MARKEL CORP - FORM 8-K - EX-99.1 - REDEFINED SEGMENT RESULTS - April 22, 2014

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Exhibit 99.1

Markel Corporation
Segment Results
(unaudited)
 
Reconciliation of Segment Profit (Loss) to Net Income to Shareholders
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (1)
 
2012
 
2011
(dollars in thousands)
1Q
 
2Q
 
3Q
 
4Q
 
Total
 
Total
 
Total
Segment Profit (Loss):
 
 
 
 
 
 
 
 

 

 
 
U.S. Insurance Segment
$
33,157

 
$
27,732

 
$
17,098

 
$
60,790

 
$
138,777

 
$
3,443

 
$
60,424

International Insurance Segment
13,160

 
(5,851
)
 
38,314

 
5,823

 
51,446

 
59,304

 
(65,821
)
Reinsurance Segment
4,845

 
(41,441
)
 
5,669

 
(24,623
)
 
(55,550
)
 
26,764

 
(40,311
)
Other Insurance (Discontinued Lines) Segment
526

 
(3,266
)
 
(41,172
)
 
(13,514
)
 
(57,426
)
 
(21,283
)
 
4,706

Investing Segment
82,534

 
89,525

 
97,430

 
111,036

 
380,525

 
313,700

 
299,533

Total Segment Profit (Loss)
134,222

 
66,699

 
117,339

 
139,512

 
457,772

 
381,928

 
258,531

Other revenues (non-insurance)
161,518

 
152,124

 
172,580

 
200,226

 
686,448

 
489,352

 
317,532

Other expenses (non-insurance)
(144,762
)
 
(133,314
)
 
(150,318
)
 
(184,856
)
 
(613,250
)
 
(432,956
)
 
(275,324
)
Amortization of intangible assets
(9,615
)
 
(11,292
)
 
(16,848
)
 
(17,468
)
 
(55,223
)
 
(33,512
)
 
(24,291
)
Interest expense
(23,574
)
 
(28,561
)
 
(30,619
)
 
(31,250
)
 
(114,004
)
 
(92,762
)
 
(86,252
)
Income tax expense
(28,526
)
 
(16,980
)
 
(25,167
)
 
(7,225
)
 
(77,898
)
 
(53,802
)
 
(41,710
)
Net Income
89,263

 
28,676

 
66,967

 
98,939

 
283,845

 
258,248

 
148,486

Net income attributable to noncontrolling interests
(361
)
 
(920
)
 
(1,368
)
 
(175
)
 
(2,824
)
 
(4,863
)
 
(6,460
)
Net Income to Shareholders
$
88,902

 
$
27,756

 
$
65,599

 
$
98,764

 
$
281,021

 
$
253,385

 
$
142,026


(1) Reflects the acquisition of Alterra Capital Holdings Limited (Alterra) effective May 1, 2013.




Markel Corporation
U.S. Insurance Segment
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (1)
 
2012
 
2011
(dollars in thousands)
1Q
 
2Q
 
3Q
 
4Q
 
Total
 
Total
 
Total
Gross premium volume
$
445,264

 
$
611,504

 
$
600,374

 
$
595,597

 
$
2,252,739

 
$
1,595,849

 
$
1,433,736

Net written premiums
401,549

 
529,595

 
498,505

 
486,121

 
1,915,770

 
1,418,579

 
1,294,408

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned premiums
355,141

 
418,941

 
465,775

 
487,909

 
1,727,766

 
1,360,229

 
1,263,888

Losses and loss adjustment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accident year
(234,671
)
 
(288,427
)
 
(326,941
)
 
(323,219
)
 
(1,173,258
)
 
(984,018
)
 
(925,057
)
Prior accident years
62,404

 
79,911

 
67,626

 
88,172

 
298,113

 
225,870

 
253,798

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Prospective adoption of FASB ASU No. 2010-26 (2)
—

 
—

 
—

 
—

 
—

 
(31,033
)
 
—

Transaction costs and other acquisition-related expenses (3)
—

 
(10,490
)
 
(1,640
)
 
(594
)
 
(12,724
)
 
—

 
—

All other expenses
(150,783
)
 
(173,525
)
 
(182,832
)
 
(190,541
)
 
(697,681
)
 
(571,148
)
 
