Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q


xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2017
☒    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2020
or
¨Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______
☐    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)

Virginia54-1959284
(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 (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 classTrading Symbol(s)Name of exchange on which registered
Common Stock, no par valueMKLNew 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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post 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 filerx
x
Accelerated filer  o
☐
Non-accelerated filer  o
☐
Smaller reporting companyo
☐
Emerging growth company o
☐
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 October 18, 2017: 13,891,90120, 2020: 13,778,084


Table of Contents
Markel Corporation
Form 10-Q
Index
 
Page Number
Consolidated Balance Sheets—September 30, 20172020 and December 31, 20162019
3
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)—Quarters and Nine Months Ended September 30, 20172020 and 20162019
4
Consolidated Statements of Changes in Equity—Quarters and Nine Months Ended September 30, 20172020 and 20162019
5
Condensed Consolidated Statements of Cash Flows—Nine Months Ended September 30, 20172020 and 20162019
67
Notes to Consolidated Financial Statements
78
3136
Critical Accounting Estimates
32
4760
4861
4962
5165
5166
5270
5472

2

PART I. FINANCIAL INFORMATION


Item 1. Financial Statements


MARKEL CORPORATION AND SUBSIDIARIES


Consolidated Balance Sheets
(dollars in thousands)
September 30,
2017		 December 31,
2016		September 30,
2020		December 31,
2019
(unaudited)  (unaudited)
ASSETS   ASSETS
Investments, available-for-sale, at estimated fair value:   
Fixed maturities (amortized cost of $9,515,082 in 2017 and $9,591,734 in 2016)$9,919,346
 $9,891,510
Equity securities (cost of $2,713,805 in 2017 and $2,481,448 in 2016)5,709,946
 4,745,841
Short-term investments (estimated fair value approximates cost)1,995,562
 2,336,151
Investments, at estimated fair value:Investments, at estimated fair value:
Fixed maturity securities, available-for-sale (amortized cost of $9,290,362 in 2020 and $9,448,840 in 2019)Fixed maturity securities, available-for-sale (amortized cost of $9,290,362 in 2020 and $9,448,840 in 2019)$10,244,242 $9,970,909 
Equity securities (cost of $2,811,397 in 2020 and $3,266,735 in 2019)Equity securities (cost of $2,811,397 in 2020 and $3,266,735 in 2019)6,183,944 7,590,755 
Short-term investments, available-for-sale (estimated fair value approximates cost)Short-term investments, available-for-sale (estimated fair value approximates cost)1,897,459 1,196,248 
Total Investments17,624,854
 16,973,502
Total Investments18,325,645 18,757,912 
Cash and cash equivalents2,076,266
 1,738,747
Cash and cash equivalents4,593,025 3,072,807 
Restricted cash and cash equivalents279,399
 346,417
Restricted cash and cash equivalents669,528 427,546 
Receivables1,588,636
 1,241,649
Receivables2,004,080 1,847,802 
Reinsurance recoverable on unpaid losses2,466,554
 2,006,945
Reinsurance recoverable on paid losses72,487
 64,892
Reinsurance recoverablesReinsurance recoverables5,665,838 5,432,712 
Deferred policy acquisition costs506,294
 392,410
Deferred policy acquisition costs638,134 566,042 
Prepaid reinsurance premiums352,676
 299,923
Prepaid reinsurance premiums1,457,580 1,415,857 
Goodwill1,425,789
 1,142,248
Goodwill2,604,575 2,308,548 
Intangible assets990,008
 722,542
Intangible assets1,820,453 1,738,474 
Other assets1,136,448
 946,024
Other assets2,391,161 1,906,115 
Total Assets$28,519,411
 $25,875,299
Total Assets$40,170,019 $37,473,815 
LIABILITIES AND EQUITY   LIABILITIES AND EQUITY
Unpaid losses and loss adjustment expenses$11,443,148
 $10,115,662
Unpaid losses and loss adjustment expenses$15,723,231 $14,728,676 
Life and annuity benefits1,108,947
 1,049,654
Life and annuity benefits1,034,093 985,729 
Unearned premiums2,750,243
 2,263,838
Unearned premiums4,509,811 4,057,727 
Payables to insurance and reinsurance companies230,041
 231,327
Payables to insurance and reinsurance companies416,988 406,720 
Senior long-term debt and other debt (estimated fair value of $2,686,000 in 2017 and $2,721,000 in 2016)2,471,419
 2,574,529
Senior long-term debt and other debt (estimated fair value of $4,270,000 in 2020 and $3,907,000 in 2019)Senior long-term debt and other debt (estimated fair value of $4,270,000 in 2020 and $3,907,000 in 2019)3,498,311 3,534,183 
Other liabilities1,455,459
 1,099,200
Other liabilities2,838,807 2,504,802 
Total Liabilities19,459,257
 17,334,210
Total Liabilities28,021,241 26,217,837 
Redeemable noncontrolling interests153,310
 73,678
Redeemable noncontrolling interests241,020 177,562 
Commitments and contingencies
 
Commitments and contingencies
Shareholders' equity:   Shareholders' equity:
Preferred stockPreferred stock591,891 0 
Common stock3,379,156
 3,368,666
Common stock3,425,247 3,404,919 
Retained earnings3,378,524
 3,526,395
Retained earnings7,377,095 7,457,176 
Accumulated other comprehensive income2,151,205
 1,565,866
Accumulated other comprehensive income499,714 208,772 
Total Shareholders' Equity8,908,885
 8,460,927
Total Shareholders' Equity11,893,947 11,070,867 
Noncontrolling interests(2,041) 6,484
Noncontrolling interests13,811 7,549 
Total Equity8,906,844
 8,467,411
Total Equity11,907,758 11,078,416 
Total Liabilities and Equity$28,519,411
 $25,875,299
Total Liabilities and Equity$40,170,019 $37,473,815 
See accompanying notes to consolidated financial statements.

3
Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES


Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Unaudited)
Quarter Ended September 30, Nine Months Ended September 30,Quarter Ended September 30,Nine Months Ended September 30,
2017 2016 2017 20162020201920202019
(dollars in thousands, except per share data)(dollars in thousands, except per share data)
OPERATING REVENUES       OPERATING REVENUES
Earned premiums$1,099,862
 $974,244
 $3,116,038
 $2,882,789
Earned premiums$1,394,428 $1,300,032 $4,085,311 $3,703,470 
Net investment income104,489
 93,147
 304,156
 279,437
Net investment income90,384 113,382 274,242 339,395 
Net realized investment gains (losses):       
Other-than-temporary impairment losses(3,444) —
 (7,261) (12,080)
Net realized investment gains (losses), excluding other-than-temporary impairment losses(36,563) 27,416
 5,746
 77,916
Net realized investment gains (losses)(40,007) 27,416
 (1,515) 65,836
Other revenues341,804
 336,475
 980,713
 955,339
Net investment gains (losses):Net investment gains (losses):
Net realized investment gainsNet realized investment gains4,935 150 11,861 764 
Change in fair value of equity securitiesChange in fair value of equity securities534,367 31,994 (242,757)1,069,224 
Net investment gains (losses)Net investment gains (losses)539,302 32,144 (230,896)1,069,988 
Products revenuesProducts revenues342,039 386,708 1,117,781 1,237,178 
Services and other revenuesServices and other revenues545,582 200,792 1,132,978 594,631 
Total Operating Revenues1,506,148
 1,431,282
 4,399,392
 4,183,401
Total Operating Revenues2,911,735 2,033,058 6,379,416 6,944,662 
OPERATING EXPENSES       OPERATING EXPENSES
Losses and loss adjustment expenses1,075,432
 579,405
 2,210,129
 1,564,925
Losses and loss adjustment expenses863,247 752,134 2,652,811 2,118,000 
Underwriting, acquisition and insurance expenses395,909
 372,521
 1,169,175
 1,112,789
Underwriting, acquisition and insurance expenses492,824 475,219 1,477,349 1,392,747 
Products expensesProducts expenses296,371 354,404 974,925 1,098,968 
Services and other expensesServices and other expenses522,237 153,358 1,024,733 498,760 
Amortization of intangible assets18,654
 17,010
 53,450
 51,474
Amortization of intangible assets44,664 35,695 120,276 112,663 
Other expenses344,287
 309,713
 925,984
 862,715
Total Operating Expenses1,834,282
 1,278,649
 4,358,738
 3,591,903
Total Operating Expenses2,219,343 1,770,810 6,250,094 5,221,138 
Operating Income (Loss)(328,134) 152,633
 40,654
 591,498
Operating IncomeOperating Income692,392 262,248 129,322 1,723,524 
Interest expense31,814
 33,152
 97,013
 97,690
Interest expense(42,744)(47,465)(133,201)(129,022)
Net foreign exchange gains (losses)Net foreign exchange gains (losses)(65,577)53,850 (8,736)57,001 
Loss on early extinguishment of debt—
 —
 —
 44,100
Loss on early extinguishment of debt0 (6,705)0 (6,705)
Income (Loss) Before Income Taxes(359,948) 119,481
 (56,359) 449,708
Income (Loss) Before Income Taxes584,071 261,928 (12,615)1,644,798 
Income tax expense (benefit)(98,913) 36,060
 (17,791) 121,968
Income tax expenseIncome tax expense(130,028)(57,975)(3,047)(356,849)
Net Income (Loss)(261,035) 83,421
 (38,568) 327,740
Net Income (Loss)454,043 203,953 (15,662)1,287,949 
Net income (loss) attributable to noncontrolling interests(1,894) (375) 1,044
 4,777
Net (income) loss attributable to noncontrolling interestsNet (income) loss attributable to noncontrolling interests(1,317)1,684 (15,607)(8,587)
Net Income (Loss) to Shareholders$(259,141) $83,796
 $(39,612) $322,963
Net Income (Loss) to Shareholders452,726 205,637 (31,269)1,279,362 
Preferred stock dividendsPreferred stock dividends0 0 0 0 
Net Income (Loss) to Common ShareholdersNet Income (Loss) to Common Shareholders$452,726 $205,637 $(31,269)$1,279,362 
       
OTHER COMPREHENSIVE INCOME       OTHER COMPREHENSIVE INCOME
Change in net unrealized gains on investments, net of taxes:       
Change in net unrealized gains on available-for-sale investments, net of taxes:Change in net unrealized gains on available-for-sale investments, net of taxes:
Net holding gains arising during the period$227,447
 $23,098
 $577,796
 $411,394
Net holding gains arising during the period$64,449 $48,315 $301,487 $329,113 
Change in unrealized other-than-temporary impairment losses on fixed maturities arising during the period—
 (17) —
 (40)
Reclassification adjustments for net gains included in net income (loss)(5,207) (9,758) (14,598) (33,308)
Change in net unrealized gains on investments, net of taxes222,240
 13,323
 563,198
 378,046
Reclassification adjustments for net gains (losses) included in net income (loss)Reclassification adjustments for net gains (losses) included in net income (loss)(3,362)203 (3,560)760 
Change in net unrealized gains on available-for-sale investments, net of taxesChange in net unrealized gains on available-for-sale investments, net of taxes61,087 48,518 297,927 329,873 
Change in foreign currency translation adjustments, net of taxes16,263
 (8,349) 19,770
 (6,141)Change in foreign currency translation adjustments, net of taxes5,756 (4,606)(8,383)(5,978)
Change in net actuarial pension loss, net of taxes773
 390
 2,391
 1,247
Change in net actuarial pension loss, net of taxes538 462 1,422 2,338 
Total Other Comprehensive Income239,276
 5,364
 585,359
 373,152
Total Other Comprehensive Income67,381 44,374 290,966 326,233 
Comprehensive Income (Loss)(21,759) 88,785
 546,791
 700,892
Comprehensive income (loss) attributable to noncontrolling interests(1,890) (376) 1,064
 4,795
Comprehensive Income (Loss) to Shareholders$(19,869) $89,161
 $545,727
 $696,097
Comprehensive IncomeComprehensive Income521,424 248,327 275,304 1,614,182 
Comprehensive (income) loss attributable to noncontrolling interestsComprehensive (income) loss attributable to noncontrolling interests(1,335)1,742 (15,631)(8,538)
Comprehensive Income to ShareholdersComprehensive Income to Shareholders$520,089 $250,069 $259,673 $1,605,644 
       
NET INCOME (LOSS) PER SHARE       
NET INCOME (LOSS) PER COMMON SHARENET INCOME (LOSS) PER COMMON SHARE
Basic$(18.82) $5.62
 $(4.52) $22.27
Basic$31.07 $13.97 $(3.76)$92.92 
Diluted$(18.82) $5.60
 $(4.52) $22.16
Diluted$31.03 $13.95 $(3.76)$92.84 
See accompanying notes to consolidated financial statements.

4
Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES


Consolidated Statements of Changes in Equity
(Unaudited)
Quarter Ended September 30, 2020Preferred SharesCommon SharesPreferred StockCommon
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income		Total
Shareholders'
Equity		Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
Interests
(in thousands)
June 30, 2020600 13,776 $591,891 $3,421,845 $6,948,466 $432,351 $11,394,553 $15,695 $11,410,248 $214,653 
Net income (loss)452,726 0 452,726 (2,393)450,333 3,710 
Other comprehensive income0 67,363 67,363 0 67,363 18 
Comprehensive Income (Loss)520,089 (2,393)517,696 3,728 
Issuance of common stock0 2 0 0 0 0 0 0 0 0 
Restricted stock units expensed0 0 0 3,402 0 0 3,402 0 3,402 0 
Adjustment of redeemable noncontrolling interests0 0 0 0 (23,621)0 (23,621)0 (23,621)23,621 
Other0 0 0 0 (476)0 (476)509 33 (982)
September 30, 2020600 13,778 $591,891 $3,425,247 $7,377,095 $499,714 $11,893,947 $13,811 $11,907,758 $241,020 

Nine Months Ended September 30, 2020Nine Months Ended September 30, 2020Preferred SharesCommon SharesPreferred StockCommon
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income		Total
Shareholders'
Equity		Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
Interests
(in thousands)Common Shares 
Common
Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income
 
Total
Shareholders'
Equity
 
Noncontrolling
Interests
 Total Equity 
Redeemable
Noncontrolling
Interests
(in thousands)
December 31, 201513,959
 $3,342,357
 $3,137,285
 $1,354,508
 $7,834,150
 $6,459
 $7,840,609
 $62,958
Net income    322,963
 —
 322,963
 605
 323,568
 4,172
December 31, 2019December 31, 20190 13,794 $0 $3,404,919 $7,457,176 $208,772 $11,070,867 $7,549 $11,078,416 $177,562 
Cumulative effect of adoption of ASU No. 2016-13, net of taxesCumulative effect of adoption of ASU No. 2016-13, net of taxes(3,827)0 (3,827)0 (3,827)0 
January 1, 2020January 1, 20200 13,794 0 3,404,919 7,453,349 208,772 11,067,040 7,549 11,074,589 177,562 
Net income (loss)Net income (loss)(31,269)0 (31,269)4,201 (27,068)11,406 
Other comprehensive income    —
 373,134
 373,134
 —
 373,134
 18
Other comprehensive income0 290,942 290,942 0 290,942 24 
Comprehensive Income        696,097
 605
 696,702
 4,190
Comprehensive Income259,673 4,201 263,874 11,430 
Issuance of preferred stockIssuance of preferred stock600 0 591,891 0 0 0 591,891 0 591,891 0 
Issuance of common stock48
 4,531
 —
 —
 4,531
 —
 4,531
 —
Issuance of common stock0 5 0 57 0 0 57 0 57 0 
Repurchase of common stock(16) —
 (15,503) —
 (15,503) —
 (15,503) —
Repurchase of common stock0 (21)0 0 (23,943)0 (23,943)0 (23,943)0 
Restricted stock units expensed—
 18,512
 —
 —
 18,512
 —
 18,512
 —
Restricted stock units expensed0 0 0 26,386 0 0 26,386 0 26,386 0 
Acquisition of LansingAcquisition of Lansing0 0 0 0 0 0 0 0 0 43,566 
Adjustment of redeemable noncontrolling interests—
 —
 (10,909) —
 (10,909) —
 (10,909) 10,909
Adjustment of redeemable noncontrolling interests0 0 0 0 (20,681)0 (20,681)0 (20,681)20,681 
Purchase of noncontrolling interest—
 350
 —
 —
 350
 —
 350
 (3,517)Purchase of noncontrolling interest0 0 0 (6,131)0 0 (6,131)0 (6,131)(7,029)
Other—
 —
 55
 —
 55
 (72) (17) (3,880)Other0 0 0 16 (361)0 (345)2,061 1,716 (5,190)
September 30, 201613,991
 $3,365,750
 $3,433,891
 $1,727,642
 $8,527,283
 $6,992
 $8,534,275
 $70,660
               
December 31, 201613,955
 $3,368,666
 $3,526,395
 $1,565,866
 $8,460,927
 $6,484
 $8,467,411
 $73,678
Net income (loss)    (39,612) —
 (39,612) (493) (40,105) 1,537
Other comprehensive income    —
 585,339
 585,339
 —
 585,339
 20
Comprehensive Income (Loss)        545,727
 (493) 545,234
 1,557
Issuance of common stock24
 359
 —
 —
 359
 —
 359
 —
Repurchase of common stock(85) —
 (84,436) —
 (84,436) —
 (84,436) —
Restricted stock units expensed—
 13,389
 —
 —
 13,389
 —
 13,389
 —
Acquisition of Costa Farms—
 —
 —
 —
 —
 —
 —
 66,600
Adjustment of redeemable noncontrolling interests—
 —
 (23,582) —
 (23,582) —
 (23,582) 23,582
Purchase of noncontrolling interest—
 (2,910) —
 —
 (2,910) (8,109) (11,019) (6,179)
Other—
 (348) (241) —
 (589) 77
 (512) (5,928)
September 30, 201713,894
 $3,379,156
 $3,378,524
 $2,151,205
 $8,908,885
 $(2,041) $8,906,844
 $153,310
September 30, 2020September 30, 2020600 13,778 $591,891 $3,425,247 $7,377,095 $499,714 $11,893,947 $13,811 $11,907,758 $241,020 
See accompanying notes to consolidated financial statements.

5
Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES


Consolidated Statements of Changes in Equity (continued)
(Unaudited)
Quarter Ended September 30, 2019Common SharesCommon
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income		Total
Shareholders'
Equity		Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
Interests
(in thousands)
June 30, 201913,826 $3,400,964 $6,808,201 $187,200 $10,396,365 $16,716 $10,413,081 $151,297 
Net income (loss)205,637 0 205,637 (5,590)200,047 3,906 
Other comprehensive income (loss)0 44,432 44,432 0 44,432 (58)
Comprehensive Income (Loss)250,069 (5,590)244,479 3,848 
Issuance of common stock1 43 0 0 43 0 43 0 
Repurchase of common stock(12)0 (12,732)— (12,732)0 (12,732)0 
Restricted stock units expensed0 2,410 0 0 2,410 0 2,410 0 
Adjustment of redeemable noncontrolling interests0 0 (12,221)0 (12,221)0 (12,221)12,221 
Purchase of noncontrolling interest0 (483)0 0 (483)0 (483)483 
Other0 0 3 0 3 290 293 (2,247)
September 30, 201913,815 $3,402,934 $6,988,888 $231,632 $10,623,454 $11,416 $10,634,870 $165,602 

Nine Months Ended September 30, 2019Common SharesCommon
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
Shareholders'
Equity		Noncontrolling
Interests		Total EquityRedeemable
Noncontrolling
Interests
(in thousands)
December 31, 201813,888 $3,392,993 $5,782,310 $(94,650)$9,080,653 $19,649 $9,100,302 $174,062 
Net income (loss)1,279,362 0 1,279,362 (4,185)1,275,177 12,772 
Other comprehensive income (loss)0 326,282 326,282 0 326,282 (49)
Comprehensive Income (Loss)1,605,644 (4,185)1,601,459 12,723 
Issuance of common stock7 43 0 0 43 0 43 0 
Repurchase of common stock(80)0 (81,998)0 (81,998)0 (81,998)0 
Restricted stock units expensed0 14,282 0 0 14,282 0 14,282 0 
Adjustment to Nephila purchase price allocation0 0 0 0 0 (8,250)(8,250)51 
Adjustment of redeemable noncontrolling interests0 0 9,464 0 9,464 0 9,464 (9,464)
Purchase of noncontrolling interest0 (4,219)0 0 (4,219)0 (4,219)(4,542)
Other0 (165)(250)0 (415)4,202 3,787 (7,228)
September 30, 201913,815 $3,402,934 $6,988,888 $231,632 $10,623,454 $11,416 $10,634,870 $165,602 
See accompanying notes to consolidated financial statements.
6
Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,Nine Months Ended September 30,
2017 201620202019
(dollars in thousands)(dollars in thousands)
OPERATING ACTIVITIES   OPERATING ACTIVITIES
Net income (loss)$(38,568) $327,740
Net income (loss)$(15,662)$1,287,949 
Adjustments to reconcile net income (loss) to net cash provided by operating activities637,271
 (3,383)Adjustments to reconcile net income (loss) to net cash provided by operating activities1,277,250 (575,991)
Net Cash Provided By Operating Activities598,703
 324,357
Net Cash Provided By Operating Activities1,261,588 711,958 
INVESTING ACTIVITIES   INVESTING ACTIVITIES
Proceeds from sales of fixed maturities and equity securities360,327
 330,110
Proceeds from maturities, calls and prepayments of fixed maturities948,756
 734,010
Cost of fixed maturities and equity securities purchased(1,162,438) (1,728,396)
Proceeds from sales of fixed maturity securities and equity securitiesProceeds from sales of fixed maturity securities and equity securities1,544,501 326,304 
Proceeds from maturities, calls and prepayments of fixed maturity securitiesProceeds from maturities, calls and prepayments of fixed maturity securities507,480 446,625 
Cost of fixed maturity securities and equity securities purchasedCost of fixed maturity securities and equity securities purchased(764,823)(657,563)
Net change in short-term investments406,138
 (340,742)Net change in short-term investments(697,580)(451,408)
Proceeds from sales of equity method investments2,938
 9,325
Cost of equity method investmentsCost of equity method investments(5,066)(216,806)
Proceeds from sales of equity and cost method investmentsProceeds from sales of equity and cost method investments15,167 4,634 
Additions to property and equipment(50,099) (49,565)Additions to property and equipment(72,771)(95,457)
Proceeds from disposals of fixed assetsProceeds from disposals of fixed assets20,527 15,949 
Acquisitions, net of cash acquired(592,045) (5,762)Acquisitions, net of cash acquired(547,847)(25,627)
Other(7,802) (4,618)Other22,903 (3,809)
Net Cash Used By Investing Activities(94,225) (1,055,638)
Net Cash Provided (Used) By Investing ActivitiesNet Cash Provided (Used) By Investing Activities22,491 (657,158)
FINANCING ACTIVITIES   FINANCING ACTIVITIES
Additions to senior long-term debt and other debt42,638
 553,537
Additions to senior long-term debt and other debt189,846 1,578,823 
Repayment of senior long-term debt and other debt(224,516) (260,086)Repayment of senior long-term debt and other debt(227,692)(680,516)
Premiums and fees related to early extinguishment of debt—
 (43,691)Premiums and fees related to early extinguishment of debt0 (10,086)
Repurchases of common stock(84,436) (15,503)Repurchases of common stock(23,943)(81,998)
Issuance of common stock359
 4,531
Issuance of preferred stock, netIssuance of preferred stock, net591,891 0 
Payment of contingent consideration(5,018) (14,219)Payment of contingent consideration(31,426)(14,113)
Purchase of noncontrolling interests(18,068) (3,167)Purchase of noncontrolling interests(14,558)(9,754)
Distributions to noncontrolling interests(5,929) (3,931)Distributions to noncontrolling interests(5,325)(7,147)
Other(4,345) (14,478)Other(3,172)(4,565)
Net Cash Provided (Used) By Financing Activities(299,315) 202,993
Net Cash Provided By Financing ActivitiesNet Cash Provided By Financing Activities475,621 770,644 
Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents65,338
 (1,484)Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents2,500 (22,107)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents270,501
 (529,772)
Increase in cash, cash equivalents, restricted cash and restricted cash equivalentsIncrease in cash, cash equivalents, restricted cash and restricted cash equivalents1,762,200 803,337 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period2,085,164
 3,070,141
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period3,500,353 2,396,432 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD$2,355,665
 $2,540,369
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD$5,262,553 $3,199,769 
See accompanying notes to consolidated financial statements.

