investments, net of taxes | 54,846 | (31,896) | 352,773 | 297,977 | |||||||||||
Change in foreign currency translation adjustments, net of taxes | 38,230 | 6,360 | 29,847 | 382 | |||||||||||
Change in net actuarial pension loss, net of taxes | (8,420) | 2,704 | (6,998) | 5,042 | |||||||||||
Total Other Comprehensive Income (Loss) | 84,656 | (22,832) | 375,622 | 303,401 | |||||||||||
Comprehensive Income | 932,085 | 488,681 | 1,207,389 | 2,102,863 | |||||||||||
Comprehensive income attributable to noncontrolling interests | (124) | (437) | (15,755) | (8,975) | |||||||||||
Comprehensive Income to Shareholders | $ | 931,961 | $ | 488,244 | $ | 1,191,634 | $ | 2,093,888 | |||||||
NET INCOME PER COMMON SHARE | |||||||||||||||
Basic | $ | 59.44 | $ | 36.34 | $ | 55.67 | $ | 129.25 | |||||||
Diluted | $ | 59.33 | $ | 36.26 | $ | 55.63 | $ | 129.07 |
Selected Data | |||||||
| |||||||
(in thousands, except per share data) | 2020 | 2019 | |||||
Total investments, cash and cash equivalents and restricted cash and cash equivalents | $ | 24,926,592 | $ | 22,258,265 | |||
Reinsurance recoverables | 5,989,337 | 5,432,712 | |||||
| 4,387,342 | 4,047,022 | |||||
Total assets | 41,710,054 | 37,473,815 | |||||
Unpaid losses and loss adjustment expenses | 16,222,376 | 14,728,676 | |||||
Unearned premiums | 4,433,245 | 4,057,727 | |||||
Senior long-term debt and other debt | 3,484,023 | 3,534,183 | |||||
Total shareholders' equity | 12,799,789 | 11,070,867 | |||||
Book value per common share outstanding | $ | 885.13 | $ | 802.59 | |||
Common shares outstanding | 13,783 | 13,794 |
Supplemental Financial Information For the Quarters and Years Ended | |||||||||||||||
Components of Consolidated Operating Income | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Insurance segment profit (1) | $ | 165,342 | $ | 128,833 | $ | 169,001 | $ | 309,778 | |||||||
Reinsurance segment loss (1) | (31,385) | (45,696) | (75,470) | (39,999) | |||||||||||
Investing segment profit (2) | 946,460 | 644,103 | 989,564 | 2,052,874 | |||||||||||
| 53,312 | 21,361 | 254,078 | 168,417 | |||||||||||
Other operations (4) | 10,833 | 5,221 | (63,289) | (13,724) | |||||||||||
Consolidated Operating Income | $ | 1,144,562 | $ | 753,822 | $ | 1,273,884 | $ | 2,477,346 |
(1) | Segment profit (loss) for each of the Company's underwriting segments includes underwriting profit (loss), as well as other revenues and expenses attributable to our underwriting operations that are not captured in underwriting profit (loss). The Reinsurance segment loss for the quarter and year ended |
(2) | Net investment income and net investment gains, if any, attributable to |
(3) | Segment profit for the |
(4) | Other operations includes the results 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 |
Gross Written Premiums | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Insurance | $ | 1,546,875 | $ | 1,340,694 | $ | 6,029,024 | $ | 5,320,253 | |||||||
Reinsurance | 172,395 | 151,008 | 1,130,923 | 1,114,153 | |||||||||||
Other underwriting | 3 | (91) | 58 | (79) | |||||||||||
Total Underwriting | 1,719,273 | 1,491,611 | 7,160,005 | 6,434,327 | |||||||||||
Program services and other | 578,643 | 521,679 | 2,106,660 | 2,345,644 | |||||||||||
Total | $ | 2,297,916 | $ | 2,013,290 | $ | 9,266,665 | $ | 8,779,971 | |||||||
Net Written Premiums | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Insurance | $ | 1,293,895 | $ | 1,138,255 | $ | 4,977,662 | $ | 4,444,702 | |||||||
Reinsurance | 139,550 | 119,998 | 960,123 | 964,947 | |||||||||||
Other underwriting | (221) | 482 | (170) | 581 | |||||||||||
Total Underwriting | 1,433,224 | 1,258,735 | 5,937,615 | 5,410,230 | |||||||||||
Program services and other | (1,135) | 221 | (5,377) | 1,841 | |||||||||||
Total | $ | 1,432,089 | $ | 1,258,956 | $ | 5,932,238 | $ | 5,412,071 | |||||||
Net Earned Premiums | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Insurance | $ | 1,287,688 | $ | 1,120,208 | $ | 4,688,448 | $ | 4,144,073 | |||||||
Reinsurance | 240,464 | 225,205 | 929,348 | 903,587 | |||||||||||
Other underwriting | (221) | 482 | (170) | 581 | |||||||||||
