01—Abstract
Summary
Summary of the 10-K filed February 17, 2023. Cited figures are marked; the original filing is the authoritative source.
Markel Corporation, a diverse financial holding company serving a variety of niche markets, reported a net loss to common shareholders of $250.1 milliona for 2022, compared with net income to common shareholders of $2.39 billion in 2021.
Total operating revenues were $11.68 billionb versus $12.85 billion in 2021. The decline was driven mainly by pre-tax net investment losses of $1.6 billion in 2022 versus gains of $2.0 billion in 2021, along with pre-tax net unrealized losses on fixed maturity securities of $1.5 billion. Diluted loss per share was $23.57, compared with diluted income of $176.51 per share in 2021.
Book value per common share declined 10% to $929.27, and shareholders' equity fell to $13.07 billionc from $14.72 billion. Underlying underwriting remained profitable. Underwriting profit was $626.6 million, and the combined ratio was 91.7% compared with 90.3% in 2021.
Gross premium volume rose 16% to $9.84 billiond, driven by growth across the Insurance segment. Favorable prior-year reserve development fell to $167.4 million from $479.8 million, and the Insurance segment's professional and general liability lines recorded adverse development of $70.9 million. The company also recorded an $80.0 million goodwill impairment at its Nephila insurance-linked securities unit.
Markel Ventures, the controlling-interest business group, grew revenues 31% to $4.76 billion, aided by the Metromont and Buckner acquisitions. The company's balance sheet remains substantial, with invested assets of $27.4 billion and cash and cash equivalents of $4.14 billion at December 31, 2022. The company repurchased $290.8 million of common stock during 2022 and holds $511.7 million remaining under its $750 million repurchase program.
Markel does not pay a cash dividend on common stock. Its debt-to-capital ratio rose to 24% from 23%. Investors should weigh the earnings volatility from the equity portfolio, which made up 59% of shareholders' equity, against the strength of the underwriting franchise.
02—Key points
Key Highlights
- Net loss to common shareholders of $250.1 million in 2022, versus net income of $2.39 billion in 2021; diluted loss per share of $23.57.
- Pre-tax net investment losses of $1.6 billion in 2022, compared with gains of $2.0 billion in 2021, reflecting equity market declines and rising interest rates.
- Book value per common share fell 10% to $929.27 from $1,036.20 at year-end 2021.
- Underwriting profit of $626.6 million with a 91.7% combined ratio, versus a 90.3% combined ratio in 2021.
- Gross premium volume grew 16% to $9.84 billion, while prior-year favorable reserve development declined to $167.4 million from $479.8 million.
- An $80.0 million goodwill impairment was recorded at the Nephila insurance-linked securities operations.
- Markel Ventures revenues grew 31% to $4.76 billion, and the company repurchased $290.8 million of common stock during 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 17, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $11.68B$12.85B | −9.1% |
| Operating Expenses | $11.77B$9.60B | +22.5% |
| Operating Income | -$93.34M$3.24B | −102.9% |
| Interest Expense | $196.06M$183.58M | +6.8% |
| Net Income | -$216.28M$2.42B | −108.9% |
| EPS (Basic) | $-23.72$176.79 | −113.4% |
| EPS (Diluted) | $-23.72$176.38 | −113.4% |
| Shares Outstanding (Basic) | 13.58M13.77M | −1.4% |
| Shares Outstanding (Diluted) | 13.58M13.80M | −1.6% |
05—Questions
Frequently Asked Questions
Why did Markel report a net loss in 2022 after strong earnings in 2021?
The loss was driven mainly by investment results. Pre-tax net investment losses were $1.6 billion in 2022, compared with gains of $2.0 billion in 2021, mainly from declines in the equity portfolio and pre-tax net unrealized losses on fixed maturity securities of $1.5 billion as interest rates rose. Underwriting remained profitable.
How did the core insurance operations perform?
Underwriting profit was $626.6 million with a combined ratio of 91.7%, compared with 90.3% in 2021. Gross premium volume increased 16% to $9.84 billion, but favorable prior-year reserve development was smaller at $167.4 million, and professional and general liability lines saw adverse development.
What happened to shareholder value and capital return?
Book value per common share decreased 10% to $929.27, and shareholders' equity fell to $13.07 billion. The company repurchased $290.8 million of common stock in 2022 and had $511.7 million remaining under its share repurchase program. It does not pay a cash dividend on common stock.
What is the Markel Ventures segment and how did it perform?
Markel Ventures owns controlling interests in a diverse set of businesses across industries. In 2022 it generated operating revenues of $4.76 billion, up 31%, operating income of $325.2 million and EBITDA of $506.3 million, a non-GAAP measure. Acquisitions of Metromont and Buckner contributed $604.6 million to the revenue increase.
What were the notable one-time items affecting 2022 results?
Results included an $80.0 million goodwill impairment at the Nephila ILS unit and a $101.9 million expense tied to the Markel CATCo buy-out. Gains of $225.8 million came from the sales of the Velocity and Volante managing general agent operations.
06—Continue