7
Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1. BasisSummary of PresentationSignificant 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 and programs.products. Through its wholly-ownedwholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures), Markel Corporation also owns interests in various businesses that operate outside of the specialty insurance marketplace.


a)Basis of Presentation. The consolidated balance sheet as of September 30, 2017,2020 and the related consolidated statements of income (loss) and comprehensive income (loss)and changes in equity for the quarters and nine months ended September 30, 20172020 and 2016,2019, and the consolidated statements of changes in equity and cash flows for the nine months ended September 30, 20172020 and 20162019 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. 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, 20162019 was derived from Markel Corporation's audited annual consolidated financial statements.


The accompanying consolidated financial statements have been prepared in accordance with U.S.United States (U.S.) generally accepted accounting principles (U.S. GAAP)(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 year amounts have been reclassified to conform to the current 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. For further details regarding certain estimates, see note 16.


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. Certain accounting policies were updated to reflect accounting pronouncements that became effective in 2020. See note 2. Readers are urged to review the Company's 20162019 Annual Report on Form 10-K for a more complete description of the Company's business and accounting policies.


b)Investments. Available-for-sale investments and equity securities are recorded at estimated fair value. Unrealized gains and losses on available-for-sale investments, net of income taxes, are included in other comprehensive income. Unrealized gains and losses on equity securities, net of income taxes, are included in net income.
2. Recent Accounting Pronouncements

The Company completes a detailed analysis each quarter to assess declines in the fair value of available-for-sale investments. Effective for the year ended December 31, 2016,January 1, 2020, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-09, 2016-13,Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts, which requires significant new disclosures for insurers relating to short-duration insurance contract claims and the unpaid claims liability rollforward for long and short-duration contracts on both an annual and interim basis. Interim period disclosures required by ASU No. 2015-09 include a tabular rollforward and related qualitative information for the liability for unpaid losses and loss adjustment expenses. The interim disclosures were required beginning in the first quarter of 2017 and have been included in note 7.

Effective January 1, 2017, the Company early adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Some of the topics covered by the ASU include the classification of debt prepayment and extinguishment costs, contingent consideration payments made after a business combination and distributions from equity method investees. Upon adoption of this ASU, the Company made an accounting policy election to use the cumulative earnings approach for presenting distributions received from equity method investees, which is consistent with its existing approach. Under this approach, distributions up to the amount of cumulative equity in earnings recognized will be treated as returns on investment and presented in operating activities and those in excess of that amount will be treated as returns of investment and presented in financing activities. The provisions of ASU No. 2016-15 were adopted on a retrospective basis and did not impact the Company's financial position, results of operations or cash flows.

Effective January 1, 2017, the Company early adopted ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. The ASU requires that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company previously presented changes in restricted cash and restricted cash equivalents on the statements of cash flows as an investing activity. The Company generally describes amounts held in trust or on deposit to support underwriting activities as well as amounts pledged as security for letters of credit as restricted cash or restricted cash equivalents. The provisions of ASU No. 2016-18 were adopted on a retrospective basis and did not impact the Company's financial position, results of operations or total comprehensive income. As a result of adoption of this ASU, investing cash inflows of $61.1 million attributed to the change in restricted cash for the nine months ended September 30, 2016 were reclassified out of investing activities. The Company's statements of cash flows now include restricted cash and restricted cash equivalents in the beginning-of-period and end-of-period total amounts for cash, cash equivalents, restricted cash and restricted cash equivalents.

Effective January 1, 2017, the Company early adopted ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The ASUchanges the definition of a business to assist entities with evaluating when a set of transferred assets and activities is a business. The guidance provides a screen to determine when a set of assets and activities is not a business. The provisions of ASU No. 2017-01 were adopted on a prospective basis and did not have an impact on the Company's financial position, results of operations or cash flows.

Effective January 1, 2017, the Company early adopted ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU eliminates Step 2 of the goodwill impairment test, which is performed by estimating the fair value of individual assets and liabilities of the reporting unit to calculate the implied fair value of goodwill. Instead, an entity will record a goodwill impairment charge based on the excess of a reporting unit's carrying value over its estimated fair value, not to exceed the carrying amount of goodwill. The provisions of ASU No. 2017-04 were adopted on a prospective basis and did not have an impact on the Company's financial position, results of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which creates a new comprehensive revenue recognition standard that will serve as a single source of revenue guidance for all companies in all industries. The guidance applies to all companies that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards, such as insurance contracts. ASU No. 2014-09's core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the current guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. Several ASUs have also been issued as amendments to ASU No. 2014-09 and will be evaluated and adopted in conjunction with ASU No. 2014-09. ASU No. 2014-09 becomes effective for the Company during the first quarter of 2018 and will be applied using the modified retrospective method, whereby the cumulative effect of adoption will be recognized as an adjustment to retained earnings at the date of initial application. The adoption of this ASU will not impact the Company's insurance premium revenues or revenues from its investment portfolio, which totaled 77% of consolidated revenues for the year ended December 31, 2016, but will impact certain of the Company's other revenues, which are comprised of a diverse portfolio of contracts across various industries. Based on the Company’s evaluation of the impacted revenue streams, which was completed in the third quarter of 2017, the timing of the recognition of revenue and related costs may change with respect to certain contracts with customers, none of which are expected to have a material effect on the consolidated financial statements. For instance, revenues and costs for certain contracts may be recognized over time rather than when the product or service is delivered, as is the current practice. Additionally, the cumulative effect adjustment to retained earnings at the date of initial application is not expected to be material. The Company also expects to provide additional disclosures in the notes to the consolidated financial statements as required under the new guidance.


In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities. The ASU significantly changes the income statement impact of equity investments and the recognition of changes in fair value of financial liabilities attributable to an entity's own credit risk when the fair value option is elected. The ASU requires equity instruments that do not result in consolidation and are not accounted for under the equity method to be measured at fair value and to recognize any changes in fair value in net income rather than other comprehensive income. ASU No. 2016-01 becomes effective for the Company during the first quarter of 2018 and will be applied using a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. The provisions related to equity investments without a readily determinable fair value will be applied prospectively to equity investments as of the adoption date. The Company is currently evaluating ASU No. 2016-01 to determine the impact that adopting this standard will have on the consolidated financial statements. Adoption of this ASU is not expected to have a material impact on the Company's financial position, cash flows, or total comprehensive income, but will have a material impact on the Company's results of operations as changes in fair value of equity instruments will be presented in net income rather than other comprehensive income. As of September 30, 2017, accumulated other comprehensive income included $2.0 billion of net unrealized gains on equity securities, net of taxes. See note 4(e) for details regarding the change in net unrealized gains on equity securities included in other comprehensive income for the quarters and nine months ended September 30, 2017 and 2016.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU requires lessees to record most leases on their balance sheets as a lease liability with a corresponding right-of-use asset, but continue to recognize the related leasing expense within net income. ASU No. 2016-02 becomes effective for the Company during the first quarter of 2019 and will be applied using a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. The Company's future minimum lease payments, which represent minimum annual rental commitments excluding taxes, insurance and other operating costs for noncancelable operating leases, and will be subject to this new guidance, totaled $234.3 million at December 31, 2016. The calculation of the lease liability and right-of-use asset requires further analysis of the underlying leases to determine which portions of the underlying lease payments are required to be included in the calculation. Adoption of this standard will impact the Company’s consolidated balance sheets but is not expected to have a material impact on the Company’s results of operations or cash flows. The Company is currently evaluating ASU No. 2016-02 to determine the magnitude of the impact that adopting this standard will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The ASU replaces the current incurred loss model used to measure impairmentInstruments, and related amendments, which created a new comprehensive credit losses with an expected loss model for trade, reinsurance, and other receivables as well as financial instruments measured at amortized cost. For available-for-sale debt securities, which are measured at fair value, the ASU requires entities to record impairments as an allowance, rather than a reduction of the amortized cost, as is currently required under the other-than-temporary impairment model. ASU No. 2016-13 becomes effective for the Company during the first quarter of 2020 and will be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating ASU No. 2016-13 to determine the potential impact that adopting this standard, will have on the consolidated financial statements. Application of the new expected loss model for measuring impairment losses will not impact the Company's investment portfolio, all of which is considered available-for sale, but will impact the Company's other financial assets, including its reinsurance recoverables.FASB Accounting Standards Codification (ASC) 326, Financial Instruments—Credit Losses. Upon adoption of this ASU,ASC 326, any impairment losses on the Company's available-for-sale debt securities will beinvestments are recorded as an allowance, subject to reversal, rather than as a reduction in amortized cost.cost, as was required under the previous other-than-temporary impairment (OTTI) model. In accordance with the provisions of ASU No. 2016-13, prior periods have not been restated.


Premiums and discounts are amortized or accreted over the lives of the related fixed maturity securities as an adjustment to the yield using the effective interest method. Dividend and interest income are recognized when earned. Accrued interest receivable is excluded from both the estimated fair value and the amortized cost basis of available-for-sale securities and included within other assets on the Company's consolidated balance sheets. Any uncollectible accrued interest receivable is written off in the period it is deemed uncollectible. Realized investment gains or losses on available-for-sale investments are included in net income. Realized gains or losses from sales of available-for-sale investments are derived using the first-in, first-out method on the trade date.


8
Table of Contents
c)Receivables. Receivables include amounts receivable from agents, brokers and insureds, which represent premiums that are both currently due and amounts not yet due on insurance and reinsurance policies. Premiums for insurance policies are generally due at inception. Premiums for reinsurance policies generally become due over the period of coverage based on the policy terms. Changes in the estimate of reinsurance premiums written will result in an adjustment to premiums receivable in the period they are determined. Receivables also include amounts receivable from contracts with customers, which represent the Company's unconditional right to consideration for satisfying the performance obligations outlined in the contract.

The Company monitors credit risk associated with receivables, taking into consideration the fact that in certain instances in the Company's insurance operations, credit risk may be reduced by the Company's right to offset loss obligations or unearned premiums against premiums receivable. An allowance is established for amounts deemed uncollectible and receivables are recorded net of this allowance. Following the adoption of ASC 326, as described in note 2, beginning January 1, 2020 the allowance is established for expected credit losses to be recognized over the life of the receivable. The Company considers reasonable and supportable forecasts of future economic conditions in addition to information about past events and current conditions when estimating the allowance for credit losses. The Company uses information obtained from external sources to forecast short-term changes in macroeconomic conditions that are expected to impact the Company's exposure to credit losses. Any allowance for credit losses is charged to net income in the period the receivable is recorded and revised in subsequent periods to reflect changes in the Company's estimate of expected credit losses.

d)Reinsurance Recoverables. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured business. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk to minimize its exposure to significant losses from individual reinsurers. To further reduce credit exposure on reinsurance recoverables, the Company has received collateral, including letters of credit and trust accounts, from certain reinsurers. Collateral related to these reinsurance agreements is available, without restriction, when the Company pays losses covered by the reinsurance agreements. An allowance is established for amounts deemed uncollectible and reinsurance recoverables are recorded net of this allowance. Following the adoption of ASC 326, as described in note 2, beginning January 1, 2020 the allowance is established for expected credit losses to be recognized over the life of the reinsurance recoverable. The Company considers reasonable and supportable forecasts of future economic conditions in addition to information about past events and current conditions when estimating the allowance for credit losses. The Company uses information obtained from external sources to forecast short-term changes in macroeconomic conditions that are expected to impact the Company's exposure to credit losses. Any allowance for credit losses is charged to net income in the period the recoverable is recorded and revised in subsequent periods to reflect changes in the Company's estimate of expected credit losses.

9
Table of Contents
2. Recent Accounting Pronouncements

Accounting Standards Adopted in 2020

Effective January 1, 2020, the Company adopted ASC 326, Financial Instruments—Credit Losses. This new standard replaced the incurred loss model used to measure impairment losses for financial assets measured at amortized cost with a current expected credit loss (CECL) model and also made changes to the impairment model for available-for-sale investments. Under the CECL model, allowances are established for expected credit losses to be recognized over the life of financial assets. Application of the CECL model does not impact the Company's investment portfolio, which is not measured at amortized cost, but it impacts certain of the Company's other financial assets, including its reinsurance recoverables and receivables. ASC 326 also replaced the OTTI model with an impairment allowance model, subject to reversal, for available-for-sale investments, which are measured at fair value. As a result of adopting ASC 326, the Company increased its allowances for credit losses related to its reinsurance recoverables and receivables by $3.8 million and $1.0 million, respectively, which was recorded through a cumulative-effect adjustment to retained earnings as of January 1, 2020 ($3.8 million, net of taxes). The Company continues to apply the previous guidance to 2019 and prior periods.

The following ASU's relate to topicsASUs are relevant to the Company's operations and were adopted effective January 1, 2017.2020. These ASU'sASUs did not have a material impact on the Company’sCompany's financial position, results of operations or cash flows:
•ASU No. 2015-11, Inventory2018-13, Fair Value Measurement (Topic 330)820): SimplifyingDisclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement of Inventory
•ASU No. 2016-07, Investments - Equity Method2018-15, Intangibles—Goodwill and Joint Ventures (Topic 323)Other—Internal-Use Software (Subtopic 350-40): Simplifying the Transition to the Equity Method ofCustomer's Accounting
for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract
•ASU No. 2016-17,2018-17, Consolidation (Topic 810): Interests Held throughTargeted Improvements to Related Parties That Are under Common Control
Party Guidance for Variable Interest Entities

Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2017-01, Business Combinations2018-12, Financial Services—Insurance (Topic 805)944): ClarifyingTargeted Improvements to the DefinitionAccounting for Long-Duration Contracts. The ASU requires insurance entities with long duration contracts to: (1) review and, if there is a change, update the assumptions used to measure cash flows at least annually, as well as update the discount rate assumption at each reporting date; (2) measure all market risk benefits associated with deposit (or account balance) contracts at fair value; and (3) disclose liability rollforwards and information about significant inputs, judgments, assumptions and methods used in measurement, including changes thereto and the effect of those changes on measurement. In July 2020, the FASB proposed an update to ASU No. 2018-12 to defer its effective date. The proposed update would make the ASU effective for the Company during the first quarter of 2023. ASU No. 2018-12 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 Business
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.


The following ASU’s relate to topicsASUs are relevant to the Company's operations and are not yet effective. These ASU'sASUs are not expected to have a material impact on the Company's financial position, results of operations or cash flows:
•ASU No. 2016-16, 2019-12, Income Taxes (Topic 740): Intra-entity Transfers of Assets Other Than Inventory
Simplifying the Accounting for Income Taxes
•ASU No. 2017-07, Compensation - Retirement Benefits2020-04, Reference Rate Reform (Topic 715)848): ImprovingFacilitation of the PresentationEffects of Net Periodic Pension Cost and Net Periodic Postretirement Benefit CostReference Rate Reform on Financial Reporting

10
ASU No. 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities
ASU No. 2017-09, Stock Compensation (Topic 718): ScopeTable of Modification AccountingContents

3. Acquisitions


SureTec AcquisitionLansing Building Products, LLC


In April 2017,2020, the Company completedacquired a controlling interest in Lansing Building Products, LLC, a supplier of exterior building products and materials to professional contractors throughout the U.S., which simultaneously acquired the distribution business of Harvey Building Products to enhance geographic reach and scale (together, Lansing), bringing the Company's ownership in Lansing to 91%. Under the terms of the acquisition of SureTec Financial Corp. (SureTec), a Texas-based privately held surety company primarily offering contract, commercialagreement, the Company has the option to acquire the remaining equity interests and court bonds. Results attributablethe remaining equity holders have the option to this acquisition are includedsell their interests to the Company in the U.S. Insurance segment.

future. The redemption value of the remaining equity interests is generally based on Lansing's earnings in specified periods preceding the redemption dates. Total consideration for this acquisitionboth transactions was $246.9$556.2 million, all of which included cash consideration of $225.6 million. Total consideration also includes the estimated fair value of contingent consideration the Company expects to pay based on SureTec's earnings, as defined in the merger agreement, for the years 2017 through 2020. The purchase price was allocated to the acquired assets and liabilities of SureTec based on estimated fair values on the acquisition date. The Company recognized goodwill of $70.4 million, which is primarily attributable to synergies that are expected to result upon integration of SureTec into the Company's insurance operations. None of the goodwill recognized is expected to be deductible for income tax purposes. The Company also recognized other intangible assets of $103.0 million, which includes $92.0 million of agent relationships to be amortized over a weighted average period of 15 years.

Costa Farms Acquisition

In August 2017, the Company acquired 81% of Costa Farms, a Florida-based privately held grower of house and garden plants. Total consideration for the purchase was $424.5 million, which included cash consideration of $395.2 million. Total consideration also includes the estimated fair value of contingent consideration the Company expects to pay based on Costa Farms' earnings, as defined in the purchase agreement, annually through 2021.cash. The purchase price was preliminarily allocated to the acquired assets and liabilities of Costa FarmsLansing based on estimated fair valuesvalue at the acquisition date. The Company preliminarily recognized goodwill of $201.0$290.8 million, which is primarily attributable to expected future earnings and cash flow potential of Costa Farms.Lansing. The majority of the goodwill recognized is not expected to be deductible for income tax purposes. The Company also preliminarily recognized other intangible assets of $192.0$210.0 million, which includes $161.0$188.0 million of customer relationships and $31.0$22.0 million of trade names, which are expected to be amortized over a weighted average period of 1716 years and nine14 years, respectively. The Company also preliminarily recognized redeemable non-controllingnoncontrolling interests of $66.6$43.6 million. Results attributable to this acquisitionLansing are included within the Company's non-insurance operations, which are not included in a reportableMarkel Ventures segment.


The Company has not completed the process of determining the fair value of the assets acquired and liabilities acquired with Costa Farms.assumed. These valuations willare required to be completed within the measurement period, which cannot exceed 12 months from the acquisition date. As a result, the fair value amounts recorded for these items areis a provisional estimatesestimate and may be 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,goodwill.

VSC Fire & Security, Inc.

In November 2019, the Company acquired VSC Fire & Security, Inc. (VSC), a provider of comprehensive fire protection, life safety, and low voltage solutions to retailers, commercial campuses, healthcare facilities, and government properties throughout the southeastern United States. Total consideration for the acquisition was $225.0 million, which included cash of $204.0 million. Total consideration also included the estimated fair value of contingent consideration the Company expects to pay in 2021 based on VSC's earnings, as defined in the purchase agreement.

As of December 31, 2019, the purchase price was preliminarily allocated to the acquired assets and liabilities of VSC based on estimated fair value at the acquisition date. During the first quarter of 2020, the Company completed the process of determining the fair value of the assets and liabilities acquired with VSC. The Company recognized goodwill of $124.9 million, which is primarily attributable to expected future earnings and cash flow potential of VSC. All of the noncontrolling equity interest holders.


State National Acquisition

In July 2017, thegoodwill recognized is deductible for income tax purposes. The Company entered into a definitive merger agreement to acquire State National Companies, Inc. (State National). State National is a leading specialty provideralso recognized other intangible assets of property and casualty insurance services that includes both fronting services and collateral protection insurance coverage. Under the merger agreement, State National stockholders will receive $21.00 cash for each outstanding share of State National common stock (other than restricted shares that do not vest in connection with the transaction). The aggregate merger consideration,$64.5 million, which includes net cash payments for State National stock options$48.0 million of customer relationships, $14.0 million of trade names and restricted stock, is estimated$2.5 million of other intangible assets, which are being amortized over a weighted average period of 12 years, 12 years and 8 years, respectively. Results attributable to be $919 million. The merger was approved by State National's stockholders on October 24, 2017. The transaction remains subject to customary closing conditions, including regulatory approvals, and is expected to closeVSC are included in the fourth quarterCompany's Markel Ventures segment.

11
Table of 2017.Contents

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 in the tables below are presented before taxes and any reserve deficiency adjustments for life and annuity benefit reserves. See note 11.

 September 30, 2020
(dollars in thousands)Amortized
Cost		Gross
Unrealized
Holding
Gains		Gross
Unrealized
Holding
Losses		Estimated
Fair
Value
Fixed maturity securities:
U.S. Treasury securities$352,049 $10,726 $(37)$362,738 
U.S. government-sponsored enterprises471,629 53,212 (24)524,817 
Obligations of states, municipalities and political subdivisions3,898,016 388,563 (280)4,286,299 
Foreign governments1,333,875 210,688 (2,372)1,542,191 
Commercial mortgage-backed securities1,682,784 150,932 (22)1,833,694 
Residential mortgage-backed securities825,711 67,671 (28)893,354 
Asset-backed securities6,165 168 0 6,333 
Corporate bonds720,133 75,354 (671)794,816 
Total fixed maturity securities9,290,362 957,314 (3,434)10,244,242 
Short-term investments1,898,317 682 (1,540)1,897,459 
Investments, available-for-sale$11,188,679 $957,996 $(4,974)$12,141,701 

 December 31, 2019
(dollars in thousands)Amortized
Cost		Gross
Unrealized
Holding
Gains		Gross
Unrealized
Holding
Losses		Estimated
Fair
Value
Fixed maturity securities:
U.S. Treasury securities$282,305 $2,883 $(402)$284,786 
U.S. government-sponsored enterprises318,831 23,949 (200)342,580 
Obligations of states, municipalities and political subdivisions3,954,779 235,915 (812)4,189,882 
Foreign governments1,415,639 135,763 (9,398)1,542,004 
Commercial mortgage-backed securities1,761,777 57,450 (1,382)1,817,845 
Residential mortgage-backed securities855,641 32,949 (517)888,073 
Asset-backed securities11,042 28 (22)11,048 
Corporate bonds848,826 47,551 (1,686)894,691 
Total fixed maturity securities9,448,840 536,488 (14,419)9,970,909 
Short-term investments1,194,953 1,355 (60)1,196,248 
Investments, available-for-sale$10,643,793 $537,843 $(14,479)$11,167,157 

12
Table of Contents
 September 30, 2017
(dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Unrealized
Other-Than-
Temporary
Impairment
Losses
 
Estimated
Fair
Value
Fixed maturities:         
U.S. Treasury securities$129,631
 $64
 $(859) $—
 $128,836
U.S. government-sponsored enterprises359,492
 11,389
 (1,240) —
 369,641
Obligations of states, municipalities and political subdivisions4,366,775
 199,013
 (12,789) —
 4,552,999
Foreign governments1,395,157
 153,766
 (3,601) —
 1,545,322
Commercial mortgage-backed securities1,195,384
 8,353
 (12,327) —
 1,191,410
Residential mortgage-backed securities799,872
 19,269
 (3,079) —
 816,062
Asset-backed securities20,221
 7
 (72) —
 20,156
Corporate bonds1,248,550
 49,349
 (2,979) —
 1,294,920
Total fixed maturities9,515,082
 441,210
 (36,946) —
 9,919,346
Equity securities:         
Insurance, banks and other financial institutions910,682
 1,103,007
 (3,418) —
 2,010,271
Industrial, consumer and all other1,803,123
 1,908,012
 (11,460) —
 3,699,675
Total equity securities2,713,805
 3,011,019
 (14,878) —
 5,709,946
Short-term investments1,995,489
 87
 (14) —
 1,995,562
Investments, available-for-sale$14,224,376
 $3,452,316
 $(51,838) $—
 $17,624,854

 December 31, 2016
(dollars in thousands)
Amortized
Cost
 
Gross
Unrealized
Holding
Gains
 
Gross
Unrealized
Holding
Losses
 
Unrealized
Other-Than-
Temporary
Impairment
Losses
 
Estimated
Fair
Value
Fixed maturities:         
U.S. Treasury securities$259,379
 $99
 $(894) $—
 $258,584
U.S. government-sponsored enterprises418,457
 9,083
 (4,328) —
 423,212
Obligations of states, municipalities and political subdivisions4,324,332
 145,678
 (41,805) —
 4,428,205
Foreign governments1,306,324
 159,291
 (2,153) —
 1,463,462
Commercial mortgage-backed securities1,055,947
 3,953
 (19,544) —
 1,040,356
Residential mortgage-backed securities779,503
 18,749
 (5,048) (2,258) 790,946
Asset-backed securities27,494
 2
 (158) —
 27,338
Corporate bonds1,420,298
 49,146
 (9,364) (673) 1,459,407
Total fixed maturities9,591,734
 386,001
 (83,294) (2,931) 9,891,510
Equity securities:         
Insurance, banks and other financial institutions846,343
 857,063
 (5,596) —
 1,697,810
Industrial, consumer and all other1,635,105
 1,421,080
 (8,154) —
 3,048,031
Total equity securities2,481,448
 2,278,143
 (13,750) —
 4,745,841
Short-term investments2,336,100
 57
 (6) —
 2,336,151
Investments, available-for-sale$14,409,282
 $2,664,201
 $(97,050) $(2,931) $16,973,502

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.