Total Underwriting | 1,527,931 | 1,345,895 | 5,617,626 | 5,048,241 | |||||||||||
Program services and other | (1,037) | 428 | (5,421) | 1,552 | |||||||||||
Total | $ | 1,526,894 | $ | 1,346,323 | $ | 5,612,205 | $ | 5,049,793 | |||||||
Combined Ratios | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Insurance | 87 | % | 89 | % | 96 | % | 93 | % | |||||||
Reinsurance | 96 | % | 120 | % | 104 | % | 104 | % | |||||||
Consolidated | 89 | % | 93 | % | 98 | % | 94 | % | |||||||
Products, Services and Other Revenues | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Products revenues: | |||||||||||||||
| $ | 321,734 | $ | 372,408 | $ | 1,439,515 | $ | 1,609,586 | |||||||
Services and other revenues: | |||||||||||||||
| $ | 459,730 | $ | 114,045 | $ | 1,355,199 | $ | 444,698 | |||||||
Insurance-linked securities | 66,042 | 67,034 | 212,307 | 225,604 | |||||||||||
Program services | 29,610 | 29,418 | 104,171 | 108,813 | |||||||||||
Life and annuity | 162 | 362 | 1,233 | 1,507 | |||||||||||
Other | 5,015 | 7,712 | 20,627 | 32,580 | |||||||||||
Total services and other revenues | $ | 560,559 | $ | 218,571 | $ | 1,693,537 | $ | 813,202 | |||||||
Products, Services and Other Expenses | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Products expenses: | |||||||||||||||
| $ | 281,234 | $ | 356,277 | $ | 1,256,159 | $ | 1,455,245 | |||||||
Services and other expenses: | |||||||||||||||
| $ | 433,648 | $ | 98,640 | $ | 1,232,150 | $ | 389,385 | |||||||
Insurance-linked securities | 47,659 | 58,406 | 231,473 | 217,412 | |||||||||||
Program services | 4,354 | 5,256 | 20,427 | 19,556 | |||||||||||
Life and annuity | 5,100 | 6,778 | 17,713 | 21,062 | |||||||||||
Underwriting (1) | 41,461 |
| 41,461 |
| |||||||||||
Other | 4,165 | 7,839 | 17,896 | 28,264 | |||||||||||
Total services and other expenses | $ | 536,387 | $ | 176,919 | $ | 1,561,120 | $ | 675,679 |
(1) | Other expenses attributable to the Company's underwriting operations for the quarter and year ended |
Net Income per Common Share | |||||||||||||||
The following table presents net income per common share and diluted net income per common share. | |||||||||||||||
Quarters Ended | Years Ended | ||||||||||||||
(in thousands, except per share amounts) | 2020 | 2019 | 2020 | 2019 | |||||||||||
Net income to common shareholders | $ | 828,899 | $ | 511,104 | $ | 797,630 | $ | 1,790,466 | |||||||
Adjustment of redeemable noncontrolling interests | (8,024) | (8,359) | (28,705) | 1,105 | |||||||||||
Adjusted net income to common shareholders | $ | 820,875 | $ | 502,745 | $ | 768,925 | $ | 1,791,571 | |||||||
Basic common shares outstanding | 13,811 | 13,835 | 13,811 | 13,861 | |||||||||||
Dilutive potential common shares from restricted stock units and restricted stock (1) | 24 | 29 | 12 | 20 | |||||||||||
Diluted common shares outstanding | 13,835 | 13,864 | 13,823 | 13,881 | |||||||||||
Basic net income per common share | $ | 59.44 | $ | 36.34 | $ | 55.67 | $ | 129.25 | |||||||
Diluted net income per common share | $ | 59.33 | $ | 36.26 | $ | 55.63 | $ | 129.07 |
(1) | The Company has an equity incentive compensation plan that provides for grants and awards of restricted stock units to employees as a performance, retention or hiring incentive. The plan also provides for awards of restricted stock to non-employee directors. At |
Non-GAAP Financial Measures
Underwriting
In addition to the
When analyzing our combined ratio, we exclude underwriting losses attributed to natural catastrophes and certain significant, infrequent loss events, for example, the COVID-19 pandemic in 2020. Due to the unique characteristics of a catastrophe loss, there is inherent variability as to the timing or loss amount, which cannot be predicted in advance. The same is true for the COVID-19 pandemic, as there are no events in recent history with characteristics similar to COVID-19. We believe measures that exclude the effects of catastrophe events, and COVID-19, are meaningful to understand the underlying trends and variability in our underwriting results that may be obscured by these items.