(532,028
)
Underwriting profit (loss)
32,091

 
26,410

 
21,988

 
61,727

 
142,216

 
(100
)
 
60,601

Other revenues (insurance)
7,263

 
3,280

 
1,402

 
1,703

 
13,648

 
44,968

 
33,545

Other expenses (insurance)
(6,197
)
 
(1,958
)
 
(6,292
)
 
(2,640
)
 
(17,087
)
 
(41,425
)
 
(33,722
)
Segment profit (loss)
$
33,157

 
$
27,732

 
$
17,098

 
$
60,790

 
$
138,777

 
$
3,443

 
$
60,424

 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP Combined Ratio (4)
91
%
 
94
%
 
95
%
 
87
%
 
92
%
 
100
%
 
95
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Catastrophe losses (5)
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
4
%
 
2
%

(1)
Reflects the acquisition of Alterra effective May 1, 2013.
(2) 
Effective January 1, 2012, the Company prospectively adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2010-26, Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts. At December 31, 2011, deferred policy acquisition costs included $43.1 million ($31.0 million in the U.S. Insurance segment) of costs that no longer met the criteria for deferral as of January 1, 2012 and were recognized into income during 2012, consistent with policy terms.
(3) 
In connection with the acquisition of Alterra on May 1, 2013, the Company incurred transaction costs of $16.0 million for the year ended December 31, 2013, which primarily consist of due diligence, legal and investment banking costs. Additionally, the Company incurred severance costs of $31.7 million, stay bonuses of $14.8 million and other compensation costs totaling $12.6 million related to the acceleration of certain long-term incentive compensation awards and restricted stock awards that were granted by Alterra prior to the acquisition. Of the $75.1 million total transaction and acquisition-related costs incurred by the Company for the year ended December 31, 2013, $12.7 million were allocated to the U.S. Insurance segment.
(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) 
Impact of current year events on the U.S. GAAP combined ratio.



Markel Corporation
International Insurance Segment
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (1)
 
2012
 
2011
(dollars in thousands)
1Q
 
2Q
 
3Q
 
4Q
 
Total
 
Total
 
Total
Gross premium volume
$
235,875

 
$
310,310

 
$
274,724

 
$
280,190

 
$
1,101,099

 
$
788,092

 
$
729,510

Net written premiums
201,677

 
244,821

 
193,419

 
200,133

 
840,050

 
677,344

 
632,244

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned premiums
178,192

 
192,871

 
224,237

 
238,684

 
833,984

 
672,405

 
605,360

Losses and loss adjustment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accident year
(120,862
)
 
(142,472
)
 
(140,449
)
 
(184,976
)
 
(588,759
)
 
(492,177
)
 
(499,102
)
Prior accident years
23,000

 
32,500

 
38,521

 
36,639

 
130,660

 
172,758

 
76,874

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Prospective adoption of FASB ASU No. 2010-26 (2)
—

 
—

 
—

 
—

 
—

 
(10,597
)
 
—

Transaction costs and other acquisition-related expenses (3)
—

 
(11,820
)
 
(880
)
 
(666
)
 
(13,366
)
 
—

 
—

All other expenses
(69,774
)
 
(76,441
)
 
(80,735
)
 
(83,342
)
 
(310,292
)
 
(284,182
)
 
(248,953
)
Underwriting profit (loss)
10,556

 
(5,362
)
 
40,694

 
6,339

 
52,227

 
58,207

 
(65,821
)
Other revenues (insurance)
3,962

 
748

 
(1,213
)
 
787

 
4,284

 
4,964

 
—

Other expenses (insurance)
(1,358
)
 
(1,237
)
 
(1,167
)
 
(1,303
)
 
(5,065
)
 
(3,867
)
 
—

Segment profit (loss)
$
13,160

 
$
(5,851
)
 
$
38,314

 
$
5,823

 
$
51,446

 
$
59,304

 
$
(65,821
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP Combined Ratio (4)
94
%
 
103
%
 
82
%
 
97
%
 
94
%
 
91
%
 
111
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Catastrophe losses (5)
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
5
%
 
8
%
Marine and energy large losses (5)
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
—
%
 