September 30, 2020
Less than 12 months12 months or longerTotal
(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$51,672 $(37)$0 $0 $51,672 $(37)
U.S. government-sponsored enterprises14,986 (24)0 0 14,986 (24)
Obligations of states, municipalities and political subdivisions57,282 (265)2,994 (15)60,276 (280)
Foreign governments6,105 (85)131,231 (2,287)137,336 (2,372)
Commercial mortgage-backed securities7,372 (9)5,389 (13)12,761 (22)
Residential mortgage-backed securities3,303 (28)0 0 3,303 (28)
Corporate bonds11,391 (370)10,573 (301)21,964 (671)
Total fixed maturity securities152,111 (818)150,187 (2,616)302,298 (3,434)
Short-term investments1,706,815 (1,540)0 0 1,706,815 (1,540)
Total$1,858,926 $(2,358)$150,187 $(2,616)$2,009,113 $(4,974)
 September 30, 2017
 Less than 12 months 12 months or longer Total
(dollars in thousands)
Estimated
Fair
Value
 
Gross
Unrealized
Holding and
Other-Than-
Temporary
Impairment
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Holding and
Other-Than-
Temporary
Impairment
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Holding and
Other-Than-
Temporary
Impairment
Losses
Fixed maturities:           
U.S. Treasury securities$102,240
 $(585) $23,609
 $(274) $125,849
 $(859)
U.S. government-sponsored enterprises102,957
 (1,237) 1,744
 (3) 104,701
 (1,240)
Obligations of states, municipalities and political subdivisions525,844
 (6,801) 143,119
 (5,988) 668,963
 (12,789)
Foreign governments135,018
 (3,594) 7,158
 (7) 142,176
 (3,601)
Commercial mortgage-backed securities569,763
 (12,071) 13,486
 (256) 583,249
 (12,327)
Residential mortgage-backed securities106,673
 (1,501) 70,723
 (1,578) 177,396
 (3,079)
Asset-backed securities9,676
 (38) 6,561
 (34) 16,237
 (72)
Corporate bonds266,040
 (2,275) 69,916
 (704) 335,956
 (2,979)
Total fixed maturities1,818,211
 (28,102) 336,316
 (8,844) 2,154,527
 (36,946)
Equity securities:           
Insurance, banks and other financial institutions23,636
 (2,616) 1,099
 (802) 24,735
 (3,418)
Industrial, consumer and all other60,596
 (8,333) 11,112
 (3,127) 71,708
 (11,460)
Total equity securities84,232
 (10,949) 12,211
 (3,929) 96,443
 (14,878)
Short-term investments75,829
 (14) —
 —
 75,829
 (14)
Total$1,978,272
 $(39,065) $348,527
 $(12,773) $2,326,799
 $(51,838)


At September 30, 2017,2020, the Company held 46578 available-for-sale securities with a total estimated fair value of $2.3$2.0 billion and gross unrealized losses of $51.8$5.0 million. Of these 46578 securities, 10525 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $348.5$150.2 million and gross unrealized losses of $12.8$2.6 million. Of these securities, 90 securities were fixed maturities and 15 were equity securities. The Company does not intend to sell or believe it will be required to sell these fixed maturitiesavailable-for-sale securities before recovery of their amortized cost. The Company has the ability and intent to hold these equity securities for a period of time sufficient to allow for the anticipated recovery of their fair value.



December 31, 2019
Less than 12 months12 months or longerTotal
(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$36,862 $(361)$46,518 $(41)$83,380 $(402)
U.S. government-sponsored enterprises24,148 (197)2,868 (3)27,016 (200)
Obligations of states, municipalities and political subdivisions127,836 (702)6,830 (110)134,666 (812)
Foreign governments162,907 (3,393)159,888 (6,005)322,795 (9,398)
Commercial mortgage-backed securities202,530 (1,126)33,853 (256)236,383 (1,382)
Residential mortgage-backed securities11,706 (66)58,162 (451)69,868 (517)
Asset-backed securities0 0 3,632 (22)3,632 (22)
Corporate bonds41,847 (1,287)40,274 (399)82,121 (1,686)
Total fixed maturity securities607,836 (7,132)352,025 (7,287)959,861 (14,419)
Short-term investments3,316 (60)0 0 3,316 (60)
Total$611,152 $(7,192)$352,025 $(7,287)$963,177 $(14,479)

 December 31, 2016
 Less than 12 months 12 months or longer Total
(dollars in thousands)
Estimated
Fair
Value
 
Gross
Unrealized
Holding and
Other-Than-
Temporary
Impairment
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Holding and
Other-Than-
Temporary
Impairment
Losses
 
Estimated
Fair
Value
 
Gross
Unrealized
Holding and
Other-Than-
Temporary
Impairment
Losses
Fixed maturities:           
U.S. Treasury securities$122,950
 $(894) $—
 $—
 $122,950
 $(894)
U.S. government-sponsored enterprises220,333
 (4,324) 7,618
 (4) 227,951
 (4,328)
Obligations of states, municipalities and political subdivisions1,004,947
 (37,685) 31,723
 (4,120) 1,036,670
 (41,805)
Foreign governments68,887
 (2,145) 5,005
 (8) 73,892
 (2,153)
Commercial mortgage-backed securities749,889
 (19,091) 29,988
 (453) 779,877
 (19,544)
Residential mortgage-backed securities181,557
 (4,987) 79,936
 (2,319) 261,493
 (7,306)
Asset-backed securities14,501
 (106) 5,869
 (52) 20,370
 (158)
Corporate bonds494,573
 (8,357) 93,790
 (1,680) 588,363
 (10,037)
Total fixed maturities2,857,637
 (77,589) 253,929
 (8,636) 3,111,566
 (86,225)
Equity securities:           
Insurance, banks and other financial institutions8,808
 (410) 37,973
 (5,186) 46,781
 (5,596)
Industrial, consumer and all other98,406
 (4,772) 29,650
 (3,382) 128,056
 (8,154)
Total equity securities107,214
 (5,182) 67,623
 (8,568) 174,837
 (13,750)
Short-term investments504,211
 (6) —
 —
 504,211
 (6)
Total$3,469,062
 $(82,777) $321,552
 $(17,204) $3,790,614
 $(99,981)

At December 31, 2016,2019, the Company held 654201 securities with a total estimated fair value of $3.8 billion$963.2 million and gross unrealized losses of $100.0$14.5 million. Of these 654201 securities, 109122 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $321.6$352.0 million and gross unrealized losses of $17.2$7.3 million. Of these securities, 93 securities were fixed maturities and 16 were equity securities.


The
13
Table of Contents
Following the adoption of ASC 326, as described in note 1, beginning January 1, 2020 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 deemed other-than-temporary.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 other-than-temporarycredit-related impairment to determine whether a credit loss exists, including the length of time and the extent to which fair value has beenis 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 and near-term prospects of the issuer. For equity securities, the ability and intent to hold the security for a period of time sufficient to allow for anticipated recovery is considered. For fixed maturities, the Company considers whether it intends to sell the security or if it is more likely than not that it will be required to sell the security before recovery, the implied yield-to-maturity, the credit quality of the issuer and industry factors that could negatively impact the ability to recover all amounts outstanding when contractually due.capital markets.


For equity securities, a decline in fair value that is considered to be other-than-temporary is recognized in net income (loss) based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. For fixed maturities where the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before recovery of its amortized cost, a decline in fair value is considered to be other-than-temporary and is recognized in net income (loss) based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security. If the decline in fair value of a fixed maturityan available-for-sale security below its amortized cost is considered to be other-than-temporary based upon other considerations,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-related portion of the other-than-temporary impairment,credit loss, which is recorded as an allowance and recognized in net income (loss), resulting in a newincome. The allowance is limited to the difference between the fair value and the amortized cost basis forof the security. Any remaining decline in fair value represents the non-credit portion of the other-than-temporary impairment, which is recognized in other comprehensive income.

The discount rate used to calculate the estimated present value of the cash flows expected to be collected is the effective interest rate implicit for the security at the date of purchase.


When assessingCompany also considers whether it intends to sell a fixed maturityan available-for-sale security or if it is more likely tothan not that it will be required to sell a fixed maturitythe 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 Company evaluates facts and circumstances including decisions to reposition the investment portfolio, potential sales of investments to meet cash flow needs and, ultimately, current market prices.security.


c)The amortized cost and estimated fair value of fixed maturitiesmaturity securities at September 30, 20172020 are shown below by contractual maturity.

(dollars in thousands)Amortized
Cost		Estimated
Fair Value
Due in one year or less$346,355 $348,093 
Due after one year through five years1,512,824 1,608,497 
Due after five years through ten years2,169,620 2,385,810 
Due after ten years2,746,903 3,168,461 
6,775,702 7,510,861 
Commercial mortgage-backed securities1,682,784 1,833,694 
Residential mortgage-backed securities825,711 893,354 
Asset-backed securities6,165 6,333 
Total fixed maturity securities$9,290,362 $10,244,242 

(dollars in thousands)
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less$375,471
 $377,672
Due after one year through five years1,232,430
 1,276,160
Due after five years through ten years1,567,938
 1,646,296
Due after ten years4,323,766
 4,591,590
 7,499,605
 7,891,718
Commercial mortgage-backed securities1,195,384
 1,191,410
Residential mortgage-backed securities799,872
 816,062
Asset-backed securities20,221
 20,156
Total fixed maturities$9,515,082
 $9,919,346

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

Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Interest:
Municipal bonds (tax-exempt)$15,693 $17,456 $48,451 $54,167 
Municipal bonds (taxable)16,456 18,442 50,185 55,634 
Other taxable bonds38,788 40,560 118,376 122,583 
Short-term investments, including overnight deposits894 14,294 13,516 38,259 
Dividends on equity securities20,282 25,493 66,916 73,486 
Income (loss) from equity method investments2,483 366 (11,849)3,436 
Other(365)797 438 3,971 
94,231 117,408 286,033 351,536 
Investment expenses(3,847)(4,026)(11,791)(12,141)
Net investment income$90,384 $113,382 $274,242 $339,395 

14
Table of Contents
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Interest:       
Municipal bonds (tax-exempt)$21,486
 $22,136
 $66,616
 $66,621
Municipal bonds (taxable)17,732
 16,710
 53,030
 48,820
Other taxable bonds36,337
 36,697
 107,521
 108,975
Short-term investments, including overnight deposits7,779
 2,878
 18,562
 7,823
Dividends on equity securities21,467
 17,308
 61,090
 51,718
Income from equity method investments4,239
 1,232
 10,634
 4,900
Other(315) (60) (520) 2,614
 108,725
 96,901
 316,933
 291,471
Investment expenses(4,236) (3,754) (12,777) (12,034)
Net investment income$104,489
 $93,147
 $304,156
 $279,437


e)The following table presents the components of net realized investment gains (losses) and the change in net unrealized gains on investments. included in other comprehensive income.


 Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Fixed maturity securities:
Realized gains$5,292 $856 $12,025 $2,660 
Realized losses(1,209)(198)(7,480)(1,109)
Change in allowance for expected credit losses202 0 0 0 
Short-term investments:
Realized gains655 1,540 1,756 1,288 
Realized losses(43)(2,172)(399)(2,659)
Cost-method investments:
Realized gains0 0 11,167 0 
Other investment gains (losses):38 124 (5,208)584 
Net realized investment gains4,935 150 11,861 764 
Equity securities:
Change in fair value of securities sold during the period16,090 (345)(453,258)35,786 
Change in fair value of securities held at the end of the period518,277 32,339 210,501 1,033,438 
Total change in fair value534,367 31,994 (242,757)1,069,224 
Net investment gains (losses)$539,302 $32,144 $(230,896)$1,069,988 
Change in net unrealized gains on available-for-sale investments included in other comprehensive income:
Fixed maturity securities$96,723 $95,170 $431,811 $509,712 
Short-term investments1,425 (2,266)(2,153)1,595 
Reserve deficiency adjustment for life and annuity benefit reserves (see note 11)(20,625)(31,314)(56,237)(93,065)
Net increase$77,523 $61,590 $373,421 $418,242 

15
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Realized gains:       
Sales of fixed maturities$3,426
 $3,698
 $4,189
 $4,658
Sales of equity securities9,276
 18,418
 25,806
 63,931
Other1,129
 423
 5,979
 1,117
Total realized gains13,831
 22,539
 35,974
 69,706
Realized losses:       
Sales of fixed maturities(663) (60) (1,271) (608)
Sales of equity securities(578) (4,187) (1,791) (6,672)
Other-than-temporary impairments(3,444) —
 (7,261) (12,080)
Other(776) (55) (1,086) (2,972)
Total realized losses(5,461) (4,302) (11,409) (22,332)
Gains (losses) on securities measured at fair value through net income (loss)(48,377) 9,179
 (26,080) 18,462
Net realized investment gains (losses)$(40,007) $27,416
 $(1,515) $65,836
Change in net unrealized gains on investments included in other comprehensive income:       
Fixed maturities$20,428
 $(53,962) $104,488
 $399,020
Equity securities308,324
 80,285
 731,748
 220,029
Short-term investments16
 58
 22
 23
Net increase$328,768
 $26,381
 $836,258
 $619,072

Table of Contents
5. Fair Value Measurements


FASB ASC 820-10, 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 FASB 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.



Investments available-for-sale. Investments available-for-saleAvailable-for-sale investments and equity securities. Available-for-sale investments and equity securities are recorded at fair value on a recurring basis andbasis. Available-for-sale investments include fixed maturities, equitymaturity 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 for available-for-sale investments available-for-sale isand equity securities are 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 maturitiesmaturity 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 certain insurance-linked securities funds (ILS Funds)managed by Markel CATCo Investment Management Ltd. (MCIM), as further described in note 12, whicha consolidated subsidiary, that are not traded on an active exchange, as further described and defined in note 12 (the Markel CATCo Funds), and are valued using unobservable inputs.

16
Table of Contents
Fair value for available-for-sale investments available-for-saleand 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 maturitiesmaturity securities are classified as Level 2 investments. The fair value of fixed maturitiesmaturity 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 described above. If there are no recent reported trades, the fair value of fixed maturitiesmaturity 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.


Due to the significance of unobservable inputs required in measuring the fair value of the Company's investments in the ILSMarkel CATCo Funds, these investments are classified as Level 3 within the fair value hierarchy. Changes in fair value of the ILS Funds are included in net realized gains (losses) in net income (loss). The fair value of the securities are 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 in which the ILSMarkel CATCo Funds invest. Significant unobservable inputs used in the valuation of these investments include an adjustment to include the fair value of the equity that was issued by one of the ILSMarkel CATCo Funds in exchange for notes receivable, rather than cash, which is excluded from NAV. The determination of fair value of the securities also considers external market data, including the trading price relative to its NAV of CATCo Reinsurance Opportunities Fund Ltd. (CROF), a comparable security traded on a market operated by the London Stock Exchange and on the Bermuda Stock Exchange. In July 2019, the Markel CATCo Funds were placed into run-off and capital is being returned to investors as it becomes available. However, due to the significant loss events on the underlying securitized reinsurance contracts in 2017 and 2018, portions of the Company's investments in the ILS Funds are redeemable annually as of January 1st of each calendar year.may be restricted up to three years.


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, which includes the price of a comparable security and an insurance-linked security index.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 for senior long-term debt and other debt 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.


17
Table of Contents
The following tables present the balances of assets measured at fair value on a recurring basis by level within the fair value hierarchy.

September 30, 2020
(dollars in thousands)Level 1Level 2Level 3Total
Assets:
Investments:
Fixed maturity securities, available-for-sale:
U.S. Treasury securities$0 $362,738 $0 $362,738 
U.S. government-sponsored enterprises0 524,817 0 524,817 
Obligations of states, municipalities and political subdivisions0 4,286,299 0 4,286,299 
Foreign governments0 1,542,191 0 1,542,191 
Commercial mortgage-backed securities0 1,833,694 0 1,833,694 
Residential mortgage-backed securities0 893,354 0 893,354 
Asset-backed securities0 6,333 0 6,333 
Corporate bonds0 794,816 0 794,816 
Total fixed maturity securities, available-for-sale0 10,244,242 0 10,244,242 
Equity securities:
Insurance, banks and other financial institutions2,161,293 0 102,050 2,263,343 
Industrial, consumer and all other3,920,601 0 0 3,920,601 
Total equity securities6,081,894 0 102,050 6,183,944 
Short-term investments, available-for-sale1,787,423 110,036 0 1,897,459 
Total investments$7,869,317 $10,354,278 $102,050 $18,325,645 

December 31, 2019
(dollars in thousands)Level 1Level 2Level 3Total
Assets:
Investments:
Fixed maturity securities, available-for-sale:
U.S. Treasury securities$0 $284,786 $0 $284,786 
U.S. government-sponsored enterprises0 342,580 0 342,580 
Obligations of states, municipalities and political subdivisions0 4,189,882 0 4,189,882 
Foreign governments0 1,542,004 0 1,542,004 
Commercial mortgage-backed securities0 1,817,845 0 1,817,845 
Residential mortgage-backed securities0 888,073 0 888,073 
Asset-backed securities0 11,048 0 11,048 
Corporate bonds0 894,691 0 894,691 
Total fixed maturity securities, available-for-sale0 9,970,909 0 9,970,909 
Equity securities:
Insurance, banks and other financial institutions2,463,190 0 45,992 2,509,182 
Industrial, consumer and all other5,081,573 0 0 5,081,573 
Total equity securities7,544,763 0 45,992 7,590,755 
Short-term investments, available-for-sale1,093,799 102,449 0 1,196,248 
Total investments$8,638,562 $10,073,358 $45,992 $18,757,912 

18
 September 30, 2017
(dollars in thousands)Level 1 Level 2 Level 3 Total
Assets:       
Investments available-for-sale:       
Fixed maturities:       
U.S. Treasury securities$—
 $128,836
 $—
 $128,836
U.S. government-sponsored enterprises—
 369,641
 —
 369,641
Obligations of states, municipalities and political subdivisions—
 4,552,999
 —
 4,552,999
Foreign governments—
 1,545,322
 —
 1,545,322
Commercial mortgage-backed securities—
 1,191,410
 —
 1,191,410
Residential mortgage-backed securities—
 816,062
 —
 816,062
Asset-backed securities—
 20,156
 —
 20,156
Corporate bonds—
 1,294,920
 —
 1,294,920
Total fixed maturities—
 9,919,346
 —
 9,919,346
Equity securities:       
Insurance, banks and other financial institutions1,828,997
 —
 181,274
 2,010,271
Industrial, consumer and all other3,699,675
 —
 —
 3,699,675
Total equity securities5,528,672
 —
 181,274
 5,709,946
Short-term investments1,895,262
 100,300
 —
 1,995,562
Total investments available-for-sale$7,423,934
 $10,019,646
 $181,274
 $17,624,854


Table of Contents
 December 31, 2016
(dollars in thousands)Level 1 Level 2 Level 3 Total
Assets:       
Investments available-for-sale:       
Fixed maturities:       
U.S. Treasury securities$—
 $258,584
 $—
 $258,584
U.S. government-sponsored enterprises—
 423,212
 —
 423,212
Obligations of states, municipalities and political subdivisions—
 4,428,205
 —
 4,428,205
Foreign governments—
 1,463,462
 —
 1,463,462
Commercial mortgage-backed securities—
 1,040,356
 —
 1,040,356
Residential mortgage-backed securities—
 790,946
 —
 790,946
Asset-backed securities—
 27,338
 —
 27,338
Corporate bonds—
 1,459,407
 —
 1,459,407
Total fixed maturities—
 9,891,510
 —
 9,891,510
Equity securities:       
Insurance, banks and other financial institutions1,506,607
 —
 191,203
 1,697,810
Industrial, consumer and all other3,048,031
 —
 —
 3,048,031
Total equity securities4,554,638
 —
 191,203
 4,745,841
Short-term investments2,255,898
 80,253
 —
 2,336,151
Total investments available-for-sale$6,810,536
 $9,971,763
 $191,203
 $16,973,502

The following table summarizes changes in Level 3 investments measured at fair value on a recurring basis.
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Equity securities, beginning of period$115,648 $37,988 $45,992 $53,728 
Purchases0 0 90,000 500 
Sales(13,472)(857)(31,365)(7,726)
Net investment gains (losses) on Level 3 investments(126)7,358 (2,577)(2,013)
Transfers into Level 30 0 0 0 
Transfers out of Level 30 0 0 0 
Equity securities, end of period$102,050 $44,489 $102,050 $44,489 
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Equity securities, beginning of period$183,913
 $183,523
 $191,203
 $—
Purchases49,000
 —
 56,250
 195,250
Sales—
 —
 (26,674) (25,000)
Total gains (losses) included in:       
Net income (loss)(51,639) 6,881
 (39,505) 20,154
Other comprehensive income—
 —
 —
 —
Transfers into Level 3—
 —
 —
 —
Transfers out of Level 3—
 —
 —
 —
Equity securities, end of period$181,274
 $190,404
 $181,274
 $190,404
Net unrealized gains (losses) included in net income (loss) relating to assets held at September 30, 2017 and 2016 (1)
$(51,639) $6,881
 $(39,505) $20,154

(1)IncludedIn connection with the run-off of one of the Markel CATCo Funds and to facilitate the return of capital to third party investors, the Company invested $90.0 million in net realizedthat fund effective January 1, 2020. This investment gains (losses)replaces collateral previously provided by other investors for risk exposures within the underlying reinsurance contracts in which the consolidated statementsfund is invested related to loss events that occur after December 31, 2019 and through the expiration of income (loss) and comprehensive income (loss).

Net realized investment lossesthe reinsurance contracts, all of which either had expired or were commuted as of September 30, 2020. Underwriting results for the quarter and nine months ended September 30, 2017 included losses of $51.6 million and $39.5 million, respectively,2020 loss exposures on these contracts are attributed to the Company'sCompany through its investment in the ILS Funds as a result of a decrease in the NAV of the ILS Funds during the third quarter.fund.


There were no transfers into or out of Level 1 and Level 2 during the quarter and nine months ended September 30, 2017 and 2016.

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 nine months ended September 30, 20172020 and 2016.2019.



6. Receivables

The following table presents the components of receivables and the related allowance for credit losses.
(dollars in thousands)September 30, 2020December 31, 2019
Amounts receivable from agents, brokers and insureds$1,527,801 $1,424,881 
Trade accounts receivable330,721 259,062 
Other171,889 182,582 
2,030,411 1,866,525 
Allowance for credit losses(26,331)(18,723)
Receivables$2,004,080 $1,847,802 

The increase in the allowance for credit losses on receivables from December 31, 2019 to September 30, 2020 reflects the impact of adopting ASC 326 effective January 1, 2020 as well as a decline in short-term economic conditions as forecasted during the nine months ended September 30, 2020 as a result of expected impacts from the COVID-19 pandemic. See note 1 for further details regarding the impact of adopting ASC 326.
19
Table of Contents
7. Segment Reporting Disclosures


The Company monitors and reports itschief operating decision maker reviews the Company's ongoing underwriting operations on a global basis in the following threetwo segments: U.S. Insurance, International Insurance and Reinsurance. In determining how to aggregateallocate resources and monitorassess the performance of its underwriting results, the Companymanagement considers many factors, including the geographic location and regulatory environment of the insurance entity underwriting the risk, the nature of the insurance product sold, the type of account written and the type of customer served. The U.S. Insurance segment includes all direct business and facultative placements written bywithin the Company's insurance subsidiaries domiciled in the United States. The International Insurance segment includes all direct business and facultative placements written by the Company's insurance subsidiaries domiciled outside of the United States, including the Company's syndicate at Lloyd's of London.underwriting operations. The Reinsurance segment includes all treaty reinsurance written acrosswithin the Company. Results for lines of business discontinued prior to, or in conjunction with, acquisitions, including the results attributable to the run-off of life and annuity reinsurance business, are reported in the Other Insurance (Discontinued Lines) segment.Company's underwriting operations. All investing activities related to the Company's insurance operations are included in the Investing segment.


