01—Abstract
Summary
Summary of the 10-K filed February 19, 2021. Cited figures are marked; the original filing is the authoritative source.
Markel Corporation, now Markel Group Inc. (MKL), reported a 2020 U.S. GAAP combined ratio of 98% and net income to shareholders of $816.0 milliona, down from $1.79 billion in 2019, as lower net investment gains on its equity portfolio offset growth in operating results.
Total operating revenues rose to $9.74 billionb from $9.53 billion. Book value per common share grew to $885.72 at December 31, 2020, up from $802.59, and the company describes a five-year compound annual growth rate of 10% in book value per share. The company attributed $360.4 million, or six points, of underwriting losses to COVID-19 and $168.9 million, or three points, to 2020 catastrophes, including Hurricanes Isaias, Laura, Sally, Delta and Zeta.
The company operates three engines: Insurance (gross premium volume of $6.0 billionc and an underwriting profit of $169.0 million), Investing (net investment income of $371.8 million and net investment gains of $618.0 million), and Markel Ventures (revenues of $2.8 billion and operating income of $254.1 million). Insurance-linked securities and program services generated total revenues of $212.3 million and $104.2 million, respectively. In late 2020 the company decided to stop writing catastrophe-exposed property reinsurance on a risk-bearing basis, shifting that business to its ILS operations.
Shareholders' equity rose to $12.80 billiond after a $600 million preferred stock issuance in May 2020, and the company recommenced share repurchases in February 2021 under a program with $240.8 million remaining. The filing also notes the Markel CATCo inquiries by the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority, which the company says it cannot yet predict, and the Thomas Yeransian contingent value rights litigation, which the company believes is without merit. Equity securities represented 55% of shareholders' equity at December 31, 2020, compared with 69% a year earlier, which the risk factors identify as a source of earnings and equity volatility.
02—Key points
Key Highlights
- Net income to shareholders was $816.0 million in 2020, compared with $1.79 billion in 2019, primarily reflecting lower net investment gains on the equity portfolio.
- Book value per common share reached $885.72 at December 31, 2020, up from $802.59, with a five-year compound annual growth rate of 10%.
- The consolidated U.S. GAAP combined ratio was 98% in 2020, versus 94% in 2019, including six points of COVID-19 losses and three points of catastrophe losses.
- Insurance segment gross premium volume grew to $6.0 billion and produced a $169.0 million underwriting profit; the Reinsurance segment had a $34.0 million underwriting loss.
- Markel Ventures reported 2020 revenues of $2.8 billion, operating income of $254.1 million and EBITDA of $366.9 million, aided by the Lansing Building Products acquisition.
- In late 2020 the company decided to discontinue writing catastrophe-exposed property reinsurance on a risk-bearing basis, moving it to its insurance-linked securities operations.
- Equity securities fell to 55% of shareholders' equity from 69%, and the company issued $600 million of 6.00% Series A preferred shares in May 2020.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 19, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $9.74B$9.53B | +2.2% |
| Operating Expenses | $8.46B$7.05B | +20.0% |
| Operating Income | $1.27B$2.48B | −48.6% |
| Interest Expense | $177.58M$171.69M | +3.4% |
| Net Income | $816.03M$1.80B | −54.7% |
| EPS (Basic) | $55.67$129.25 | −56.9% |
| EPS (Diluted) | $55.63$129.07 | −56.9% |
| Shares Outstanding (Basic) | 13.81M13.86M | −0.4% |
| Shares Outstanding (Diluted) | 13.82M13.88M | −0.4% |
05—Questions
Frequently Asked Questions
How did Markel's underwriting performance look in 2020?
The consolidated U.S. GAAP combined ratio was 98% in 2020, compared with 94% in 2019. The filing attributes $360.4 million, or six points, of underwriting losses to COVID-19 and $168.9 million, or three points, to 2020 catastrophes. Excluding those items, the company says its combined ratio improved on a lower attritional loss ratio and a lower expense ratio in the Insurance segment.
Why did net income fall in 2020 even though operating revenues rose?
The filing states that the decrease in comprehensive income to shareholders was primarily due to lower net investment gains on the equity portfolio. Net investment gains were $618.0 million in 2020 compared with $1.6 billion in 2019. Income tax expense also fell to $168.7 million from $486.3 million, which partly offset the decline.
What is the company doing about its catastrophe-exposed reinsurance business?
In late 2020 Markel decided to discontinue writing catastrophe-exposed property reinsurance on a risk-bearing basis. Beginning January 1, 2021, this business will either be written directly by or ceded to its insurance-linked securities operations, where it will be placed with third-party capital. The company expects less volatility in its underwriting results as a result.
What legal matters does the filing disclose?
The filing describes inquiries from the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority into loss reserves at Markel CATCo Re in late 2017 and early 2018, and says the company cannot currently predict their outcome. It also describes three suits by Thomas Yeransian over contingent value rights from the Aspen acquisition, which the company believes are without merit.
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