4
%

(1) 
Reflects the acquisition of Alterra effective May 1, 2013.
(2) 
Effective January 1, 2012, the Company prospectively adopted FASB ASU No. 2010-26. At December 31, 2011, deferred policy acquisition costs included $43.1 million ($10.6 million in the International Insurance segment) of costs that no longer met the criteria for deferral as of January 1, 2012 and were recognized into income during 2012, consistent with policy terms.
(3) 
In connection with the acquisition of Alterra on May 1, 2013, the Company incurred transaction costs of $16.0 million for the year ended December 31, 2013, which primarily consist of due diligence, legal and investment banking costs. Additionally, the Company incurred severance costs of $31.7 million, stay bonuses of $14.8 million and other compensation costs totaling $12.6 million related to the acceleration of certain long-term incentive compensation awards and restricted stock awards that were granted by Alterra prior to the acquisition. Of the $75.1 million total transaction and acquisition-related costs incurred by the Company for the year ended December 31, 2013, $13.4 million were allocated to the International Insurance segment.
(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) 
Impact of current year events on the U.S. GAAP combined ratio.



Markel Corporation
Reinsurance Segment
(unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2013 (1)
 
2012
 
2011
(dollars in thousands)
1Q
 
2Q
 
3Q
 
4Q
 
Total
 
Total
 
Total
Gross premium volume
$
62,140

 
$
179,152

 
$
201,200

 
$
123,856

 
$
566,348

 
$
129,744

 
$
127,874

Net written premiums
59,741

 
152,850

 
151,008

 
117,223

 
480,822

 
118,208

 
115,199

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earned premiums
31,233

 
172,992

 
229,712

 
235,889

 
669,826

 
114,499

 
110,104

Losses and loss adjustment expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Current accident year
(17,205
)
 
(130,789
)
 
(143,293
)
 
(174,098
)
 
(465,385
)
 
(76,875
)
 
(139,832
)
Prior accident years
(979
)
 
6,432

 
3,624

 
3,861

 
12,938

 
21,449

 
18,967

Underwriting, acquisition and insurance expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
Prospective adoption of FASB ASU No. 2010-26 (2)
—

 
—

 
—

 
—

 
—

 
(1,463
)
 
—

Transaction costs and other acquisition-related expenses (3)
—

 
(39,499
)
 
(5,988
)
 
(3,563
)
 
(49,050
)
 
—

 
—

All other expenses
(8,204
)
 
(51,531
)
 
(79,969
)
 
(89,607
)
 
(229,311
)
 
(30,846
)
 
(29,550
)
Underwriting profit (loss)
4,845

 
(42,395
)
 
4,086

 
(27,518
)
 
(60,982
)
 
26,764

 
(40,311
)
Other revenues (insurance)
—

 
954

 
1,583

 
2,895

 
5,432

 
—

 
—

Other expenses (insurance)
—

 
—

 
—

 
—

 
—

 
—

 
—

Segment profit (loss)
$
4,845

 
$
(41,441
)
 
$
5,669

 
$
(24,623
)
 
$
(55,550
)
 
$
26,764

 
$
(40,311
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
U.S. GAAP Combined Ratio (4)
84
%
 
125
%
 
98
%
 
112
 %
 
109
%
 
77
%
 
137
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Catastrophe losses (5)
—
%
 
15
%
 
3
%
 
(3
)%
 
4
%
 
13
%
 
72
%

(1) 
Reflects the acquisition of Alterra effective May 1, 2013.
(2) 
Effective January 1, 2012, the Company prospectively adopted FASB ASU No. 2010-26. At December 31, 2011, deferred policy acquisition costs included $43.1 million ($1.5 million in the Reinsurance segment) of costs that no longer met the criteria for deferral as of January 1, 2012 and were recognized into income during 2012, consistent with policy terms.
(3) 
In connection with the acquisition of Alterra on May 1, 2013, the Company incurred transaction costs of $16.0 million for the year ended December 31, 2013, which primarily consist of due diligence, legal and investment banking costs. Additionally, the Company incurred severance costs of $31.7 million, stay bonuses of $14.8 million and other compensation costs totaling $12.6 million related to the acceleration of certain long-term incentive compensation awards and restricted stock awards that were granted by Alterra prior to the acquisition. Of the $75.1 million total transaction and acquisition-related costs incurred by the Company for the year ended December 31, 2013, $49.1 million were allocated to the Reinsurance segment.
(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) 
Impact of current year events on the U.S. GAAP combined ratio.


MARKEL CORP Reports