The Company's non-insurance operations includechief operating decision maker reviews and assesses Markel Ventures' performance in the Company'saggregate, as a single operating segment. The Markel Ventures operations, whichsegment primarily consistconsists of controlling interests in variousa diverse portfolio of businesses that operate outside of the specialty insurance marketplace. in various industries.

The Company's non-insuranceother operations also include the results of the Company's insurance-linked securities operations and program services business, as well as the results of its legal and professional consulting servicesservices. 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 resultsrun-off of life and annuity reinsurance business, which are monitored separately from the Company's investment management services attributable to Markel CATCo Investment Management Ltd.ongoing underwriting operations. For purposes of segment reporting, the Company's non-insurancenone of these other operations are not considered to be a reportable segment.segments.


Segment profit for the Investing segment is measured by net investment income and net realized investment gains. Segment profit or loss for each of the Company's underwriting segments is measured by underwriting profit or loss.profit. 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. Underwriting profit or loss 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 or loss for the Company's underwriting segments also includes other revenuesInvesting segment is measured by net investment income and other expenses, primarily related tonet investment gains. Segment profit for the run-off of managing general agent operations that were discontinued in conjunction with acquisitions. Other revenues and other expenses in the Other Insurance (Discontinued Lines)Markel Ventures segment are comprised of the results attributable to the run-off of life and annuity reinsurance business.is measured by operating income.


For management reporting purposes, the Company allocates assets to its underwriting investingoperations and non-insuranceto 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 all assets not specifically allocated to the Investing segment or to the Company's non-insuranceother operations. Underwriting and investing assets are not allocated to the U.S. Insurance, International Insurance, Reinsurance or Other Insurance (Discontinued Lines)Company's underwriting segments since the Company does not manage its assets by underwriting segment. The Company does not allocate capital expenditures for long-lived assets to anyeither of its underwriting segments for management reporting purposes.



20
Table of Contents
a)The following tables summarize the Company's segment disclosures.
Quarter Ended September 30, 2020
(dollars in thousands)InsuranceReinsuranceInvesting
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume$1,514,002 $222,066 $0 $0 $536,666 $2,272,734 
Net written premiums1,220,054 178,994 0 0 (1,772)1,397,276 
Earned premiums1,173,758 222,369 0 0 (1,699)1,394,428 
Losses and loss adjustment expenses:
Current accident year(817,174)(213,325)0 0 0 (1,030,499)
Prior accident years137,312 30,681 0 0 (741)167,252 
Amortization of policy acquisition costs(239,096)(56,997)0 0 0 (296,093)
Other operating expenses(179,840)(17,609)0 0 718 (196,731)
Underwriting profit (loss)74,960 (34,881)0 0 (1,722)38,357 
Net investment income0 0 90,380 4 0 90,384 
Net investment gains0 0 539,302 0 0 539,302 
Products revenues0 0 0 342,039 0 342,039 
Services and other revenues0 0 0 482,089 63,493 545,582 
Products expenses0 0 0 (296,371)0 (296,371)
Services and other expenses0 0 0 (432,294)(89,943)(522,237)
Amortization of intangible assets (3)
0 0 0 (15,862)(28,802)(44,664)
Segment profit (loss)$74,960 $(34,881)$629,682 $79,605 $(56,974)$692,392 
Interest expense(42,744)
Net foreign exchange losses(65,577)
Income before income taxes$584,071 
U.S. GAAP combined ratio (4)
94 %116 %NM(5)97 %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $15.3 million for the quarter ended September 30, 2020.
(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 quarter ended September 30, 2020, 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
21
Table of Contents
Quarter Ended September 30, 2017Quarter Ended September 30, 2019
(dollars in thousands)
U.S.
Insurance
 
International
Insurance
 Reinsurance 
Other
Insurance
(Discontinued
Lines)
 Investing Consolidated(dollars in thousands)InsuranceReinsuranceInvesting
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume$778,323
 $319,914
 $230,077
 $(186) $—
 $1,328,128
Gross premium volume$1,418,363 $226,387 $0 $0 $619,742 $2,264,492 
Net written premiums653,970
 254,326
 189,636
 (178) —
 1,097,754
Net written premiums1,181,919 187,180 0 0 1,285 1,370,384 
           
Earned premiums600,294
 240,145
 259,601
 (178) —
 1,099,862
Earned premiums1,058,869 240,144 0 0 1,019 1,300,032 
Losses and loss adjustment expenses:           Losses and loss adjustment expenses:
Current accident year(533,662) (274,581) (418,297) —
 —
 (1,226,540)Current accident year(722,172)(178,058)0 0 0 (900,230)
Prior accident years87,613
 40,740
 21,164
 1,591
 —
 151,108
Prior accident years135,029 13,800 0 0 (733)148,096 
Amortization of policy acquisition costs(134,243) (43,140) (53,440) —
 —
 (230,823)Amortization of policy acquisition costs(218,710)(61,925)0 0 0 (280,635)
Other operating expenses(90,350) (50,771) (23,885) (80) —
 (165,086)Other operating expenses(171,731)(20,436)0 0 (2,417)(194,584)
Underwriting profit (loss)(70,348) (87,607) (214,857) 1,333
 —
 (371,479)Underwriting profit (loss)81,285 (6,475)0 0 (2,131)72,679 
Net investment income—
 —
 —
 —
 104,489
 104,489
Net investment income0 0 113,220 162 0 113,382 
Net realized investment losses—
 —
 —
 —
 (40,007) (40,007)
Other revenues (insurance)979
 658
 —
 428
 —
 2,065
Other expenses (insurance)(162) (1,035) —
 (6,776) —
 (7,973)
Net investment gainsNet investment gains0 0 32,144 0 0 32,144 
Products revenuesProducts revenues0 0 0 386,708 0 386,708 
Services and other revenuesServices and other revenues0 0 0 109,373 91,419 200,792 
Products expensesProducts expenses0 0 0 (354,404)0 (354,404)
Services and other expensesServices and other expenses0 0 0 (96,015)(57,343)(153,358)
Amortization of intangible assets (3)
Amortization of intangible assets (3)
0 0 0 (10,357)(25,338)(35,695)
Segment profit (loss)$(69,531) $(87,984) $(214,857) $(5,015) $64,482
 $(312,905)Segment profit (loss)$81,285 $(6,475)$145,364 $35,467 $6,607 $262,248 
Other revenues (non-insurance)          339,739
Other expenses (non-insurance)          (336,314)
Amortization of intangible assets          (18,654)
Interest expense          (31,814)Interest expense(47,465)
Loss before income taxes          $(359,948)
U.S. GAAP combined ratio (1)
112% 136% 183% NM
(2) 
  134%
Net foreign exchange gainsNet foreign exchange gains53,850 
Loss on early extinguishment of debtLoss on early extinguishment of debt(6,705)
Income before income taxesIncome before income taxes$261,928 
U.S. GAAP combined ratio (4)
U.S. GAAP combined ratio (4)
92 %103 %NM(5)94 %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $12.9 million for the quarter ended September 30, 2019.
(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 quarter ended September 30, 2019, 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
22
Table of Contents
 Quarter Ended September 30, 2016
(dollars in thousands)
U.S.
Insurance
 
International
Insurance
 Reinsurance 
Other
Insurance
(Discontinued
Lines)
 Investing Consolidated
Gross premium volume$663,196
 $269,093
 $196,948
 $536
 $—
 $1,129,773
Net written premiums562,215
 209,656
 157,043
 469
 —
 929,383
            
Earned premiums548,792
 218,968
 206,018
 466
 —
 974,244
Losses and loss adjustment expenses:           
Current accident year(370,435) (159,812) (129,875) —
 —
 (660,122)
Prior accident years21,471
 42,705
 19,135
 (2,594) —
 80,717
Amortization of policy acquisition costs(115,504) (38,075) (48,294) —
 —
 (201,873)
Other operating expenses(91,124) (44,716) (34,196) (612) —
 (170,648)
Underwriting profit (loss)(6,800) 19,070
 12,788
 (2,740) —
 22,318
Net investment income—
 —
 —
 —
 93,147
 93,147
Net realized investment gains—
 —
 —
 —
 27,416
 27,416
Other revenues (insurance)1,285
 419
 —
 466
 —
 2,170
Other expenses (insurance)(670) (677) —
 (4,232) —
 (5,579)
Segment profit (loss)$(6,185) $18,812
 $12,788
 $(6,506) $120,563
 $139,472
Other revenues (non-insurance)          334,305
Other expenses (non-insurance)          (304,134)
Amortization of intangible assets          (17,010)
Interest expense          (33,152)
Income before income taxes          $119,481
U.S. GAAP combined ratio (1)
101% 91% 94% NM
(2) 
  98%
(1)
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.
(2)
NM – Ratio is not meaningful.



Nine Months Ended September 30, 2020
(dollars in thousands)InsuranceReinsuranceInvesting
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume$4,482,149 $958,529 $0 $0 $1,528,072 $6,968,750 
Net written premiums3,683,767 820,573 0 0 (4,191)4,500,149 
Earned premiums3,400,760 688,884 0 0 (4,333)4,085,311 
Losses and loss adjustment expenses:
Current accident year(2,554,010)(534,218)0 0 0 (3,088,228)
Prior accident years404,649 29,049 0 0 1,719 435,417 
Amortization of policy acquisition costs(717,300)(176,799)0 0 0 (894,099)
Other operating expenses(530,440)(51,001)0 0 (1,809)(583,250)
Underwriting profit (loss)3,659 (44,085)0 0 (4,423)(44,849)
Net investment income0 0 274,000 242 0 274,242 
Net investment losses0 0 (230,896)0 0 (230,896)
Products revenues0 0 0 1,117,781 0 1,117,781 
Services and other revenues0 0 0 895,469 237,509 1,132,978 
Products expenses0 0 0 (974,925)0 (974,925)
Services and other expenses0 0 0 (798,502)(226,231)(1,024,733)
Amortization of intangible assets (3)
0 0 0 (39,299)(80,977)(120,276)
Segment profit (loss)$3,659 $(44,085)$43,104 $200,766 $(74,122)$129,322 
Interest expense(133,201)
Net foreign exchange losses(8,736)
Loss before income taxes$(12,615)
U.S. GAAP combined ratio (4)
100 %106 %NM(5)101 %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $43.5 million for the nine months ended September 30, 2020.
(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 $31.5 million for the nine months ended September 30, 2020, 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

23
Table of Contents
Nine Months Ended September 30, 2017Nine Months Ended September 30, 2019
(dollars in thousands)
U.S.
Insurance
 
International
Insurance
 Reinsurance 
Other
Insurance
(Discontinued
Lines)
 Investing Consolidated(dollars in thousands)InsuranceReinsuranceInvesting
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume$2,171,481
 $949,031
 $1,025,716
 $(185) $—
 $4,146,043
Gross premium volume$3,979,559 $963,145 $0 $0 $1,823,977 $6,766,681 
Net written premiums1,829,528
 766,571
 899,698
 (157) —
 3,495,640
Net written premiums3,306,447 844,949 0 0 1,719 4,153,115 
           
Earned premiums1,727,871
 673,606
 714,718
 (157) —
 3,116,038
Earned premiums3,023,865 678,382 0 0 1,223 3,703,470 
Losses and loss adjustment expenses:           Losses and loss adjustment expenses:
Current accident year(1,259,777) (579,601) (710,093) —
 —
 (2,549,471)Current accident year(1,998,042)(456,870)0 0 0 (2,454,912)
Prior accident years207,499
 146,268
 (22,248) 7,823
 —
 339,342
Prior accident years309,324 20,695 0 0 6,893 336,912 
Amortization of policy acquisition costs(371,241) (114,219) (163,385) —
 —
 (648,845)Amortization of policy acquisition costs(627,318)(178,209)0 0 0 (805,527)
Other operating expenses(292,409) (157,249) (70,293) (379) —
 (520,330)Other operating expenses(526,884)(58,301)0 0 (2,035)(587,220)
Underwriting profit (loss)11,943
 (31,195) (251,301) 7,287
 —
 (263,266)
Underwriting profitUnderwriting profit180,945 5,697 0 0 6,081 192,723 
Net investment income—
 —
 —
 —
 304,156
 304,156
Net investment income0 0 338,783 612 0 339,395 
Net realized investment losses—
 —
 —
 —
 (1,515) (1,515)
Other revenues (insurance)2,685
 5,227
 417
 1,634
 —
 9,963
Other expenses (insurance)(1,005) (6,109) —
 (21,009) —
 (28,123)
Net investment gainsNet investment gains0 0 1,069,988 0 0 1,069,988 
Products revenuesProducts revenues0 0 0 1,237,178 0 1,237,178 
Services and other revenuesServices and other revenues0 0 0 330,653 263,978 594,631 
Products expensesProducts expenses0 0 0 (1,098,968)0 (1,098,968)
Services and other expensesServices and other expenses0 0 0 (290,745)(208,015)(498,760)
Amortization of intangible assets (3)
Amortization of intangible assets (3)
0 0 0 (31,674)(80,989)(112,663)
Segment profit (loss)$13,623
 $(32,077) $(250,884) $(12,088) $302,641
 $21,215
Segment profit (loss)$180,945 $5,697 $1,408,771 $147,056 $(18,945)$1,723,524 
Other revenues (non-insurance)          970,750
Other expenses (non-insurance)          (897,861)
Amortization of intangible assets          (53,450)
Interest expense          (97,013)Interest expense(129,022)
Loss before income taxes          $(56,359)
U.S. GAAP combined ratio (1)
99% 105% 135% NM
(2) 
  108%
Net foreign exchange gainsNet foreign exchange gains57,001 
Loss on early extinguishment of debtLoss on early extinguishment of debt(6,705)
Income before income taxesIncome before income taxes$1,644,798 
U.S. GAAP combined ratio (4)
U.S. GAAP combined ratio (4)
94 %99 %NM(5)95 %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $40.4 million for the nine months ended September 30, 2019.
(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 $29.5 million for the nine months ended September 30, 2019, 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

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

(dollars in thousands)September 30, 2020December 31, 2019
Segment assets:
Investing$23,412,502 $22,129,633 
Underwriting7,304,769 6,621,639 
Markel Ventures3,657,470 2,550,835 
Total segment assets34,374,741 31,302,107 
Other operations5,795,278 6,171,708 
Total assets$40,170,019 $37,473,815 

24
 Nine Months Ended September 30, 2016
(dollars in thousands)
U.S.
Insurance
 
International
Insurance
 Reinsurance 
Other
Insurance
(Discontinued
Lines)
 Investing Consolidated
Gross premium volume$2,000,454
 $879,078
 $920,038
 $515
 $—
 $3,800,085
Net written premiums1,694,193
 680,691
 786,450
 555
 —
 3,161,889
            
Earned premiums1,614,588
 637,365
 630,151
 685
 —
 2,882,789
Losses and loss adjustment expenses:           
Current accident year(1,038,860) (451,741) (413,044) —
 —
 (1,903,645)
Prior accident years126,457
 111,359
 90,140
 10,764
 —
 338,720
Amortization of policy acquisition costs(336,093) (105,220) (138,895) —
 —
 (580,208)
Other operating expenses(280,913) (162,739) (88,243) (686) —
 (532,581)
Underwriting profit85,179
 29,024
 80,109
 10,763
 —
 205,075
Net investment income—
 —
 —
 —
 279,437
 279,437
Net realized investment gains—
 —
 —
 —
 65,836
 65,836
Other revenues (insurance)3,662
 5,149
 —
 1,407
 —
 10,218
Other expenses (insurance)(2,078) (4,368) —
 (19,432) —
 (25,878)
Segment profit (loss)$86,763
 $29,805
 $80,109
 $(7,262) $345,273
 $534,688
Other revenues (non-insurance)          945,121
Other expenses (non-insurance)          (836,837)
Amortization of intangible assets          (51,474)
Interest expense          (97,690)
Loss on early extinguishment of debt          (44,100)
Income before income taxes          $449,708
U.S. GAAP combined ratio (1)
95% 95% 87% NM
(2) 
  93%
(1)
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.
(2)
NM – Ratio is not meaningful.

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

8. Products, Services and Other Revenues

The amount of revenues from contracts with customers was $839.2 million and $535.7 million for the quarters ended September 30, 2020 and 2019, respectively, and $2.1 billion and $1.7 billion for the nine months ended September 30, 2020 and 2019, respectively.

The following tables present 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.
Quarter Ended September 30,
20202019
(dollars in thousands)Markel VenturesOtherTotalMarkel VenturesOtherTotal
Products$332,584 $0 $332,584 $378,421 $0 $378,421 
Services467,377 18,136 485,513 97,062 17,516 114,578 
Investment management0 21,066 21,066 0 42,750 42,750 
Total revenues from contracts with customers799,961 39,202 839,163 475,483 60,266 535,749 
Program services and other fronting0 23,395 23,395 0 30,775 30,775 
Other24,167 896 25,063 20,598 378 20,976 
Total$824,128 $63,493 $887,621 $496,081 $91,419 $587,500 

Nine Months Ended September 30,
20202019
(dollars in thousands)Markel VenturesOtherTotalMarkel VenturesOtherTotal
Products$1,085,338 $0 $1,085,338 $1,198,124 $0 $1,198,124 
Services850,861 86,143 937,004 291,617 64,142 355,759 
Investment management0 75,898 75,898 0 113,738 113,738 
Total revenues from contracts with customers1,936,199 162,041 2,098,240 1,489,741 177,880 1,667,621 
Program services and other fronting0 73,889 73,889 0 84,953 84,953 
Other77,051 1,579 78,630 78,090 1,145 79,235 
Total$2,013,250 $237,509 $2,250,759 $1,567,831 $263,978 $1,831,809 

Receivables from contracts with customers were $378.3 million and $263.9 million as of September 30, 2020 and December 31, 2019, respectively.

25
(dollars in thousands)September 30, 2017 December 31, 2016
Segment assets:   
Investing$19,884,334
 $19,029,584
Underwriting6,528,093
 5,397,696
Total segment assets26,412,427
 24,427,280
Non-insurance operations2,106,984
 1,448,019
Total assets$28,519,411
 $25,875,299
Table of Contents

7.9. Unpaid Losses and Loss Adjustment Expenses


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

Nine Months Ended September 30,
(dollars in thousands)20202019
Net reserves for losses and loss adjustment expenses, beginning of year$9,475,261 $9,214,443 
Effect of foreign currency rate changes on beginning of year balance(25,659)(51,544)
Effect of adoption of ASC 326 (see note 2)3,849 0 
Adjusted net reserves for losses and loss adjustment expenses, beginning of year9,453,451 9,162,899 
Incurred losses and loss adjustment expenses:
Current accident year3,088,228 2,454,912 
Prior accident years(435,467)(336,942)
Total incurred losses and loss adjustment expenses2,652,761 2,117,970 
Payments:
Current accident year469,447 410,493 
Prior accident years1,407,641 1,597,117 
Total payments1,877,088 2,007,610 
Effect of foreign currency rate changes on current year activity(220)(669)
Net reserves for losses and loss adjustment expenses, end of period10,228,904 9,272,590 
Reinsurance recoverables on unpaid losses5,494,327 5,165,226 
Gross reserves for losses and loss adjustment expenses, end of period$15,723,231 $14,437,816 
 Nine Months Ended September 30,
(dollars in thousands)2017 2016
Net reserves for losses and loss adjustment expenses, beginning of year$8,108,717
 $8,235,288
Foreign currency movements158,360
 (56,741)
Adjusted net reserves for losses and loss adjustment expenses, beginning of year8,267,077
 8,178,547
Incurred losses and loss adjustment expenses:   
Current accident year2,549,471
 1,903,645
Prior accident years(335,494) (327,064)
Total incurred losses and loss adjustment expenses2,213,977
 1,576,581
Payments:   
Current accident year342,055
 319,049
Prior accident years1,185,689
 1,219,755
Total payments1,527,744
 1,538,804
Effect of foreign currency rate changes10,582
 38
Net reserves for losses and loss adjustment expenses of acquired insurance companies12,702
 —
Net reserves for losses and loss adjustment expenses, end of period8,976,594
 8,216,362
Reinsurance recoverable on unpaid losses2,466,554
 2,041,928
Gross reserves for losses and loss adjustment expenses, end of period$11,443,148
 $10,258,290

In March 2015, the Company completed a retroactive reinsurance transaction to cede to a third party a portfolio of policies primarily comprised of liabilities arising from asbestos and environmental exposures that originated before 1992. Effective March 31, 2017, the related reserves, which totaled $69.1 million, were formally transferred to the third party by way of a Part VII transfer pursuant to the Financial Services and Markets Act 2000 of the United Kingdom. The Part VII transfer eliminates the uncertainty regarding the potential for adverse development of estimated ultimate liabilities on the underlying policies. Upon completion of the transfer in the first quarter of 2017, the Company recognized a previously deferred gain of $3.9 million, which is included in losses and loss adjustment expenses on the consolidated statement of income (loss) and comprehensive income (loss) for the nine months ended September 30, 2017. This amount is excluded from the prior years' incurred losses and loss adjustment expenses for the nine months ended September 30, 2017 in the above table as the deferred gain was included in other liabilities on the consolidated balance sheet as of December 31, 2016, rather than unpaid losses and loss adjustment expenses.


For the nine months ended September 30, 2016, incurred losses and loss adjustment expenses in the above table exclude $11.7 million of favorable development on prior years loss reserves included in losses and loss adjustment expenses on the consolidated statement of income (loss) and comprehensive income (loss) related to the commutation of a property and casualty deposit contract, for which the underlying deposit liability was included in other liabilities on the consolidated balance sheet as of December 31, 2015, rather than unpaid losses and loss adjustment expenses.

For the nine months ended September 30, 2017, the Company recorded net reserves for losses and loss adjustment expenses of $12.7 million as a result of the acquisition of SureTec.


Underwriting results for the nine months ended September 30, 20172020 included $503.0$371.8 million of net losses and loss adjustment expenses attributed to the COVID-19 pandemic, including $356.8 million for which COVID-19 was identified as the proximate, or direct, cause of loss. These losses and loss adjustment expenses were net of ceded losses of $92.6 million.

Both the gross and net loss estimates for direct losses attributed to COVID-19 represent the Company's best estimates as of September 30, 2020 based upon information currently available. The Company's estimates for these direct losses and loss adjustment expenses are based on reported claims, as well as detailed policy level reviews and reviews of in-force assumed reinsurance contracts for potential exposures. These estimates also consider analysis provided by brokers and claims counsel. There are no recent historical events with similar characteristics to COVID-19, and therefore the Company has no past loss experience on which to base its estimates. Additionally, the economic and social impacts of the pandemic continue to evolve.

Significant assumptions on which the Company's estimates of reserves for direct COVID-19 losses and loss adjustment expenses are based include:
•the scope of coverage provided under the Company's policies, particularly those that provide for business interruption coverage;
•coverage provided under the Company's ceded reinsurance contracts;
•the expected duration of the disruption caused by the COVID-19 pandemic; and
•the ability of insureds to mitigate some or all of their losses.

26
Table of Contents
The Company's estimates continue to be based on broad assumptions about coverage, liability and reinsurance. Additionally, it is highly likely that there will be significant litigation involved in the handling of claims associated with COVID-19, and in certain instances, assessing the validity of policy exclusions for pandemics and interpreting policy terms to determine coverage for pandemics. Such matters have been, and are expected to continue to be, subject to judicial review and also may be subject to government action. A test case of a sample of business interruption coverages for policies written in the United Kingdom, which do not have the same exclusions as policies commonly written in the U.S., concluded in the third quarter of 2020 with the court's judgment finding mostly in favor of policyholders. This ruling was most impactful to certain estimates in the Company's Reinsurance segment, resulting in an increase in the Company's estimate of losses and loss adjustment expenses on certain treaties during the third quarter following an increase in estimated losses by the respective cedents on the treaties. The Company's estimates at September 30, 2020 also reflect additional data gathered through increased claims reporting and a change in expectation of the duration of the pandemic. While the Company believes the net reserves for losses and loss adjustment expenses for COVID-19 as of September 30, 2020 are adequate based on information available at this time, the Company will continue to closely monitor reported claims, government actions, judicial decisions and changes in the levels of worldwide social disruption and economic activity arising from the pandemic and will adjust the estimates of gross and net losses as new information becomes available. Such adjustments to the Company's reserves for COVID-19 losses and loss adjustment expenses may be material to the Company's results of operations, financial condition and cash flows. See note 16 for details regarding other potential loss exposures arising from the pandemic.