When analyzing our loss ratio, we evaluate losses and loss adjustment expenses attributable to the current accident year separate from losses and loss adjustment expenses attributable to prior accident years. Prior accident year reserve development, which can either be favorable or unfavorable, represents changes in our estimates of losses and loss adjustment expenses related to loss events that occurred in prior years. We believe a discussion of current accident year loss ratios, which exclude prior accident year reserve development, is helpful since it provides more insight into estimates of current underwriting performance and excludes changes in estimates related to prior year loss reserves. We also analyze our loss ratios excluding losses and loss adjustment expenses attributable to catastrophes, and in 2020, the COVID-19 pandemic, for the reasons previously discussed. The current accident year loss ratio excluding the impact of catastrophes and significant, infrequent loss events is also commonly referred to as an attritional loss ratio within the property and casualty insurance industry.
The following tables reconcile the combined ratio to the combined ratio excluding the impact of COVID-19 and catastrophes, by underwriting segment.
Quarters Ended | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Insurance | Reinsurance | Consolidated | Insurance | Reinsurance | Consolidated | ||||||||||||
Combined ratio | 87.2 | % | 95.8 | % | 88.7 | % | 88.5 | % | 120.3 | % | 93.5 | % | |||||
COVID-19 impact | 0.7 | % | 1.9 | % | 0.9 | % |
| % |
| % |
| % | |||||
Catastrophe impact | (4.5) | % | (4.3) | % | (4.5) | % | 0.5 | % | (28.5) | % | (4.4) | % | |||||
Combined ratio, excluding COVID-19 and catastrophes | 83.4 | % | 93.4 | % | 85.1 | % | 89.0 | % | 91.8 | % | 89.1 | % |
Years Ended | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Insurance | Reinsurance | Consolidated | Insurance | Reinsurance | Consolidated | ||||||||||||
Combined ratio | 96.4 | % | 103.7 | % | 97.7 | % | 92.5 | % | 104.4 | % | 94.4 | % | |||||
COVID-19 impact | (6.4) | % | (6.6) | % | (6.4) | % |
| % |
| % |
| % | |||||
Catastrophe impact | (2.7) | % | (4.8) | % | (3.0) | % | (0.2) | % | (10.3) | % | (2.0) | % | |||||
Combined ratio, excluding COVID-19 and catastrophes | 87.3 | % | 92.3 | % | 88.3 | % | 92.3 | % | 94.1 | % | 92.4 | % |
The following tables reconcile the loss ratio to the current accident year loss ratio excluding the impact of COVID-19 and catastrophes, by underwriting segment.