In 2020, underwriting results also included $101.0 million of underwriting loss from Hurricanes Harvey, IrmaLaura, Sally and MariaIsaias as well as the earthquakesderecho in Mexico (2017Iowa and wildfires in the western U.S. (2020 Catastrophes). The net loss estimates on the 2020 Catastrophes represent the Company's best estimates based upon information currently available. The estimates for these losses are based on preliminary industry loss estimates, output from both industry and proprietary models, claims received to date and detailed policy and reinsurance contract level reviews. Due to limited claims activity thus far on the 2020 Catastrophes, these loss estimates are still dependent on broad assumptions about coverage, liability and reinsurance and are therefore subject to a wide range of variability. While the Company believes its reserves for the 2020 Catastrophes as of September 30, 2020 are adequate, it continues to closely monitor industry loss estimates and reported claims and will adjust estimates of gross and net losses as new information becomes available.

In 2019, underwriting results included $42.6 million of underwriting loss from Hurricane Dorian and Typhoon Faxai (2019 Catastrophes). The underwriting loss on the 20172019 Catastrophes was comprised of $521.2$45.1 million of estimated net losses and loss adjustment expenses and $18.2partially offset by $2.5 million of net assumed reinstatement premiums. The estimated net losses and loss adjustment expenses on the 2017 Catastrophes for the nine months ended September 30, 2017 were net of estimated reinsurance recoverables of $464.4 million.


For the nine months ended September 30, 2017,2020, incurred losses and loss adjustment expenses included $335.5$435.5 million of favorable development on prior years' loss reserves, which included $302.5$294.9 million of loss reserve redundanciesfavorable development on the Company's general liability, personal lines businessprofessional liability and worker'sworkers' compensation product lines within the U.S. Insurance segment, professional liability, general liability and marine and energy product lines within the International Insurance segment and property and whole account product lines within the Reinsurance segment. Redundancies for the nine months ended September 30, 2017 were partially offset by $85.0 million of adverse development resulting from a decrease in the discount rate, known as the Ogden Rate, used to calculate lump sum awards in United Kingdom (U.K.) bodily injury cases. Effective March 20, 2017, the Ogden Rate decreased from plus 2.5% to minus 0.75%, which represents the first rate change since 2001. The effect of the rate change is most impactful to the Company's U.K. auto casualty exposures through reinsurance contracts written in the Reinsurance segment. In late 2014, the Company ceased writing auto reinsurance in the U.K. The reduction in the Ogden Rate increased the expected claims payments on these exposures, and management increased loss reserves accordingly. The Company's estimate of the ultimate cost of settling these claims is based on many factors, and is subject to increase or decrease as the effect of changes in these factors becomes known over time.


For the nine months ended September 30, 2016,2019, incurred losses and loss adjustment expenses included $327.1$336.9 million of favorable development on prior years' loss reserves, which included $263.3$257.7 million of loss reserve redundanciesfavorable development on the Company's general liability, propertyworkers' compensation and worker's compensationprofessional liability product lines within the U.S. Insurance segment, professional liability and marine and energy product lines within the International Insurance segment and propertyaviation, auto and worker's compensationwhole account product lines within the Reinsurance segment. Redundancies for the nine months ended September 30, 2016 were partially offset by $71.4 million

27
Table of adverse development on our specified medical and medical malpractice product lines within the U.S. Insurance segment.Contents

8. Senior Long-Term Debt and Other Debt

In April 2017, the Company repaid its 7.20% unsecured senior notes due April 14, 2017 ($90.6 million principal outstanding at December 31, 2016).

Also in 2017, the Company repaid $84.3 million of debt assumed in connection with acquisitions.

9. Other Revenues and Other Expenses

The following tables summarize the components of other revenues and other expenses.
 Quarter Ended September 30,
 2017 2016
(dollars in thousands)
Other
Revenues
 
Other
Expenses
 
Other
Revenues
 
Other
Expenses
Insurance:       
Managing general agent operations$1,637
 $1,134
 $1,704
 $1,347
Life and annuity428
 6,776
 466
 4,232
Other—
 63
 —
 —
 2,065
 7,973
 2,170
 5,579
Non-Insurance:       
Markel Ventures: Manufacturing195,535
 173,174
 203,909
 171,595
Markel Ventures: Non-Manufacturing137,213
 145,434
 117,433
 115,529
Investment management1,248
 11,552
 8,297
 10,385
Other5,743
 6,154
 4,666
 6,625
 339,739
 336,314
 334,305
 304,134
Total$341,804
 $344,287
 $336,475
 $309,713
 Nine Months Ended September 30,
 2017 2016
(dollars in thousands)
Other
Revenues
 
Other
Expenses
 
Other
Revenues
 
Other
Expenses
Insurance:       
Managing general agent operations$7,912
 $4,480
 $8,811
 $6,446
Life and annuity1,634
 21,009
 1,407
 19,432
Other417
 2,634
 —
 —
 9,963
 28,123
 10,218
 25,878
Non-Insurance:       
Markel Ventures: Manufacturing556,691
 483,724
 589,752
 491,188
Markel Ventures: Non-Manufacturing376,589
 357,549
 315,863
 295,647
Investment management19,884
 37,682
 22,820
 31,151
Other17,586
 18,906
 16,686
 18,851
 970,750
 897,861
 945,121
 836,837
Total$980,713
 $925,984
 $955,339
 $862,715

The Company's Markel Ventures operations primarily consist of controlling interests in various businesses that operate outside of the specialty insurance marketplace and are viewed by management as separate and distinct from the Company's insurance operations. While each of the businesses is operated independently from one another, management aggregates financial results into two industry groups: manufacturing and non-manufacturing.


10. Reinsurance


The following tables summarizetable summarizes the effect of reinsurance and retrocessional reinsurance on premiums written and earned.
Quarter Ended September 30,
20202019
(dollars in thousands)DirectAssumedCededNet PremiumsDirectAssumedCededNet Premiums
Underwriting:
Written$1,420,067 $315,774 $(337,181)$1,398,660 $1,358,243 $282,506 $(271,094)$1,369,655 
Earned1,323,451 362,539 (290,058)1,395,932 1,219,103 327,431 (246,965)1,299,569 
Program services and other:
Written518,921 17,972 (538,277)(1,384)584,196 39,547 (623,014)729 
Earned491,524 14,489 (507,517)(1,504)576,576 20,399 (596,512)463 
Consolidated:
Written1,938,988 333,746 (875,458)1,397,276 1,942,439 322,053 (894,108)1,370,384 
Earned$1,814,975 $377,028 $(797,575)$1,394,428 $1,795,679 $347,830 $(843,477)$1,300,032 
 Quarter Ended September 30,
 2017 2016
(dollars in thousands)Written Earned Written Earned
Direct$1,035,705
 $966,735
 $888,009
 $883,687
Assumed292,423
 356,529
 241,764
 292,951
Ceded(230,374) (223,402) (200,390) (202,394)
Net premiums$1,097,754
 $1,099,862
 $929,383
 $974,244

Nine Months Ended September 30,
20202019
(dollars in thousands)DirectAssumedCededNet PremiumsDirectAssumedCededNet Premiums
Underwriting:
Written$4,229,398 $1,211,335 $(936,342)$4,504,391 $3,808,759 $1,129,440 $(786,704)$4,151,495 
Earned3,886,390 1,035,501 (832,196)4,089,695 3,510,203 946,648 (754,505)3,702,346 
Program services and other:
Written1,475,709 52,308 (1,532,259)(4,242)1,754,613 73,869 (1,826,862)1,620 
Earned1,535,248 54,800 (1,594,432)(4,384)1,629,659 49,672 (1,678,207)1,124 
Consolidated:
Written5,705,107 1,263,643 (2,468,601)4,500,149 5,563,372 1,203,309 (2,613,566)4,153,115 
Earned$5,421,638 $1,090,301 $(2,426,628)$4,085,311 $5,139,862 $996,320 $(2,432,712)$3,703,470 
 Nine Months Ended September 30,
 2017 2016
(dollars in thousands)Written Earned Written Earned
Direct$2,932,022
 $2,743,970
 $2,724,341
 $2,617,074
Assumed1,214,021
 976,636
 1,075,744
 878,882
Ceded(650,403) (604,568) (638,196) (613,167)
Net premiums$3,495,640
 $3,116,038
 $3,161,889
 $2,882,789


The percentageSubstantially all of cededthe premiums written and earned premiums to gross earned premiums was 17%in the Company's program services and 16%other fronting operations for the quarter and nine months ended September 30, 2017, respectively,2020 and 17%2019 were ceded. The percentage of consolidated ceded earned premiums to gross earned premiums was 36% and 18%37% for the quarter and nine months ended September 30, 2016, respectively. The percentage of assumed earned premiums to net earned premiums was 32%2020, respectively, and 31%39% and 40% for the quarter and nine months ended September 30, 2017, respectively, and 30%2019, respectively. The percentage of consolidated assumed earned premiums to net earned premiums was 27% for both the quarter and nine months ended September 30, 2016.

Incurred losses and loss adjustment expenses were net of reinsurance recoverables (ceded incurred losses and loss adjustment expenses) of $540.1 million and $83.3 million for the quarters ended September 30, 2017 and 2016, respectively, and $748.7 million and $289.4 million for the nine months ended September 30, 2017 and 2016, respectively. Ceded incurred losses and loss adjustment expenses for both2020 as well as the quarter and nine months ended September 30, 2017 included ceded2019.

Substantially all of the incurred losses and loss adjustment expenses in the Company's program services and other fronting operations, which totaled $412.7 million for both the quarter ended September 30, 2020 and 2019 and $1.1 billion for both the nine months ended September 30, 2020 and 2019, were ceded.

28
Table of Contents
The following table summarizes the effect of reinsurance and retrocessional reinsurance on losses and loss adjustment expenses in the Company's underwriting operations.
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Gross$1,023,479 $846,549 $3,135,105 $2,561,579 
Ceded(160,387)(94,362)(481,874)(443,774)
Net losses and loss adjustment expenses$863,092 $752,187 $2,653,231 $2,117,805 

The following table presents the Company's reinsurance recoverables and the related allowance for credit losses.
(dollars in thousands)September 30, 2020December 31, 2019
Reinsurance recoverables, gross$5,696,938 $5,459,561 
Allowance for credit losses(31,100)(26,849)
Reinsurance recoverables$5,665,838 $5,432,712 

The increase in the allowance for credit losses on reinsurance recoverables from December 31, 2019 to September 30, 2020 reflects the 2017 Catastrophesimpact of $464.4 million.adopting ASC 326 effective January 1, 2020 as well as a decline in short-term economic conditions as forecasted during the first nine months of 2020 as a result of expected impacts from the COVID-19 pandemic. See note 1 for further details regarding the impact of adopting ASC 326.


11.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.


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. During the quarter and nine months ended September 30, 2016,2020, the Company recognized a reserve deficiency resulting from a decrease in the market yield on the investment portfolio supporting the policy benefit reserves by increasing life and annuity benefits by $9.6$20.6 million and $57.5$56.2 million, respectively, and decreasing the change in net unrealized holding gains included in other comprehensive income by a corresponding amount. NoAs of September 30, 2020 and December 31, 2019, the cumulative adjustment wasto life and annuity benefits attributable to unrealized gains on the underlying investment portfolio totaled $107.6 million and $51.4 million, respectively. The adjustment required for the quarter orand nine months ended September 30, 2017.2019 was $31.3 million and $93.1 million, respectively.



29
Table of Contents
12. Variable Interest Entities


Markel CATCo Investment Management Ltd. (MCIM),MCIM, a wholly-owned consolidated subsidiary of the Company, is an insurance-linked securities investment fund manager and insurancereinsurance manager headquartered in Bermuda. Results attributable to MCIM are included with the Company's non-insurance operations, which are not included in a reportable segment.


MCIM managesserves as the insurance manager for 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 and reinsurance company, bothcomprised of which were organized under Bermuda law.multiple segregated accounts (Markel CATCo Funds). The mutual fund company issuesMarkel CATCo Funds issue multiple classes of nonvoting, redeemable preference shares to investors through its funds (the Funds) and the Markel CATCo Funds are primarily invested in nonvoting preference shares of the reinsurance company.Markel CATCo Re. The underwriting results of the reinsurance companyMarkel CATCo Re are attributed to the Markel CATCo Funds through the issuance ofthose nonvoting preference shares. Voting shares in Markel CATCo Reinsurance Fund Ltd. and Markel CATCo Re are held by MCIM.


The Markel CATCo Funds and the reinsurance companyMarkel CATCo Re are considered VIEs, as their preference shareholders have no voting rights. MCIM has the power to direct the activities that most significantly impact the economic performance of these entities, but does not have a variable interest in any of the entities. Except as described below,Generally, the Company is not the primary beneficiary of the Markel CATCo Funds or the reinsurance company,Markel CATCo Re, and therefore does not consolidate these entities, as the Company's involvement is generally limited to that of an investment or insurance manager, receiving fees that are at market and commensurate with the level of effort required. Investment management fees earned by the Company from unconsolidated Funds were $1.2 million and $8.3 million for the quarters ended September 30, 2017 and 2016, respectively, and $19.9 million and $22.8 million for the nine months ended September 30, 2017 and 2016, respectively.

The Company is the sole investor in one of the Markel CATCo Funds, the Markel Diversified Fund, and consolidates that fund as its primary beneficiary.

As of September 30, 2017, total assets of the Markel Diversified Fund were $183.3 million and total liabilities were $62.8 million. As of December 31, 2016, total assets of the Markel Diversified Fund were $166.8 million and total liabilities were $64.6 million. The assets of the Markel Diversified Fund are available for use only by the Markel Diversified Fund, and are not available for use by the Company. Total assets of the Markel Diversified Fund, includewhich are included on the Company's consolidated balance sheets, were $11.1 million and $19.6 million as of September 30, 2020 and December 31, 2019, respectively, and are primarily comprised of an investment in one of the unconsolidatedMarkel CATCo Funds. The Company also has investments in another one of the Markel CATCo Funds totaling $180.7($92.4 million and $26.8 million as of September 30, 20172020 and $165.1 million as of December 31, 2016,2019, respectively), which represents 7%is not consolidated and includes a $90.0 million investment that was made in the first quarter of 2020. See note 5. With the exception of the outstanding preference shares of that fund as of September 30, 2017 and 6% as of December 31, 2016. ThisCompany's investment is included in equity securities (available-for-sale) on the Company's consolidated balance sheets. Total liabilities of the Markel Diversified Fund, for both periods includes a $62.5 million note payable, delivered as part of the consideration provided forCompany generally does not have the obligation to absorb losses or the right to receive benefits from its investment. This note payable is includedinvestments in senior long-term debt and other debt on the Company's consolidated balance sheets. Other than the note payable, any liabilities held by the Markel Diversified Fund have no recourseCATCo Funds that could potentially be significant to the Company's general credit.respective fund, and therefore does not consolidate those funds.


The Company's exposure to risk from the unconsolidated Markel CATCo Funds and reinsurance companyMarkel CATCo Re is generally limited to its investment and any earned but uncollected fees. The Company has not issued any investment performance guarantees to these VIEs or their investors. As of September 30, 2017, total investment2020 and insuranceDecember 31, 2019, net assets under management of MCIM for unconsolidated VIEs were $4.5$1.1 billion and $2.7 billion, respectively. See note 15.

30
Table of Contents
13. 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 MCIM and Nephila. See note 12 for details regarding operations conducted through MCIM. 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 provides managing general agent services and 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 Company 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. Nephila also receives commissions from the Nephila Reinsurers, which are based on the direct written premiums of the insurance contracts placed. For the quarter and nine months ended September 30, 2020, total revenues from the Company's insurance-linked securities operations were $38.5 million and $146.3 million, respectively, of which $32.8 million and $122.7 million, respectively, were attributed to unconsolidated entities managed by Nephila and MCIM. For the quarter and nine months ended September 30, 2019, total revenues from the Company's insurance-linked securities operations were $54.9 million and $158.6 million, respectively, of which $52.6 million and $152.8 million, respectively, were attributed to unconsolidated entities managed by Nephila and MCIM. Other related party transactions with the Company's insurance-linked securities operations are described below.

Within the Company's program services business, the Company has a program with Nephila through which the Company writes insurance policies that are ceded to Syndicate 2357 and certain other Nephila Reinsurers. Through this arrangement, 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. Gross premiums written through the Company's program with Nephila were $119.2 million and $332.6 million for the quarter and nine months ended September 30, 2020, respectively, and $126.4 million and $360.6 million for the quarter and nine months ended September 30, 2019, respectively, all of which were ceded to Nephila Reinsurers. As of September 30, 2020 and December 31, 2019, reinsurance recoverables on the consolidated balance sheets included $291.8 million and $238.8 million, respectively, due from Nephila Reinsurers.

Under this program, 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 this program exceed the prescribed limit, the Company is obligated to pay such losses to the cedents without recourse to the Nephila Reinsurers. While the Company believes losses under this program 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.

The Hagerty Group, LLC

In June 2019, the Company acquired a minority ownership interest in The Hagerty Group, LLC (Hagerty Group), a company that primarily operates as a managing general agent under the names Hagerty Insurance Agency and Hagerty Classic Marine Insurance Agency (collectively, Hagerty), which is accounted for under the equity method. Hagerty Group also includes funds heldHagerty Re, a Bermuda Class 3 reinsurance company. Essentia Insurance Company (Essentia), one of the Company's insurance subsidiaries, is the exclusive insurance underwriter for Hagerty in the U.S., and a portion of this insurance is ceded to Hagerty Re. For the quarter and nine months ended September 30, 2020, gross written premiums attributable to Hagerty written on Essentia were $144.8 million and $399.7 million, respectively, of which $68.4 million and $189.0 million, respectively, were ceded to Hagerty Re. For the quarter and nine months ended September 30, 2019, gross written premiums attributable to Hagerty written on Essentia were $120.8 million and $333.7 million, respectively, of which $57.7 million and $159.8 million, respectively, were ceded to Hagerty Re.

31
Table of Contents
14. Shareholders' Equity

a)In May 2020, the Company issued 600,000 6.00% Fixed-Rate Reset Non-Cumulative Series A preferred shares, with 0 par value and a liquidation preference of $1,000 per share, for an aggregate initial purchase price of $600 million. Net proceeds of the Series A preferred shares offering, after deducting the underwriting discount and offering expenses, was $591.9 million. Preferred stock and related additional paid-in capital are included in preferred stock on the Company's consolidated balance sheets.

The Company has the option to redeem the Series A preferred shares:

•in whole but not in part, at any time, within 90 days after the occurrence of a "rating agency event," at $1,020 per Series A preferred share, plus accrued and unpaid dividends,
•in whole but not in part, at any time, within 90 days after the occurrence of a "regulatory capital event" at $1,000 per Series A preferred share, plus accrued and unpaid dividends, or
•in whole or in part, on June 1, 2025, or every fifth anniversary of that date, at $1,000 per Series A preferred share, plus accrued and unpaid dividends.

A "rating agency event" means that any nationally recognized statistical rating organization that publishes a rating for the Company amends, clarifies or changes the criteria it uses to assign equity credit to securities like the Series A preferred shares, which results in shortening the length of time that the Series A preferred shares are assigned a particular level of equity credit or in the lowering of the equity credit assigned to the preferred shares.

A "regulatory capital event" means that the Company becomes subject to capital adequacy supervision by a capital regulator and determines that, under such capital adequacy guidelines, the liquidation preference amount of the Series A preferred shares would not qualify as capital.

The Series A preferred shares rank senior to the Company's common stock with respect to the payment of dividends and liquidation rights. Holders of the Series A preferred shares will be usedentitled to settle claimsreceive non-cumulative cash dividends, when, as and if declared by the Board of Directors, from the original issue date, semi-annually in arrears on the first day of June and December of each year, beginning December 1, 2020. The Company accrues dividends when they are declared by the Board of Directors. To the extent declared, these dividends will accrue, on the liquidation preference of $1,000 per share, at a fixed annual rate of 6.00% from the original issue date to June 1, 2025. After June 1, 2025, the dividend rate will reset every five years and accrue at an annual rate equal to the five-year U.S. Treasury Rate as of two business days prior to the reset date, plus 5.662%. Dividends will not be cumulative and will not be mandatory. Accordingly, if dividends are not declared for incurred losses.any dividend period, then dividends for that dividend period will not accrue and will not be payable.



32
Table of Contents
13. Net Income (Loss) per Share

b)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.

 Quarter Ended September 30, Nine Months Ended September 30,
(in thousands, except per share amounts)2017 2016 2017 2016
Net income (loss) to shareholders$(259,141) $83,796
 $(39,612) $322,963
Adjustment of redeemable noncontrolling interests(3,298) (4,928) (23,582) (10,909)
Adjusted net income (loss) to shareholders$(262,439) $78,868
 $(63,194) $312,054
        
Basic common shares outstanding13,947
 14,033
 13,974
 14,013
Dilutive potential common shares from conversion of options1
 3
 2
 4
Dilutive potential common shares from conversion of restricted stock42
 49
 42
 62
Diluted shares outstanding13,990
 14,085
 14,018
 14,079
Basic net income (loss) per share$(18.82) $5.62
 $(4.52) $22.27
Diluted net income (loss) per share$(18.82) $5.60
 $(4.52) $22.16
Quarter Ended September 30,Nine Months Ended September 30,
(in thousands, except per share amounts)2020201920202019
Net income (loss) to common shareholders$452,726 $205,637 $(31,269)$1,279,362 
Adjustment of redeemable noncontrolling interests(23,621)(12,221)(20,681)9,464 
Adjusted net income (loss) to common shareholders$429,105 $193,416 $(51,950)$1,288,826 
Basic common shares outstanding13,809 13,849 13,811 13,870 
Dilutive potential common shares from restricted stock units and restricted stock (1)
18 15 0 12 
Diluted common shares outstanding13,827 13,864 13,811 13,882 
Basic net income (loss) per common share$31.07 $13.97 $(3.76)$92.92 
Diluted net income (loss) per common share (1)
$31.03 $13.95 $(3.76)$92.84 

14. Other Comprehensive Income

Other comprehensive income includes net holding gains arising during(1)The impact of restricted stock units and restricted stock of 13 thousand shares was excluded from the period, changes in unrealized other-than-temporary impairment losses on fixed maturities arising during the period and reclassification adjustments for net gains included in net income (loss). Other comprehensive income also includes changes in foreign currency translation adjustments and changes in net actuarial pension loss.

The following table presents the change in accumulated other comprehensive income by component, netcomputation of taxes and noncontrolling interests,diluted earnings per common share for the nine months ended September 30, 20172020 because the effect would have been anti-dilutive.

15. Commitments and 2016.Contingencies


a)Late in the fourth quarter of 2018, the Company was contacted by and received inquiries from the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority (collectively, Governmental Authorities) into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Re (the Markel CATCo Inquiries), an unconsolidated subsidiary managed by MCIM. As a result, the Company engaged outside counsel to conduct an internal review.
(dollars in thousands)Unrealized Holding Gains on Available-for-Sale Securities Foreign Currency Net Actuarial Pension Loss Total
December 31, 2015$1,472,762
 $(72,696) $(45,558) $1,354,508
Other comprehensive income (loss) before reclassifications411,354
 (6,159) —
 405,195
Amounts reclassified from accumulated other comprehensive income(33,308) —
 1,247
 (32,061)
Total other comprehensive income (loss)378,046
 (6,159) 1,247
 373,134
September 30, 2016$1,850,808
 $(78,855) $(44,311) $1,727,642
        
December 31, 2016$1,714,930
 $(84,406) $(64,658) $1,565,866
Other comprehensive income before reclassifications577,796
 19,750
 —
 597,546
Amounts reclassified from accumulated other comprehensive income(14,598) —
 2,391
 (12,207)
Total other comprehensive income563,198
 19,750
 2,391
 585,339
September 30, 2017$2,278,128
 $(64,656) $(62,267) $2,151,205



The following table summarizesinternal review was completed in April 2019 and found no evidence that MCIM personnel acted in bad faith in exercising business judgment in the tax expense (benefit) associatedsetting of reserves and making related disclosures during late 2017 and early 2018. The Company's outside counsel has met with each componentthe Governmental Authorities and reported the findings from the internal review. The Company cannot currently predict the duration, scope or result of other comprehensive income.the Markel CATCo Inquiries.


 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Change in net unrealized gains on investments:       
Net holding gains arising during the period$109,338
 $8,309
 $278,266
 $196,189
Change in unrealized other-than-temporary impairment losses on fixed maturities arising during the period—
 (3) —
 (9)
Reclassification adjustments for net losses included in net income (loss)(2,810) (4,811) (5,206) (12,621)
Change in net unrealized gains on investments106,528
 3,495
 273,060
 183,559
Change in foreign currency translation adjustments656
 2,847
 153
 1,152
Change in net actuarial pension loss159
 86
 492
 274
Total$107,343
 $6,428
 $273,705
 $184,985

The following table presentsDuring the details of amounts reclassified from accumulated other comprehensive income into income, by component.

 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Unrealized holding gains on available-for-sale securities:       
Other-than-temporary impairment losses$(3,444) $—
 $(7,261) $(12,080)
Net realized investment gains, excluding other-than-temporary impairment losses11,461
 14,569
 27,065
 58,009
Total before taxes8,017
 14,569
 19,804
 45,929
Income taxes(2,810) (4,811) (5,206) (12,621)
Reclassification of unrealized holding gains, net of taxes$5,207
 $9,758
 $14,598
 $33,308
        
Net actuarial pension loss:    
 
Underwriting, acquisition and insurance expenses$(932) $(476) $(2,883) $(1,521)
Income taxes159
 86
 492
 274
Reclassification of net actuarial pension loss, net of taxes$(773) $(390) $(2,391) $(1,247)


15. Contingencies

In October 2010,internal review, the Company completed its acquisitiondiscovered violations of Aspen Holdings, Inc. (Aspen).Markel policies by two senior executives of MCIM. As parta result, these two executives are no longer with the Company. On February 21, 2019, Anthony Belisle, one of the considerationtwo senior executives that is no longer with MCIM, filed suit against MCIM and Markel Corporation, which suit was amended on March 29, 2019. As amended, Mr. Belisle's complaint alleged claims for, that acquisition, Aspen shareholders received contingent value rights (CVRs), which are currently expected to result in the payment of additional cash consideration to CVR holders. Absent the litigation described below, the final amount to be paid to CVR holders would be determined after December 31, 2017, the CVR maturity date, based on, among other things, adjustments for the developmentbreach of pre-acquisition loss reservescontract, defamation, invasion of privacy, indemnification, intentional interference with contractual relations and loss sensitive profit commissions.
The CVR holder representative, Thomas Yeransian, has disputed the Company's estimationdeceptive and unfair acts and sought relief of, the value of the CVRs. On September 15, 2016, Mr. Yeransian filed a suit alleging, among other things, that$66.0 million in incentive compensation, enhanced compensatory damages, consequential damages, damages for emotional distress and injury to reputation, exemplary damages and attorneys' fees. In June 2019, MCIM, Markel Corporation, and Mr. Belisle agreed to commence binding arbitration to finally, fully and confidentially resolve the claims and counterclaims alleged in the action, and the Belisle suit was dismissed with prejudice in July 2019. In late July 2020, the parties commenced settlement discussions and reached a final agreement on July 28, 2020. The settlement amount was not material to the Company's consolidated results of operations or financial condition.

In July 2019, MCIM announced it would cease accepting new investments in the Markel CATCo Funds and would not write any new business in Markel CATCo Re. Both the Markel CATCo Funds and Markel CATCo Re have been placed into run-off, returning capital to investors as it becomes available. The process is expected to take approximately three years.
33
Table of Contents

The Markel CATCo Inquiries, as well as other matters related to or arising from the Markel CATCo Inquiries, including matters of which the Company is currently unaware, could result in default underadditional claims, litigation, investigations, enforcement actions or proceedings. For example, additional litigation may be filed by investors in the CVR agreement.Markel CATCo Funds. The holder representative seeks: $47.3 millionCompany also could become subject to increased regulatory scrutiny, investigations or proceedings in damages, which represents the unadjusted valueany of the CVRs; plus interest ($11.1 million through September 30, 2017)jurisdictions where it operates. If any regulatory authority takes action against the Company or the Company enters into an agreement to settle a matter, the Company may incur sanctions or be required to pay substantial fines or implement remedial measures that could prove costly or disruptive to its businesses and default interest (up to an additional $9.7 million through September 30, 2017, dependingoperations. Costs associated with the Company's internal review, including legal and investigation costs, as well as legal costs incurred in connection with any existing or future litigation, are being expensed as incurred.

An unfavorable outcome in one or more of these matters, and others the Company cannot anticipate, could have a material adverse effect on the date any default occurred);Company's results of operations and an unspecified amount of punitive damages, costs, and attorneys’ fees.
Atfinancial condition. In addition, the initial hearing held February 21, 2017, the court stayed the proceedings and ordered the partiesCompany may take further steps to discuss resolving the dispute pursuant to the independent CVR valuation procedure under the CVR agreement. The parties met on April 5, 2017, but were unsuccessful in reaching agreement on a process for resolving the dispute. The Company subsequently filed a motion to stay the litigation and compel arbitration, and, on July 31, 2017, the court issued an order grantingmitigate potential risks or liabilities that motion. Mr. Yeransian has filed a motion requesting that the court reconsider that order.
Management believes the holder representative’s suit to be without merit and will vigorously defend against it. Further, management believes that any material loss resultingmay arise from the holder representative’s suit to be remoteMarkel CATCo Inquiries and that the contractual contingent consideration payments related to the CVRs will notdevelopments and some of those steps may have a material impact on the Company's liquidity.results of operations or financial condition. Even if an unfavorable outcome does not materialize, these matters, and actions the Company may take in response, could have an adverse impact on the Company's reputation and result in substantial expense and disruption.

b)Since becoming aware of a matter in the first quarter of 2018 related to the manufacturing of products at one of the Company's Markel Ventures businesses, the Company has conducted an investigation, reviewed the business's operations and developed remediation plans. Upon completion of its review during 2018, the Company recorded an expense of $33.5 million in its results of operations and began implementing remediation plans. The amount accrued represented management's best estimate of amounts considered probable including: remediation costs associated with the manufacture of products, costs associated with the investigation of this matter, a write down of inventory on hand and settlement costs related to pre-existing litigation. As of September 30, 2020, $14.6 million remained accrued for this matter.

Final resolution of this matter could ultimately result in additional remediation and other costs, the amount of which cannot be estimated at this time, but which could have a material impact on the Company's income before income taxes. However, management does not expect this matter ultimately will have a material adverse effect on the Company's results of operations or financial condition. If a determination is made that additional costs associated with this matter are considered probable, these additional costs will be recognized as an expense in the Company's results of operations.

c)In addition, contingencies2019, the Company established Lodgepine Capital Management Limited (Lodgepine), a new retrocessional insurance-linked securities fund manager in Bermuda. Lodgepine's initial product offering will be Lodgepine Fund Limited, a property catastrophe retrocessional investment fund, and subject to certain conditions, the Company has committed to invest up to $100 million in Lodgepine Fund Limited.

d)On March 11, 2020, COVID-19, a novel coronavirus outbreak, was declared a pandemic by the World Health Organization. See note 16 for further details regarding potential impacts of COVID-19 on the Company's business.

e)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.


34
Table of Contents
16. Subsequent EventsDevelopments Related to COVID-19


AfterThe COVID-19 pandemic has caused unprecedented social and economic disruption, increased volatility of capital markets and intervention by various governments and central banks around the endworld, the effects of which have impacted almost all of the third quarterCompany's operations during the first nine months of 2017, northern California sustained2020. The Company cannot reasonably estimate the extent or duration of the impacts of the pandemic; however, further potential impacts of the pandemic on the Company's results of operations, financial condition and cash flows, including those described below, could be material.

The significant volatility in the equity markets arising from economic uncertainty resulted in a net decline in the fair value of the Company's equity portfolio of $242.8 million for the nine months ended September 30, 2020 and further declines are possible.

As described in note 9, the Company's underwriting results for the nine months ended September 30, 2020 included $356.8 million of net losses from several wildfires. Eventsand loss adjustment expenses directly attributed to COVID-19 and assumptions used to develop this estimate are ongoing; however, with the information currently available, the Company has preliminarily estimated itsinherently uncertain and subject to a wide range of net incurred losses on this eventvariability. The Company also has underwriting exposure to be $40 millionloss impacts that are indirectly related to $80 million before income taxes. This estimatedthe COVID-19 pandemic and associated with a broader range of coverages, including coverages within the Company's trade credit, professional liability and workers' compensation product lines, among others, as well as the Company's reinsurance product lines. Underwriting results for the nine months ended September 30, 2020 included $15.0 million of net losses was derived basedand loss adjustment expenses indirectly attributed to the COVID-19 pandemic on preliminary industry loss estimates, policy level reviews and direct contact with insureds and brokers when possible. However, the Company is still gathering loss data from policy holders and cedents and does not expect that allCompany's trade credit product line within the Insurance segment, though no other significant indirect losses have been reported at this time. PotentialBusiness closures, reduced recreational activity and lower gross receipts, revenues and payrolls of insureds, among other things, also may impact the Company's premium volume and the economic impacts of the pandemic on the Company's insureds also may subject it to increased credit risk. A significant decline in economic activity also could impact premium volume within the Company's program services operations, which may result in a reduction in fee income.

Within the Company's Markel Ventures operations, many of the Company's businesses have experienced decreased demand for their products and services as a result of the pandemic. As the social and economic disruption caused by the pandemic is ongoing, the Company expects that revenues from its Markel Ventures operations will continue to be impacted, and these impacts may continue to be material. In certain cases, revenue declines also could result in ongoing cash and working capital constraints and could impact the companies' liquidity and their ability to comply with debt covenants.

Within the Company's insurance-linked securities operations, investment losses associated with business interruptionto date within the investment funds managed by the Company have not been significant; however, uncertainty around potential COVID-19 loss exposures has reduced, and may further reduce, the net asset value on which the Company's management fees are based. Volatility in the capital markets and investor uncertainty regarding insurance industry exposure to COVID-19 also not yet clear.has impacted, and may continue to impact, the Company's ability to raise additional third party capital for the funds it manages. The Company continuesalso has experienced, and may continue to closely monitor reported claims to refine its estimateexperience, higher than anticipated investor redemptions from the funds.

Loss of losses, which will be recordedrevenues in the fourth quarterCompany's underwriting, Markel Ventures, insurance-linked securities or other operations, the extent of 2017.which the Company is currently unable to reasonably estimate, also could impact the carrying value of the Company's goodwill and intangible assets and, with respect to its Markel Ventures operations, inventory and other long-lived assets, which may become impaired. The Company's consolidated balance sheet as of September 30, 2020 included goodwill and intangible assets of $4.4 billion. Through September 30, 2020, the Company considered whether a quantitative assessment of goodwill and intangible assets for impairment was required as a result of the significant economic disruption caused by the COVID-19 pandemic. After considering qualitative factors regarding the actual and expected impacts of the pandemic on the Company's operations, as well as the amount by which the fair value of the Company's reporting units exceeded their respective carrying values at the date of the last quantitative assessment, the Company determined these conditions did not indicate that it is more likely than not that the carrying value of the Company's reporting units exceeded their fair value as of September 30, 2020 based on information available at this time. Similar factors were considered to determine if these circumstances were an indicator requiring an assessment of the recoverability of the Company's intangible assets, and the Company concluded they were not based on information available at this time. However, delayed recovery or further deterioration in market conditions related to the general economy and the specific industries in which the Company operates, a sustained trend of weaker than anticipated financial performance within a reporting unit, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in future goodwill or intangible asset impairment charges that, if incurred, could have a material adverse effect on the Company's financial condition and results of operations.



35
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations


The accompanying consolidated financial statements and related notes have been prepared in accordance with U.S.United States (U.S.) generally accepted accounting principles (U.S. GAAP)(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 (the Company).


Our Business


We are a diverse financial holding company serving a variety of niche markets. Our principal business markets and underwrites specialty insurance products. 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. We also own interests in various 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 monitorOur business is comprised of the following types of operations:
•Underwriting - our underwriting operations are comprised of our risk-bearing insurance and reportreinsurance operations
•Investing - our investing activities are primarily related to our underwriting operations
•Markel Ventures - our Markel Ventures operations include our controlling interests in a diverse portfolio of businesses that operate outside of the specialty insurance marketplace
•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

Underwriting and Investing

Our chief operating decision maker allocates resources to and assesses the performance of our ongoing underwriting operations on a global basis in the following threetwo segments: U.S. Insurance, International Insurance and Reinsurance. In determining how to aggregate and monitor our underwriting results, management considerswe consider many factors, including the geographic location and regulatory environment of the insurance entity underwriting the risk, the nature of the insurance product sold, the type of account written and the type of customer served. The U.S. Insurance segment includes all direct business and facultative placements written by our insurance subsidiaries domiciled inacross the United States. The International Insurance segment includes all direct business and facultative reinsurance placements written by our insurance subsidiaries domiciled outside of the United States, including our syndicate at Lloyd's of London (Lloyd's).Company. The Reinsurance segment includes all treaty reinsurance written across the Company. Results for lines of business discontinued prior to, or in conjunction with, acquisitions, including development on asbestos and environmental loss reserves and the results attributable to the run-off of life and annuity reinsurance business, are reportedmonitored separately and are not included in the Other Insurance (Discontinued Lines)a reportable segment. All investing activities related to our insuranceunderwriting operations are included in the Investing segment.


Our U.S. 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. The following products are included in this segment: general liability, professional liability, catastrophe-exposed property, personal property, workers' compensation, specialty program insurance for well-defined niche markets, and liability coverages and other coverages tailored for unique exposures. Business in this segment is written through our Wholesale, Specialty and Global Insurance divisions. The Wholesale division writes commercial risks, primarily on an excess and surplus lines basis, using a network of wholesale brokers managed on a regional basis. The Specialty division writes program insurance and other specialty coverages for well-defined niche markets, primarily on an admitted basis. The Global Insurance division writes risks outside of the standard market on both an admitted and non-admitted basis. Global Insurance division business written by our U.S. insurance subsidiaries is included in this segment.

In April 2017, we completed the acquisition of SureTec Financial Corp. (SureTec), a Texas-based privately held surety company primarily offering contract, commercial and court bonds. Results attributable to SureTec are included in the U.S. Insurance segment.

Our International Insurance segment writes risks that are characterized by either the unique nature of the exposure or the high limits of insurance coverage required by the insured. Risks written in the Internationalour 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. Products offered within our International Insurance segment includeThe following products are included in this segment: general liability, professional liability, primary and excess of loss property, excess liability, professional liability,including catastrophe-exposed property, personal property, workers' compensation, marine and energy liability coverages, specialty program insurance for well-defined niche markets, and liability coverages and other coverages tailored for unique exposures. Business included in this segment is producedwritten through our Markel Specialty, Markel International and Global InsuranceState National divisions. The Markel Specialty division was formed effective April 1, 2020 through the combination of our Markel Assurance and Markel Specialty divisions. The newly combined Markel Specialty division creates a unified platform that makes it easier for our customers to access our diverse portfolio of products and capabilities, offered on both an excess and surplus and admitted basis, and provides an improved customer experience. The Markel International division writes business worldwide from our London-based platform,London and Munich-based platforms, which includes our syndicate at Lloyd's. Global Insurance divisioninclude branch offices around the world. The State National division's collateral protection underwriting business written by our non-U.S. insurance subsidiaries, which primarily targets Fortune 1000 accounts,also is included in thisthe Insurance segment.

36
Table of Contents
Our Reinsurance segment includes property, 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. Principal lines of business include: property, (includingincluding catastrophe-exposed property),property, professional liability, general casualty,liability, credit, surety, auto and workers' compensation. In October 2020, we made the decision to discontinue writing catastrophe-exposed property business at our Global Reinsurance division, within our Reinsurance segment, as our Nephila ILS operations will become our single point of entry for serving the property catastrophe reinsurance market. Our reinsurance product offerings are underwritten primarily by our Global Reinsurance division and our Markel International division.



Markel Ventures
For purposes of segment reporting, the Other Insurance (Discontinued Lines) segment includes lines of business that have been discontinued prior to, or in conjunction with, acquisitions. The lines were discontinued because we believed some aspect of the product, such as risk profile or competitive environment, would not allow us to earn consistent underwriting profits. The Other Insurance (Discontinued Lines) segment also includes development on asbestos and environmental loss reserves and the results attributable to the run-off of our life and annuity reinsurance business.


Through our wholly-owned subsidiary Markel Ventures, Inc. (Markel Ventures), we own interests in various businesses that operate outside ofwe monitor and report in the specialty insurance marketplace.Markel Ventures segment. These businesses are viewed by management as separate and distinct from our insurance operations and are comprised of a diverse portfolio of businesses from different industries that offer various industries. Local management teams overseetypes of products and services to businesses and consumers, predominately in the day-to-day operations of these companies, while strategic decisions are made in conjunction with members of our executive management team. While each of these businessesUnited States. Our products group is operated independently, we aggregate their financial results into two industry groups: manufacturing and non-manufacturing. Our manufacturing operations are comprised of manufacturers of transportation and other industrial equipment. Our non-manufacturing operations are comprised of businesses from severalthat manufacture or produce equipment, transportation-related products and consumer and building products. For example, types of products offered by businesses in this group include equipment used in baking systems and food processing, over-the-road car haulers, laminated oak and composite wood flooring used in the trucking industry groups, including consumer goodsas well as ornamental plants and residential homes. The services (including healthcare)group is comprised of businesses that provide healthcare, consulting and business services. Our strategyother types of services to businesses and consumers. For example, types of services offered by businesses in making these investments is similar to our strategy for purchasing equity securities. We seek to invest in profitable companies, with honestthis group include management and talented management, that exhibit reinvestment opportunitiestechnology consulting, behavioral healthcare and capital discipline, at reasonable prices. We intend to own the businesses acquired for a long period of time.retail intelligence.


In August 2017,November 2019, we acquired 81% of Costa Farms,VSC Fire & Security, Inc. (VSC), a Florida-basedVirginia-based privately held growerprovider of housecomprehensive fire protection, life safety and garden plants.low voltage solutions. Results attributable to Costa FarmsVSC are included within our Markel Ventures segment.

In April 2020, we acquired a controlling interest in Lansing Building Products, LLC, a supplier of exterior building products and materials to professional contractors throughout the U.S., which simultaneously acquired the distribution business of Harvey Building Products to enhance its geographic reach and scale (together, Lansing), bringing our ownership in Lansing to 91%. Results attributable to Lansing are included in our Markel Ventures segment.

Insurance-Linked Securities

Our insurance-linked securities operations whichare primarily comprised of our Nephila and run-off Markel CATCo operations.
In November 2018, we completed the acquisition of all of the outstanding shares of Nephila Holdings Ltd. (together with its subsidiaries, Nephila). Nephila primarily serves as an insurance and investment fund manager headquartered in Bermuda 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 also provides managing general agent services and 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 a reportable segment.

our consolidated financial statements.
Our non-insurance operations also include our Markel CATCo operations which are conducted through Markel CATCo Investment Management Ltd. (MCIM). MCIM is an insurance-linked securities investment fund manager and reinsurance manager headquartered in Bermuda and through 2019, was focused on building and managing highly diversified, collateralized retrocession and reinsurance portfolios covering global property catastrophe risks. 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). MCIM also serves as the investment manager to CATCo Reinsurance Opportunities Fund Ltd. (CROF), a limited liability closed-end Bermuda exempted mutual fund company listed on a market operated by the London Stock Exchange and on the Bermuda Stock Exchange. CROF invests substantially all of its assets in Markel CATCo Reinsurance Fund Ltd. Both Markel CATCo Re and the Markel CATCo Funds are unconsolidated subsidiaries of Markel Corporation.

37
Table of Contents
In July 2019, MCIM announced it would cease accepting new investments in the Markel CATCo Funds and would not write any new business in Markel CATCo Re. Both the Markel CATCo Funds and Markel CATCo Re have been placed into run-off, returning capital to investors as it becomes available. See note 15 of the notes to consolidated financial statements for further details regarding other developments within our Markel CATCo operations.

In 2019, we established Lodgepine Capital Management Limited (Lodgepine), a new retrocessional insurance-linked securities fund manager in Bermuda. Lodgepine's initial product offering will be Lodgepine Fund Limited, a property catastrophe retrocessional investment fund, and subject to certain conditions, we have committed to invest up to $100 million in Lodgepine Fund Limited. Lodgepine Fund Limited initially plans to subscribe to a portfolio of retrocessional reinsurance, which includes contracts written in our Reinsurance segment.

Program Services

Our program services business is conducted through our State National division and is separately managed from our underwriting operations. Our program services business generates fee income, in the form of ceding (program service) fees, by offering issuing carrier capacity to both specialty 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. Through our program services business, we write a wide variety of insurance products, principally including general liability insurance, commercial liability insurance, commercial multi-peril insurance, property insurance and workers' compensation insurance, substantially all of which is ceded to third parties.

Although we reinsure substantially all of the risks inherent in our program services business, we have certain programs that contain limits on our reinsurers' obligations to us that expose us to underwriting risk. Under certain programs, including one program with Syndicate 2357, an unconsolidated affiliate, we bear underwriting risk for annual aggregate agreement year losses in excess of a limit that we believe is highly unlikely to be exceeded. See note 13 of the notes to consolidated financial statements for further details regarding our program with Syndicate 2357.

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, including litigation contingencies. These estimates, by necessity, are based on assumptions about numerous factors.


We review the followingOur critical accounting estimates consist of estimates and assumptions quarterly: evaluatingused in determining the reserves for unpaid losses and loss adjustment expenses and life and annuity reinsurance benefit reserves 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 and life and annuity reinsurance benefit reserves the reinsurance allowance for doubtful accounts and income tax liabilities, as well as analyzing the recoverability of deferred tax assets, estimating reinsurance premiums written and earned and evaluating the investment portfolio for other-than-temporary declines in estimated fair value. Critical accounting estimatesquarterly. Estimates and assumptions for goodwill and intangible assets are reviewed in conjunction with an acquisitionacquisitions and goodwill and indefinite-lived intangible assets are reassessed for impairment at least annually for impairment.or 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 20162019 Annual Report on Form 10-K for a more complete description of our critical accounting estimates. Additionally, see "Developments Related to COVID-19" for further discussion on our interim considerations around the evaluation of goodwill and intangible assets for impairment.


Recent Accounting Pronouncements

The Financial Accounting Standards Board has recently issued several accounting standards updates (ASUs) that have the potential to impact our consolidated financial position, results of operations or cash flows upon adoption. The standards that we expect have the most potential to significantly impact us in future periods are as follows:

ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606)
ASU No. 2016-01, Financial Instruments (Topic 825): Recognition and Measurement of Financial Assets and Financial Liabilities
ASU No. 2016-02, Leases (Topic 842)
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments



See note 2 of the notes to consolidated financial statements for discussion of these ASUsrecently issued accounting pronouncements that we have not yet adopted and the expected effects on our consolidated financial position, results of operations and cash flows.