Quarters Ended | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Insurance | Reinsurance | Consolidated | Insurance | Reinsurance | Consolidated | ||||||||||||
Loss ratio | 52.0 | % | 59.6 | % | 53.3 | % | 51.8 | % | 86.4 | % | 57.4 | % | |||||
Impact of favorable development on prior accident years' loss reserves | 11.6 | % | 9.4 | % | 11.2 | % | 13.6 | % | 19.6 | % | 14.7 | % | |||||
Current accident year loss ratio | 63.6 | % | 69.0 | % | 64.5 | % | 65.4 | % | 106.0 | % | 72.1 | % | |||||
COVID-19 impact | 0.7 | % | 1.9 | % | 0.9 | % |
| % |
| % |
| % | |||||
Catastrophe impact | (4.5) | % | (4.6) | % | (4.5) | % | 0.5 | % | (29.3) | % | (4.6) | % | |||||
Current accident year loss ratio, excluding COVID-19 and catastrophes | 59.8 | % | 66.3 | % | 60.9 | % | 65.9 | % | 76.7 | % | 67.5 | % |
Years Ended | |||||||||||||||||
2020 | 2019 | ||||||||||||||||
Insurance | Reinsurance | Consolidated | Insurance | Reinsurance | Consolidated | ||||||||||||
Loss ratio | 60.1 | % | 69.8 | % | 61.8 | % | 54.7 | % | 69.8 | % | 57.3 | % | |||||
Impact of favorable development on prior accident years' loss reserves | 11.8 | % | 5.6 | % | 10.8 | % | 11.2 | % | 7.2 | % | 10.6 | % | |||||
Current accident year loss ratio | 71.9 | % | 75.4 | % | 72.6 | % | 65.9 | % | 77.0 | % | 67.9 | % | |||||
COVID-19 impact | (6.4) | % | (6.7) | % | (6.4) | % |
| % |
| % |
| % | |||||
Catastrophe impact | (2.7) | % | (4.9) | % | (3.0) | % | (0.2) | % | (10.7) | % | (2.1) | % | |||||
Current accident year loss ratio, excluding COVID-19 and catastrophes | 62.8 | % | 63.8 | % | 63.2 | % | 65.7 | % | 66.3 | % | 65.8 | % |
Investing
We evaluate our investment performance by analyzing taxable equivalent total investment return, which is a non-GAAP financial measure. Taxable equivalent total investment return includes items that impact net income, such as coupon interest on fixed maturity securities, changes in fair value of equity securities, dividends on equity securities and realized investment gains or losses on available-for-sale securities, as well as changes in unrealized gains or losses on available-for-sale securities, which do not impact net income. Certain items that are included in net investment income have been excluded from the calculation of taxable equivalent total investment return, such as amortization and accretion of premiums and discounts on our fixed maturity portfolio, to provide a comparable basis for measuring our investment return against industry investment returns. The calculation of taxable equivalent total investment return also includes the current tax benefit associated with income on certain investments that is either taxed at a lower rate than the statutory income tax rate or is not fully included in
The following table reconciles investment yield to taxable equivalent total investment return.
Years Ended | |||||
2020 | 2019 | ||||
Investment yield (1) | 2.4 | % | 3.0 | % | |
Adjustment of investment yield from amortized cost to fair value | (0.5) | % | (0.7) | % | |
Net amortization of net premium on fixed maturity securities | 0.4 | % | 0.4 | % | |
Net investment gains and change in net unrealized investment gains on available-for-sale securities | 5.8 | % | 10.3 | % | |
Taxable equivalent effect for interest and dividends (2) | 0.1 | % | 0.2 | % | |
Other (3) | 1.2 | % | 1.4 | % | |
Taxable equivalent total investment return | 9.4 | % | 14.6 | % |
(1) | Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost. |
(2) | Adjustment to tax-exempt interest and dividend income to reflect a taxable equivalent basis. |
(3) | Adjustment to reflect the impact of time-weighting the inputs to the calculation of taxable equivalent total investment return. |
Markel Ventures EBITDA is a non-GAAP financial measure. We use Markel Ventures EBITDA as an operating performance measure in conjunction with
The following table reconciles
Quarters Ended | Years Ended | ||||||||||||||
(dollars in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
| $ | 53,312 | $ | 21,361 | $ | 254,078 | $ | 168,417 | |||||||
Depreciation expense | 16,813 | 13,153 | 60,284 | 53,554 | |||||||||||
Amortization of intangible assets | 13,273 | 10,299 | 52,572 | 41,973 | |||||||||||
Markel Ventures EBITDA | $ | 83,398 | $ | 44,813 | $ | 366,934 | $ | 263,944 |
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SOURCE
Investor Relations, Markel Corporation, investorrelations@markel.com