38
Key Performance Indicators

We measure financial success by our ability to compound growth in book value per share at a high rateTable of return over a long period of time. To mitigate the effects of short-term volatility, we measure ourselves over a five-year period. We believe that growth in book value per share is the most comprehensive measure of our success because it includes all underwriting, investing and operating results. We measure underwriting results by our underwriting profit or loss and combined ratio. We measure investing results by our net investment income and net realized gains (losses) as well as our taxable equivalent total investment return. We measure our other operating results, which primarily consist of our Markel Ventures operations, by our revenues and net income (loss), as well as earnings before interest, income taxes, depreciation and amortization (EBITDA). Our quarterly performance measures are discussed below in greater detail under "Results of Operations."Contents

Results of Operations


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

 Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Insurance segment underwriting profit$74,960 $81,285 $3,659 $180,945 
Reinsurance segment underwriting profit (loss)(34,881)(6,475)(44,085)5,697 
Investing segment profit (1)
629,682 145,364 43,104 1,408,771 
Markel Ventures segment profit (2)
79,605 35,467 200,766 147,056 
Other operations (3)
(56,974)6,607 (74,122)(18,945)
Interest expense(42,744)(47,465)(133,201)(129,022)
Net foreign exchange gains (losses)(65,577)53,850 (8,736)57,001 
Loss on early extinguishment of debt— (6,705)— (6,705)
Income tax expense(130,028)(57,975)(3,047)(356,849)
Net loss (income) attributable to noncontrolling interests(1,317)1,684 (15,607)(8,587)
Net income (loss) to shareholders452,726 205,637 (31,269)1,279,362 
Net income (loss) to common shareholders452,726 205,637 (31,269)1,279,362 
Other comprehensive income to shareholders67,363 44,432 290,942 326,282 
Comprehensive income to shareholders$520,089 $250,069 $259,673 $1,605,644 

 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
U.S. Insurance segment underwriting profit (loss)$(70,348) $(6,800) $11,943
 $85,179
International Insurance segment underwriting profit (loss)(87,607) 19,070
 (31,195) 29,024
Reinsurance segment underwriting profit (loss)(214,857) 12,788
 (251,301) 80,109
Other Insurance (Discontinued Lines) segment underwriting profit (loss)1,333
 (2,740) 7,287
 10,763
Net investment income104,489
 93,147
 304,156
 279,437
Net realized investment gains (losses)(40,007) 27,416
 (1,515) 65,836
Other revenues341,804
 336,475
 980,713
 955,339
Other expenses(344,287) (309,713) (925,984) (862,715)
Amortization of intangible assets(18,654) (17,010) (53,450) (51,474)
Interest expense(31,814) (33,152) (97,013) (97,690)
Loss on early extinguishment of debt—
 —
 —
 (44,100)
Income tax benefit (expense)98,913
 (36,060) 17,791
 (121,968)
Net (income) loss attributable to noncontrolling interests1,894
 375
 (1,044) (4,777)
Net income (loss) to shareholders$(259,141) $83,796
 $(39,612) $322,963
(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.

(2)Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to our Insurance and Reinsurance segments.
(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 $10.4 million and $31.5 million for the quarter and nine months ended September 30, 2020, respectively, and $9.8 million and $29.5 million for the quarter and nine months ended September 30, 2019; however, we do not allocate amortization of intangible assets between the Insurance and Reinsurance segments.

Comprehensive income to shareholders for the nine months ended September 30, 2020 reflects significant investing and underwriting losses attributed to COVID-19, a novel coronavirus outbreak that was declared a pandemic by the World Health Organization on March 11, 2020, which has caused unprecedented social and economic disruption, increased volatility of capital markets and intervention by various governments and central banks around the world.

The components of net income (loss) to shareholders and comprehensive income to shareholders for the quarter and nine months ended September 30, 2020 and 2019 are discussed in detail under "Underwriting Results," "Investing Results," "Markel Ventures," "Other Revenues and Other Expenses" andOperations," "Interest Expense, Loss on Early Extinguishment of Debt and Income Taxes.Taxes" and "Comprehensive Income to Shareholders."


39
Table of Contents
Underwriting Results


Underwriting profits are a key component of our strategy to grow book value per share.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 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. A combined ratio less than 100% indicates an underwriting profit, while a combined ratio greater than 100% reflects an underwriting loss. 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.


Consolidated
The following table presents selected data from our underwriting operations.
 Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Gross premium volume (1)
$1,734,457 $1,645,995 $5,436,491 $4,944,336 
Net written premiums$1,397,276 $1,370,384 $4,500,149 $4,153,115 
Net retention (1)
81 %83 %83 %84 %
Earned premiums$1,394,428 $1,300,032 $4,085,311 $3,703,470 
Losses and loss adjustment expenses$863,247 $752,134 $2,652,811 $2,118,000 
Underwriting, acquisition and insurance expenses$492,824 $475,219 $1,477,349 $1,392,747 
Underwriting profit (loss)$38,357 $72,679 $(44,849)$192,723 
U.S. GAAP Combined Ratios
Insurance94 %92 %100 %94 %
Reinsurance116 %103 %106 %99 %
Consolidated97 %94 %101 %95 %
(1)Gross premium volume and net retention exclude $538.3 million and $1.5 billion for the quarter and nine months ended September 30, 2020, respectively, and $618.5 million and $1.8 billion for the quarter and nine months ended September 30, 2019, respectively, of written premiums attributable to our program services business and other fronting arrangements that were ceded.

Combined Ratio

Our consolidated combined ratio was 97% for the quarter ended September 30, 2020 compared to 94% for the same period of 2019. The increase in the combined ratio was driven by higher catastrophe losses in 2020 compared to 2019 and an increase in our estimate of net losses and loss adjustment expenses attributed to COVID-19 during the third quarter of 2020, partially offset by a lower attritional loss ratio and a lower expense ratio within our Insurance segment in 2020 compared to 2019 .

Our consolidated combined ratio was 101% for the nine months ended September 30, 2020 compared to 95% for the same period of 2019. The increase in the consolidated combined ratio was driven by losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by more favorable development on prior accident years' loss reserves and a lower attritional loss ratio and a lower expense ratio within our Insurance segment in 2020 compared to 2019.

40
Table of Contents
 Quarter Ended September 30, Nine Months Ended September 30, 
(dollars in thousands)2017 2016 2017 2016 
Gross premium volume$1,328,128
 $1,129,773
 $4,146,043
 $3,800,085
 
Net written premiums1,097,754
 929,383
 3,495,640
 3,161,889
 
Net retention83% 82% 84% 83% 
Earned premiums1,099,862
 974,244
 3,116,038
 2,882,789
 
Losses and loss adjustment expenses1,075,432
 579,405
 2,210,129
 1,564,925
 
Underwriting, acquisition and insurance expenses395,909
 372,521
 1,169,175
 1,112,789
 
Underwriting profit (loss)(371,479) 22,318
 (263,266) 205,075
 
         
U.S. GAAP Combined Ratios        
U.S. Insurance112% 101% 99% 95% 
International Insurance136% 91% 105% 95% 
Reinsurance183% 94% 135% 87% 
Other Insurance (Discontinued Lines)NM
(1) 
NM
(1) 
NM
(1) 
NM
(1) 
Markel Corporation (Consolidated)134% 98% 108% 93% 
Catastrophe Losses
(1)
NM – Ratio is not meaningful.


Underwriting results for the quarter and nine months ended September 30, 20172020 included $503.0$101.0 million of underwriting loss from Hurricanes Harvey, IrmaLaura, Sally and MariaIsaias, as well as the earthquakesderecho in Mexico (2017Iowa and wildfires in the western U.S. (2020 Catastrophes). The underwriting loss on the 2017 Catastrophes was comprised of $521.2 million of estimated net losses and $18.2 million of net assumed reinstatement premiums, or 46% and 16% on the combined ratio for the quarter and nine months ended September 30, 2017, respectively.

The following table summarizes, by segment, the components of the underwriting losses related to the 2017 Catastrophes for the quarter and nine months ended September 30, 2017.
 Quarter and Nine Months Ended September 30, 2017
(dollars in thousands)U.S.
Insurance		 International
Insurance		 Reinsurance Consolidated
Losses and loss adjustment expenses$139,952
 $108,185
 $273,073
 $521,210
Ceded (assumed) reinstatement premiums7,654
 4,890
 (30,756) (18,212)
Underwriting loss$147,606

$113,075

$242,317
 $502,998
Impact on quarter to date combined ratio24% 47% 95% 46%
Impact on year to date combined ratio9% 17% 34% 16%

The estimated net losses and loss adjustment expenses on the 2017 Catastrophes are net of estimated reinsurance recoverables of $464.4 million. Both the gross and net loss estimates on the 20172020 Catastrophes represent our best estimate of lossesestimates based upon information currently available. Our estimateestimates for these losses isare based on claims received to date and detailed policy level reviews,preliminary industry loss estimates, output from both industry and proprietary models, as well as a review of in-force contracts. The estimate isclaims received to date and detailed policy and reinsurance contract level reviews. Due to limited claims activity thus far on the 2020 Catastrophes, these loss estimates are still dependent on broad assumptions about coverage, liability and reinsurance. Duereinsurance and are therefore subject to these factors, we believe our gross and net loss estimates on the 2017 Catastrophes have a high degreewide range of volatility.variability. While we believe our reserves for the 20172020 Catastrophes as of September 30, 20172020 are adequate, we continue to closely monitor industry loss estimates and reported claims and will adjust our estimates of gross and net losses as new information becomes available.

Underwriting results for the quarter and nine months ended September 30, 2019 included $42.6 million of underwriting loss from Hurricane Dorian and Typhoon Faxai (2019 Catastrophes).

The following table summarizes, by segment, the components of the underwriting losses related to the 2020 Catastrophes and 2019 Catastrophes for the quarter and nine months ended September 30, 2020 and 2019, respectively.

Quarter and Nine Months Ended September 30,
20202019
2020 Catastrophes2019 Catastrophes
(dollars in thousands)InsuranceReinsuranceConsolidatedInsuranceReinsuranceConsolidated
Losses and loss adjustment expenses$66,581 $35,211 $101,792 $13,868 $31,253 $45,121 
Assumed reinstatement premiums— (750)(750)— (2,475)(2,475)
Underwriting loss$66,581 $34,461 $101,042 $13,868 $28,778 $42,646 
Impact on quarter to date combined ratio6 %15 %7 %1 %12 %3 %
Impact on year to date combined ratio2 %5 %2 %— %4 %1 %

COVID-19 Losses

Underwriting results for the quarter and nine months ended September 30, 2020 included $48.9 million and $373.9 million, respectively, of underwriting losses arising from the COVID-19 pandemic.

The following table summarizes, by segment, the components of the underwriting losses attributed to the COVID-19 pandemic for the quarter and nine months ended September 30, 2020. As of September 30, 2020, losses and loss adjustment expenses were net of ceded losses of $92.6 million.

COVID-19 Pandemic
Quarter Ended September 30, 2020Nine Months Ended September 30, 2020
(dollars in thousands)InsuranceReinsuranceConsolidatedInsuranceReinsuranceConsolidated
Losses and loss adjustment expenses$12,395 $34,450 $46,845 $305,395 $66,450 $371,845 
Ceded (assumed) reinstatement premiums2,145 (93)2,052 2,145 (93)2,052 
Underwriting loss$14,540 $34,357 $48,897 $307,540 $66,357 $373,897 
Impact on combined ratio1 %15 %3 %9 %10 %9 %

41
Table of Contents
Beginning in late February, as the COVID-19 outbreak was becoming more widespread, it was identified as a potential exposure within our underwriting operations. We began to regularly review all of our product lines to identify lines of business we believed could be directly impacted by COVID-19 and to evaluate the extent to which the virus may impact our coverages. In those instances where we identified COVID-19 as the proximate, or direct, cause of loss, we established net reserves for losses and loss adjustment expenses totaling $325.0 million during the first quarter of 2020. Our direct losses from COVID-19 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. During the quarter ended September 30, 2020, we increased our estimate of direct net losses for the 2017 Catastrophes were withinand loss adjustment expenses attributable to COVID-19 by $31.8 million following changes in certain assumptions on which our risk tolerance for eventsestimates are based, as further discussed below, and resulting in total direct net losses and loss adjustment expenses of this magnitude.


The consolidated combined ratio$356.8 million for the nine months ended September 30, 20172020.

In addition to loss exposures that are directly attributable to COVID-19, we are also included $85.0exposed 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. During the quarter and nine months ended September 30, 2020, we recognized $15.0 million of net losses and loss adjustment expenses in our trade credit product line within our Insurance segment related to losses that were indirectly attributable to the pandemic. No other significant indirect losses attributable to COVID-19 have been reported at this time. See "Developments Related to COVID-19" for further discussion of other potential indirect exposures arising from the pandemic.

The following table summarizes, by coverage and underwriting platform, the components of our direct net losses and loss adjustment expenses from COVID-19 for the quarter and nine months ended September 30, 2020.

 Quarter Ended September 30, 2020
(dollars in millions)InsuranceReinsuranceConsolidated
Event cancellation
International$13.2 $— $13.2 
United States(1.0)— (1.0)
Business interruption
International(12.4)20.0 7.6 
United States(7.5)— (7.5)
All other coverages5.1 14.4 19.5 
Total$(2.6)$34.4 $31.8 

 Nine Months Ended September 30, 2020
(dollars in millions)InsuranceReinsuranceConsolidated
Event cancellation
International$185.7 $— $185.7 
United States7.5 — 7.5 
Business interruption
International79.6 22.0 101.6 
United States8.5 15.0 23.5 
All other coverages9.1 29.4 38.5 
Total$290.4 $66.4 $356.8 

Both the gross and net loss estimates for direct losses attributed to COVID-19 represent our best estimates as of September 30, 2020 based upon information currently available. Our estimates for these direct losses and loss adjustment expenses are based on reported claims, as well as detailed policy level reviews and reviews of in-force assumed reinsurance contracts for potential exposures. We also considered analysis provided by our brokers and claims counsel. 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.

42
Table of Contents
Significant assumptions on which our estimates of reserves for direct COVID-19 losses and loss adjustment expenses are based include:
•the scope of coverage provided under our policies, particularly those that provide for business interruption coverage, which generally falls under the following three categories:
◦coverage has not been triggered because the policy's insuring agreement has not been satisfied and/or three points,a covered cause of adverse development on prior years' loss reserves resulting fromhas not been established;
◦the policy would not respond because the policy includes a decreasecommunicable disease, virus or pandemic exclusion; or
◦the policy may provide coverage for communicable diseases and pandemics, but also includes conditions and limitations to coverage;
•coverage provided under our ceded reinsurance contracts;
•the expected duration of the disruption caused by the COVID-19 pandemic, which we have assumed will extend, in varying degrees, beyond the government directives currently in place and may impact certain covered events through the end of the year and beyond; and
•the ability of insureds to mitigate some or all of their losses. For example, in the discount rate, known ascase of our event cancellation coverages, by deferring the Ogden Rate, usedevent or moving to calculate lump sum awardsa virtual format, and for our business interruption exposures, the ability to continue providing certain services or to provide services remotely.

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 initial estimates at March 31, 2020 reflected limited claims reporting and were based on broad assumptions about coverage, liability and reinsurance. A test case of a sample of business interruption coverages for policies written in the United Kingdom, (U.K.) bodily injury cases. Effective March 20, 2017,which do not have the Ogden Rate decreased from plus 2.5%same exclusions as policies commonly written in the U.S., concluded in the third quarter of 2020 with the court's judgment finding mostly in favor of policyholders. This ruling was most impactful to minus 0.75%, which representscertain estimates in our Reinsurance segment, where we increased our estimate of losses and loss adjustment expenses on certain treaties following an increase in estimated losses by the first raterespective cedents on the treaties. The ruling did not meaningfully impact the reserves previously established for business interruption coverage within our Insurance segment given the assumptions made in our initial estimates and our policy terms and conditions. Our estimates at September 30, 2020 also reflect additional data gathered through increased claims reporting and a change since 2001. The effectin our expectation of the rate change isduration of the pandemic, which was most impactful to our U.K. auto casualty exposures throughevent cancellation coverages.

As of September 30, assumptions about coverage, liability and reinsurance contracts written in our Reinsurance segment. We ceased writing new U.K. auto business in late 2014. The reductioncontinue to be subject to judicial review and may be subject to other government action. Additionally, it is highly likely that there will be significant litigation involved in the Ogden Rate increasedhandling of claims associated with COVID-19, and in certain instances, assessing the expectedvalidity of policy exclusions for pandemics and interpreting policy terms to determine coverage for pandemics, which are in the process of being tested in various judicial systems. While we believe our net reserves for losses and loss adjustment expenses for COVID-19 as of September 30, 2020 are adequate based on information available at this time, we continue to closely monitor reported claims, paymentsgovernment actions, judicial decisions and changes in the levels of worldwide social disruption and economic activity arising from the pandemic and will adjust our estimates of gross and net losses as new information becomes available. Such adjustments to our reserves for COVID-19 losses and loss adjustment expenses may be material to our results of operations, financial condition and cash flows.

43
Table of Contents
Insurance Segment

The combined ratio for the Insurance segment was 94% (including six points for underwriting losses on these exposures,the 2020 Catastrophes and management increasedone point for underwriting losses attributed to COVID-19) for the quarter ended September 30, 2020 compared to 92% (including one point for underwriting losses on the 2019 Catastrophes) for the same period of 2019.

For the quarter ended September 30, 2020, the increase in the combined ratio was driven by higher catastrophe losses in 2020 compared to 2019 and the impact of losses attributed to COVID-19 in 2020, partially offset by a lower attritional loss reserves accordingly. Our estimateratio 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 and an unfavorable impact on the prior accident years' loss ratio.
•Excluding the impact of the ultimate cost2020 and 2019 Catastrophes and losses attributed to COVID-19 in 2020, the current accident year loss ratio for the quarter ended September 30, 2020 decreased compared to the same period of settling these claims is based2019 primarily driven by lower attritional loss ratios on many factors,our property and is subject to increase or decrease as the effect of changes in these factors becomes known over time.general liability product lines, which benefited from higher premium rates.

•The consolidatedInsurance segment's combined ratio for the quarter ended September 30, 20162020 included $50.1$137.3 million or five points on the consolidated combined ratio, of losses and loss adjustment expenses resulting from management actions in response to claim trends noted by our actuaries in our medical malpractice and specified medical product lines within the U.S. Insurance segment. Of this amount, $36.5 million represented reserve strengtheningfavorable development on prior accident years.years' loss reserves compared to $135.0 million for the same period of 2019. For the nine monthsquarter ended September 30, 2020, favorable development was most significant on our general liability and professional liability products lines, across several accident years, and workers' compensation product lines, primarily on the 2016 redundanciesto 2019 accident years. The favorable development on prior years' loss reserves in the third quarter of 2019 was also most significant on our U.S. Insurance segment included $71.4 million, or two points on the consolidated combined ratio, of adverse development on thesegeneral liability, workers' compensation and professional liability product lines.

•The increase in the consolidated combinedexpense ratio for the quarter ended September 30, 2017 was attributable to the impact of the 2017 Catastrophes, partially offset by a decrease in the expense ratio driven by the favorable impact from higher earned premium across all of our insurance segments in 20172020 decreased compared to the same period of 2016. Additionally, prior year redundancies increased for the third quarter of 2017 compared2019, primarily due to 2016, primarily in our U.S. Insurance segment. For the nine months ended September 30, 2017, the increase in the consolidated combined ratio was attributable to the impact of the 2017 Catastrophes, partially offset by a decrease in the expense ratio and prior accident year loss ratio driven by the favorable impact of higher earned premium in 2017 compared to 2016.premiums.

U.S. Insurance Segment


The combined ratio for the U.S. Insurance segment was 112%100% (including 24%nine points for the underwriting losslosses attributed to COVID-19 and two points for underwriting losses on the 2017 Catastrophes) for the quarter ended September 30, 2017 and 99% (including 9% for the underwriting loss on the 20172020 Catastrophes) for the nine months ended September 30, 20172020 compared to 101% and 95%94% for the same periodsperiod of 2016.2019.


For the quarternine months ended September 30, 2017,2020, the increase in the combined ratio was driven by the impact of the 2017 Catastrophes, partially offset by lower attritional losses attributed to COVID-19 in 2020 and more favorable development on prior years' loss reserves.
Excluding the impact of the 2017 Catastrophes, the current accident year loss ratio for the quarter ended September 30, 2017 decreasedhigher catastrophe losses in 2020 compared to the quarter ended September 30, 2016, primarily due to lower attritional losses on our specified medical and medical malpractice product lines and the favorable impact from our new surety business, which was acquired during the second quarter of 2017 and carries a lower loss ratio than other products in the segment.
The U.S. Insurance segment's combined ratio for the quarter ended September 30, 2017 included $87.6 million of favorable development on prior years' loss reserves compared to $21.5 million for the same period in 2016. The increase in redundancies was primarily due to adverse development on our medical malpractice and specified medical product lines in the third quarter of 2016, which totaled $36.5 million, or seven points on the segment combined ratio. There was no development on these product lines in the third quarter of 2017. In the third quarter of 2017, the favorable development on prior years' loss reserves was most significant on our general liability and workers compensation product lines, primarily on the 2012 through 2016 accident years and on our property product lines, primarily on the 2015 and 2016 accident years. The favorable development in the third quarter of 2016 was most significant on our general liability product lines.


For the nine months ended September 30, 2017, the increase in the combined ratio was driven by the impact of the 2017 Catastrophes,2019, partially offset by more favorable development on prior years' loss reserves.
The U.S. Insurance Segment's combined ratio for the nine months ended September 30, 2017 included $207.5 million of favorable development on prior years' loss reserves compared to $126.5 million for the same period in 2016. The increase in favorable development was primarily due to adverse development on our medical malpractice and specified medical product lines in the first nine months of 2016, which totaled $71.4 million, or four points on the segment combined ratio. There was no development on these product lines in the first nine months of 2017. Also contributing to the increase in favorable development on prior years' loss reserves was more favorable development on our workers compensation product lines, partially offset by less favorable development on our general liability product lines compared to the first nine months of 2016. The favorable development on prior years' loss reserves in 2017 was most significant on our general liability product lines across several accident years, workers compensation product lines, on the 2011 through 2016 accident years, and personal lines business, on the 2013 through 2016 accident years. During 2016, favorable development on prior years' loss reserves was most significant on our general liability, workers compensation and property product lines.

International Insurance Segment

The combined ratio for the International Insurance segment was 136% (including 47% for the underwriting loss on the 2017 Catastrophes) for the quarter ended September 30, 2017 and 105% (including 17% for the underwriting loss on the 2017 Catastrophes) for the nine months ended September 30, 2017, compared to 91% and 95% for the same periods of 2016.

For the quarter ended September 30, 2017, the increase in the combined ratio was driven by the impact of the 2017 Catastrophes, less favorable development on prior years' loss reserves and a higher expense ratio, partially offset by lower attritional losses.
Excluding the impact of the 2017 Catastrophes, the current accident year loss ratio for the third quarter of 2017 decreased compared to the same period of 2016. The current accident year loss ratio for the third quarter of 2016 included higher attritional losses and large losses, primarily on our marine and energy product lines, compared to the same period of 2017.
The International Insurance segment's combined ratio for the quarter ended September 30, 2017 included $40.7 million of favorable development on prior years' loss reserves compared to $42.7 million in 2016. Favorable development on prior years' loss reserves in the third quarter of 2017 had a less favorable impact on the segment combined ratio compared to the third quarter of 2016 due to higher earned premium in 2017. For the quarter ended September 30, 2017, favorable development was most significant on our professional liability and general liability product lines across several accident years. The favorable development in the third quarter of 2016 was most significant on our professional liability product lines.
The expense ratio for the International Insurance segment increased primarily due to changes in the mix of business, which was due in part to higher retentions on products with higher net commission rates compared to the third quarter of 2016, expenses in 2017 related to changes in our branch office locations and an unfavorable impact from ceded reinstatement premiums related to the 2017 Catastrophes. These increases in the expense ratio were partially offset by the favorable impact from higher earned premium and lower profit sharing expenses in the third quarter of 2017 compared to 2016.

For the nine months ended September 30, 2017, the increase in the combined ratio was driven by the impact of the 2017 Catastrophes, partially offset by more favorable development on prior years' loss reserves and 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 and an unfavorable impact on the same period of 2016.prior years' loss ratio.
•Excluding the impact of losses attributed to COVID-19 in 2020 and the 20172020 and 2019 Catastrophes, the current accident year loss ratio for the nine months ended September 30, 2017 was flat2020 decreased compared to the prior year period. In 2017, the impactsame period of higher2019, primarily due to lower net attritional loss ratios, primarily on our property product lines, was largely offset by lower attritional and large losses on our marine and energy and professional liability product lines, compared to the prior year period.partially offset by higher net attritional losses on our programs product line. We also had lower attritional loss ratios on our property and general liability product lines, which benefited from higher premium rates in 2020.
•The International Insurance segment's combined ratio for the nine months ended September 30, 20172020 included $146.3$404.6 million of favorable development on prior years' loss reserves compared to $111.4$309.3 million in 2016.for the same period of 2019. The increase in loss reserve redundanciesimpact on prior years' loss reserves in 2017 compared to 2016 was driven bythe combined ratio of more favorable development on our general liability and professional liability product lines in 2017. For the nine months ended September 30, 2017, the favorable development on prior years' loss reserves was most significantpartially offset by the unfavorable impact of higher earned premiums in 2020 compared to 2019. The increase in favorable development was primarily due to more favorable development on our professional liability and general liability product lines across several accident yearsin 2020 compared to 2019 and favorable development on our marine and energyproperty product lines primarily on the 2013 through 2016 accident years.in 2020 compared to adverse development in 2019. For the nine months ended September 30, 2016, the2020, favorable development was most significant on our general liability, professional liability and workers' compensation product lines across several accident years. The favorable development on prior years' loss reserves in 2019 was also most significant on our general liability, workers' compensation and professional liability and marine and energy product lines.

•The decrease in the expense ratio wasfor the nine months ended September 30, 2020 decreased compared to the same period of 2019, primarily due to lower profit sharing in 2017 compared to 2016, the favorable impact fromof higher earned premium in 2017 compared to 2016 and the write offpremiums.
44
Table of previously capitalized software development costs during the second quarter of 2016. These decreases in the expense ratio were partially offset by an unfavorable impact from changes in the mix of business in this segment, most notably as the result of higher retentions on products with higher net commission rates in 2017 compared to 2016, as well as expenses in 2017 related to changes in our branch office locations.Contents

Reinsurance Segment


The combined ratio for the Reinsurance segment was 183%116% (including 95%15 points for the underwriting losslosses attributed to COVID-19 and 15 points for underwriting losses on the 20172020 Catastrophes) for the quarter ended September 30, 2017 and 135%2020 compared to 103% (including 34%12 points for the underwriting losslosses on the 20172019 Catastrophes) for the nine months ended September 30, 2017, compared to 94% and 87% for the same periodsperiod of 2016.2019.


For the quarter ended September 30, 20172020, the increase in the combined ratio was driven by the impact of the 2017 Catastrophes,underwriting losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by a lower expensemore favorable development on prior accident years' loss reserves in 2020 compared to 2019.
•Excluding the impact of losses attributed to COVID-19 in 2020 and the 2020 and 2019 Catastrophes, the current accident year loss ratio in 2017for the quarter ended September 30, 2020 increased compared to the same period of 2016.2019, primarily due to less favorable premium adjustments in 2020 compared to 2019, most notably within our property and workers' compensation product lines, partially offset by lower net attritional losses, primarily on our general liability and property product lines.
•The Reinsurance segment's combined ratio for the quarter ended September 30, 20172020 included $21.2$30.7 million of favorable development on prior years' loss reserves compared to $19.1$13.8 million for the same period of 2019. The increase in favorable development was primarily due to favorable development on our professional liability and workers' compensation product lines in 2016.2020 compared to adverse development on these product lines in 2019. For the quarter ended September 30, 2017, favorable development on prior years' loss reserves was most significant on our property product lines on the 2013 through 2015 accident years. For the quarter ended September 30, 2016, the2020, favorable development was most significant on our property and generalprofessional liability product lines.
lines across several accident years. The decrease in the expense ratio was primarily due to a favorable impact from assumed reinstatement premiums related to the 2017 Catastrophes, lower profit sharing expenses and the favorable impact of higher earned premiumdevelopment on prior years' loss reserves in the third quarter of 20172019 was most significant on our property product lines.

The combined ratio for the Reinsurance segment was 106% (including 10 points for underwriting losses attributed to COVID-19 and five points for underwriting losses on the 2020 Catastrophes) for the nine months ended September 30, 2020 compared to 2016.99% (including four points for underwriting losses on the 2019 Catastrophes) for the same period of 2019.


For the nine months ended September 30, 20172020, the increase in the combined ratio was primarily driven by the impact of the 2017 Catastrophesunderwriting losses attributed to COVID-19 in 2020 and adverse development on prior year loss reserves,higher catastrophe losses in 2020 compared to 2019, partially offset by a lower expense ratio.
Excluding the impact of the 2017 Catastrophes, the currentratio and more favorable development on prior accident yearyears' loss ratio for the nine months ended September 30, 2017 increasedreserves in 2020 compared to 2016, primarily as a result of more unfavorable premium adjustments related to prior accident years in 2017 compared to 2016.2019.
•The Reinsurance segment's combined ratio for the nine months ended September 30, 20172020 included $22.2$29.0 million of adversefavorable development on prior years' loss reserves compared to $90.1$20.7 million for the same period of 2019. The increase in favorable development was primarily due to more favorable development on our property product lines in 2016. The2020 compared to 2019, partially offset by more adverse development on prior years' loss reserves in 2017 is primarily due to the decrease in the Ogden Rate, as previously discussed, which resulted in $85.0 million of adverse development, or 12 points on the Reinsurance segment combined ratio. Also contributing to the unfavorable variance to the prior year period was less favorable development across several of our public entity product lines in 20172020 compared to 2016.2019. Additionally, in 2020, we recognized additional exposure related to net favorable premium adjustments along with adverse development on certain of our professional liability product lines. For the nine months ended September 30, 2017,2020, favorable development was most significant on our property product lines, primarily on the 2012 through 2015 accident years and on our whole account product line on the 2010 through 20142017 to 2019 accident years. The favorable development on prior years' loss reserves in 20162019 was most significant on our propertyaviation, auto and workers compensationwhole account product lines.
•The expense ratio decreased for the nine months ended September 30, 20172020 decreased compared to the same period of 20162019, primarily due to lower profit sharing expenses and a favorable impact from higher earned premium, including reinstatement premiums related to the 2017 Catastrophes.general expenses.


Other Insurance (Discontinued Lines)
45

The Other Insurance (Discontinued Lines) segment produced an underwriting profit
Table of $1.3 million and $7.3 million for the quarter and nine months ended September 30, 2017, respectively, compared to an underwriting loss of $2.7 million and an underwriting profit of $10.8 million for the same periods of 2016. The underwriting profit for the nine months ended September 30, 2017 was due in part to the Part VII transaction completed during the first quarter. See note 7 of the notes to the consolidated financial statements. The underwriting profit for the nine months ended September 30, 2016 was driven by favorable development related to a commutation that was triggered during the first quarter of 2016.Contents


Premiums and Net Retentions


The following tables summarize gross premium volume, net written premiums and earned premiums by segment.premiums.


Gross Premium Volume
Gross Premium Volume       
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
U.S. Insurance$778,323
 $663,196
 $2,171,481
 $2,000,454
International Insurance319,914
 269,093
 949,031
 879,078
Reinsurance230,077
 196,948
 1,025,716
 920,038
Other Insurance (Discontinued Lines)(186) 536
 (185) 515
Total$1,328,128
 $1,129,773
 $4,146,043
 $3,800,085
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Insurance$1,514,002 $1,418,363 $4,482,149 $3,979,559 
Reinsurance222,066 226,387 958,529 963,145 
Other underwriting(227)516 55 12 
Total Underwriting1,735,841 1,645,266 5,440,733 4,942,716 
Program services and other536,893 619,226 1,528,017 1,823,965 
Total$2,272,734 $2,264,492 $6,968,750 $6,766,681 


Gross premium volume in our underwriting operations for the quarter and nine months ended September 30, 20172020 increased 18%6% and 9%10%, respectively, compared to the same periods of 2016. The2019 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 13% and 16% for the quarter and nine months ended September 30, 2020, respectively. The decrease in gross premium volume in our program services business for both periods 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 for the quarter and nine months ended September 30, 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 7% and 13% for the quarter and nine months ended September 30, 2020, respectively, compared to the same periods of 2019. The increase for both periods was primarily driven by growth and more favorable rates within our professional liability and general liability product lines, as well as growth in our personal lines product lines. For the quarter ended September 30, 2020, these increases were partially offset by lower gross premiums written within our programs product line, due in part to reduced social and economic activity related to COVID-19, as well as active portfolio management where we have discontinued writing certain underperforming programs.

Gross premium volume in our Reinsurance segment decreased slightly for both the quarter and nine months ended September 30, 2017 was attributable2020 compared to an increase in gross premium volume across all threethe same period of our ongoing underwriting segments.

Gross premium volume in our U.S. Insurance segment increased 17% and 9% for2019. For the quarter and nine months ended September 30, 2017, respectively. The increase in2020, significant offsetting variances compared to 2019 include:
•lower gross premium volume for both the quarter and nine months ended September 30, 2017 was driven by growthpremiums within our programs, general liability and personal linesworkers' compensation product lines, as well as increased premiums from our new surety business which was acquired in the second quarter of 2017.

Gross premium volume in our International Insurance segment increased 19% and 8% for the quarter and nine months ended September 30, 2017, respectively. The increase in gross premium volume for both the quarter and nine months ended September 30, 2017 was primarily due to higherlower gross premiums on renewals and less favorable premium volumeadjustments,
•lower gross premiums within our marineproperty product lines, primarily due to an unfavorable impact from the timing of multi-year contracts, and energy product lines. The increase in
•higher gross premium volume for the nine months ended September 30, 2017 was also attributable to higher premium volumepremiums within our general liability product lines.lines, primarily due to new business.

Gross premium volume in our Reinsurance segment increased 17% and 11% for the quarter and nine months ended September 30, 2017. The increase in gross premium volume for the quarter ended September 30, 2017 was driven by higher gross premium volume in our property product line as a result of the favorable impact of assumed reinstatement premiums related to the 2017 Catastrophes. The increase in gross premium volume for the nine months ended September 30, 2017 was driven by $136.5 million of premium related to two large specialty quota share treaties entered into in the first quarter of 2017, as well as a favorable impact from assumed reinstatement premiums and higher gross premium volume in our professional liability and workers compensation product lines. These increases were partially offset by lower gross premium volume in our auto, property and general liability product lines. Significant variability in gross premium volume can be expected in our Reinsurance segment due to individually significant dealscontracts and multi-year contracts.contracts, as well as the timing of renewals.


ThroughDuring the first nine months of 2017,2020, we continued to see small price decreasesimproved pricing across manymost of our product lines, especially inmost notably within our international business on ourgeneral liability, professional liability and property and marine and energy product lines. Our large account business has also been subjectThe primary exception was workers' compensation, where we continued to more pricing pressure.see low single digit rate decreases given generally favorable underlying trends 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.


See "Developments Related to COVID-19" for further discussion on potential impacts to our premiums.

46
Net Written Premiums       
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
U.S. Insurance$653,970
 $562,215
 $1,829,528
 $1,694,193
International Insurance254,326
 209,656
 766,571
 680,691
Reinsurance189,636
 157,043
 899,698
 786,450
Other Insurance (Discontinued Lines)(178) 469
 (157) 555
Total$1,097,754
 $929,383
 $3,495,640
 $3,161,889
Net Written Premiums

Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Insurance$1,220,054 $1,181,919 $3,683,767 $3,306,447 
Reinsurance178,994 187,180 820,573 844,949 
Other underwriting(388)556 51 99 
Total Underwriting1,398,660 1,369,655 4,504,391 4,151,495 
Program services and other(1,384)729 (4,242)1,620 
Total$1,397,276 $1,370,384 $4,500,149 $4,153,115 


Net retention of gross premium volume for our underwriting operations for the quarter and nine months ended September 30, 20172020 was 83%81% and 84%83%, respectively, compared to 82%83% and 83%, respectively,84% for the same periods of 2016.2019. The increasedecrease in net retention for both the quarter and nine months ended September 30, 20172020 compared to the same periods of 20162019 was driven by higher retention within the International Insurance and Reinsurance segments. The increasea decrease in net retention within the Internationalour Insurance segment, for both periods of 2017due in part to a new quota share agreement to fully cede premiums on a program that was largely dueput into run-off. Within our underwriting operations, we purchase reinsurance and retrocessional reinsurance to highermanage our net retention on our professional liability product lines. The increase in net retention within the Reinsurance segment for the quarter ended September 30, 2017 was primarily driven by higher net retentions on our property product lines. The increase in net retention within the Reinsurance segment for the nine months ended September 30, 2017 was primarily dueindividual risks and overall exposure to changes in the mix of business. Net retention in the U.S. Insurance segment decreased for both the quarterlosses and nine months ended September 30, 2017 compared to the same periods of 2016. This was dueenable us to lower retention on our programs and personal lines business, partially offset by higher retention on our casualty product lines.write policies with sufficient limits to meet policyholder needs.


Earned Premiums
Earned Premiums       
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
U.S. Insurance$600,294
 $548,792
 $1,727,871
 $1,614,588
International Insurance240,145
 218,968
 673,606
 637,365
Reinsurance259,601
 206,018
 714,718
 630,151
Other Insurance (Discontinued Lines)(178) 466
 (157) 685
Total$1,099,862
 $974,244
 $3,116,038
 $2,882,789
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Insurance$1,173,758 $1,058,869 $3,400,760 $3,023,865 
Reinsurance222,369 240,144 688,884 678,382 
Other underwriting(195)556 51 99 
Total Underwriting1,395,932 1,299,569 4,089,695 3,702,346 
Program services and other(1,504)463 (4,384)1,124 
Total$1,394,428 $1,300,032 $4,085,311 $3,703,470 


Earned premiums increased 7% and 10% for the quarter and nine months ended September 30, 2017 increased 13% and 8%,2020, respectively, compared to the same periods of 2016.2019. The increase in earned premiums for both the quarter and nine months ended September 30, 20172020 was primarily attributable to an increase in earned premiums across all three of our ongoing underwriting segments.

The increase in earned premiums in our U.S. Insurance segment for both periods of 2017 was primarily due to the increase in gross premium volume within our Insurance segment on our professional and general liability and surety product lines, as described above. The increase in earned premiums for the nine months ended September 30, 2017 was also attributable to an increase in earned premiums within our workers compensation and personal lines product lines.


The increase in earned premiums in our International Insurance segment for both the quarter and nine months ended September 30, 2017 was attributable to an increase in earned premiums across multiple product lines. The increase in earned premiums for the nine months ended September 30, 2017 was partially offset by an unfavorable impact from movements in foreign currency exchange rates.

47
The increase in earned premiums in our Reinsurance segment for both the quarter and nine months ended September 30, 2017 was primarily due to higher earned premiums in our property product lines due to the favorable impact


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 while minimizing underwriting risk. 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.
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Net investment income$90,384 $113,382 $274,242 $339,395 
Net investment gains (losses)$539,302 $32,144 $(230,896)$1,069,988 
Change in net unrealized investment gains on available-for-sale securities (1)
$98,148 $92,904 $429,658 $511,307 
Investment yield (2)
0.6 %0.7 %1.8 %2.3 %
Taxable equivalent total investment return, before foreign currency effect3.8 %11.3 %
Taxable equivalent total investment return
3.8 %10.9 %
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Net investment income$104,489
 $93,147
 $304,156
 $279,437
Net realized investment gains (losses)$(40,007) $27,416
 $(1,515) $65,836
Change in net unrealized gains on investments$328,768
 $26,381
 $836,258
 $619,072
Investment yield (1)
0.7% 0.6% 1.9% 1.8%
Taxable equivalent total investment return, before foreign currency effect    6.7% 5.8%
Taxable equivalent total investment return 
    8.1% 5.8%
(1)The change in net unrealized gains on available-for-sale securities excludes the reserve deficiency adjustment for life and annuity benefit reserves of $20.6 million and $31.3 million, respectively, for the quarters ended September 30, 2020 and 2019, and $56.2 million and $93.1 million, respectively, for the nine months ended September 30, 2020 and 2019.
(1)
Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost.

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

The increasedecrease in net investment income for both the quarter and nine months ended September 30, 20172020 compared to the same periods of 2019 was driven primarily by an increase inlower short-term investment income primarily due to higherlower short-term interest rates, and higher dividendlower interest income on our fixed maturity investment portfolio, primarily due to increaseddecreased holdings of fixed maturity securities in 2020. The decrease in net investment income for the nine months ended September 30, 2020 was also driven by losses on our equity holdings.method investments. See note 4(d) of the notes to consolidated financial statements for details regarding the components of net investment income.

Net realized investment losses for the quarter and nine months ended September 30, 2017 included losses of $51.6 million and $39.5 million, respectively, on our investment in insurance-linked securities funds (ILS Funds) as a result of a decrease in the net asset value of the ILS Funds during the third quarter, which was driven by the impact of losses from Hurricanes Harvey, Irma and Maria on the underlying reinsurance contracts in which the ILS Funds are invested. Net realized investment losses for the quarter and nine months ended September 30, 2017 also included write downs for other-than-temporary declines in the estimated fair value of investments of $3.4 million and $7.3 million, respectively, all of which were attributable to equity securities. Net realized investment gains for the nine months ended September 30, 2016 included write downs for other-than-temporary declines in the estimated fair value of investments of $12.1 million, all of which were attributable to equity securities. There were no write downs for other-than-temporary declines in the estimated fair value of investments for the quarter ended September 30, 2016.

The increase in net unrealized gains on investments, net of taxes, for both the quarter and nine months ended September 30, 2017 was attributable to an increase in the fair value of both our fixed maturity and equity portfolios compared to June 30, 2017 and December 31, 2016, respectively. The increase in net unrealized gains on investments, net of taxes, for the quarter ended September 30, 2016 was2020 were primarily attributable to an increase in the fair value of our equity portfolio partially offsetdriven by a decreasefavorable market value movements. This follows significant declines in the fair value of our fixed maturityequity portfolio comparedin the first quarter of 2020 driven by unfavorable market value movements resulting from the onset of the COVID-19 pandemic, the impacts of which are further discussed in "Developments Related to June 30, 2016.COVID-19." The increasedecline in fair value of the equity portfolio in the first quarter of 2020 resulted in net unrealized gains on investments, net of taxes,investment losses for the nine months ended September 30, 2016 was attributable to an increase in the fair value of both our fixed maturity and equity portfolios compared to December 31, 2015.2020. See note 4(e) of the notes to consolidated financial statements for further details regardingon the components of the change in net unrealizedinvestment gains on investments.(losses).

We complete a detailed analysis each quarter to assess whether the decline in the fair value of any investment below its cost basis is deemed other-than-temporary. At September 30, 2017, we held securities with gross unrealized losses of $51.8 million, or less than 1% of invested assets. All securities with unrealized losses were reviewed, and we believe that there were no other securities with indications of declines in estimated fair value that were other-than-temporary at September 30, 2017. However, given the volatility in the debt and equity markets, we caution readers that further declines in fair value could be significant and may result in additional other-than-temporary impairment charges in future periods. Variability in the timing of realized and unrealized gains and losses is to be expected.



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, (loss), such as coupon interest on fixed maturities,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 (loss).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 federalU.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 realized and unrealized investment gains or losses may vary from one period to the next.


48
The following table reconciles investment yield to taxable equivalent total investment return.
 Nine Months Ended September 30,
 2017 2016
Investment yield (1)
1.9 % 1.8 %
Adjustment of investment yield from amortized cost to fair value(0.4)% (0.3)%
Net amortization of net premium on fixed maturities0.3 % 0.3 %
Net realized investment gains (losses) and change in net unrealized gains on investments4.4 % 3.8 %
Taxable equivalent effect for interest and dividends (2)
0.3 % 0.3 %
Other (3)
1.6 % (0.1)%
Taxable equivalent total investment return8.1 % 5.8 %
(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 changes in foreign currency exchange rates and time-weighting the inputs to the calculation of taxable equivalent total investment return.

Nine Months Ended September 30,
20202019
Investment yield (1)
1.8 %2.3 %
Adjustment of investment yield from amortized cost to fair value(0.4)%(0.5)%
Net amortization of net premium on fixed maturity securities0.3 %0.3 %
Net investment gains (losses) and change in net unrealized investment gains on available-for-sale securities1.0 %8.4 %
Taxable equivalent effect for interest and dividends (2)
0.1 %0.1 %
Other (3)
1.0 %0.3 %
Taxable equivalent total investment return3.8 %10.9 %
(1)Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost.
Other Revenues(2)Adjustment to tax-exempt interest and Other Expensesdividend 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 Operations


Operating revenues and expenses associated withWe report the results of our Markel Ventures operations are included in other revenuesour Markel Ventures segment. This segment includes a diverse portfolio of businesses from different industries that offer various types of products and other expensesservices to businesses and consumers, predominantly in the consolidated statements ofUnited States. We measure Markel Ventures' results by its operating income (loss) and comprehensivenet income, (loss)as well as earnings before interest, income taxes, depreciation and amortization (EBITDA). We consolidate the results of our Markel Ventures operationssubsidiaries on a one-month lag, with the exception of any significant transactions or events that occur in the intervening period.

The following table summarizes the operating revenues, operating income, EBITDA and net income to shareholders and EBITDA from our Markel Ventures operations.segment. See note 7 of the notes to consolidated financial statements for further details regarding the components of our Markel Ventures segment operating revenues and expenses.

Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Operating revenues$824,132 $496,243 $2,013,492 $1,568,443 
Operating income$79,605 $35,467 $200,766 $147,056 
EBITDA$110,804 $58,716 $283,536 $219,131 
Net income to shareholders$48,731 $19,877 $108,712 $84,878 

 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Operating revenues$332,748
 $321,342
 $933,280
 $905,615
Net income to shareholders$3,822
 $13,490
 $38,369
 $49,520
EBITDA$24,869
 $41,800
 $115,802
 $133,842

RevenuesOperating revenues from our Markel Ventures operationssegment increased $11.4 million and $27.7 million for the quarter and nine months ended September 30, 2017, respectively,2020 compared to the same periods of 2016. In both periods, higher revenues2019 due to increased sales volumesthe contribution of revenues from Lansing, which was acquired in our non-manufacturing operations were partially offset by lowerApril 2020, and VSC, which was acquired in November 2019. The quarter and nine months ended September 30, 2020 included $373.4 million and $563.6 million, respectively, of operating revenues attributable to Lansing and VSC. Excluding the contributions of Lansing and VSC in our manufacturing operations, primarily from one of our transportation related businesses, in 2017 compared to 2016.


Net income to shareholders and EBITDA2020, operating revenues from our other Markel Ventures operationsbusinesses decreased for the quarter and nine months ended September 30, 20172020 compared to the same periods of 2016. Operating expenses for2019, primarily due to decreased demand across many of our products businesses attributable to the economic and social disruption caused by the COVID-19 pandemic. For both periods, the decrease in demand, which led to lower sales volumes, had the most significant impact at our transportation-related businesses. These decreases were partially offset by the impact of 2017 included $20.0 millionhigher sales volumes at one of estimated inventory loss arising from Hurricane Irma. We have not recognized the potential for any insurance recoveries resulting from these losses. Insurance recoveries will be recognized asour consumer and building products businesses.

49
Operating income in the period they become more certain. Operating expenses for both periods of 2016 included $10.3 million of expense as a result of an increase in our estimate of the contingent consideration obligation related to the 2015 acquisition of CapTech. There was no similar charge in 2017. We also experienced lower net income to shareholders and EBITDA from our Markel Ventures segment increased for the quarter and nine months ended September 30, 20172020 compared to the same periods of 20162019. The increase in operating income and EBITDA for both periods was due in part to lower sales volumesthe acquisitions of Lansing and VSC. The increase in operating income and EBITDA for both periods was also attributable to a gain on the sale of assets at one of our manufacturing operations, partially offset byleasing businesses and higher revenues in certainat one of our non-manufacturing operations.consumer and building products businesses, as described above. For the nine months ended September 30, 2020, the increase in operating income and EBITDA was also attributable to growth and improved operating results at one of our consulting services businesses. Operating income and EBITDA for both periods were unfavorably impacted by lower operating revenues at our transportation-related businesses, as a result of decreased demand attributed to the COVID-19 pandemic, as described above.

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 operations.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 andor amortization resulting from purchase accounting. The following table reconciles consolidated netMarkel Ventures operating income (loss) to shareholders to Markel Ventures EBITDA,EBITDA.
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Markel Ventures operating income$79,605 $35,467 $200,766 $147,056 
Depreciation expense15,337 12,892 43,471 40,401 
Amortization of intangible assets15,862 10,357 39,299 31,674 
Markel Ventures EBITDA$110,804 $58,716 $283,536 $219,131 

Net income to shareholders from our Markel Ventures segment increased for the quarter and nine months ended September 30, 2020 compared to the same periods of 2019, primarily due to higher operating income, partially offset by higher income tax expense and interest expense.

See "Developments Related to COVID-19" for further discussion of impacts of the pandemic on our Markel Ventures operations.

50
Other Operations

The following table presents the components of operating revenues and operating expenses that are not included in a reportable segment.
Quarter Ended September 30,
20202019
(dollars in thousands)Services and other revenuesServices and other expensesAmortization of intangible assetsServices and other revenuesServices and other expensesAmortization of intangible assets
Other operations:
Insurance-linked securities$38,547 $83,495 $9,612 $54,947 $46,123 $9,611 
Program services23,519 4,746 5,235 28,844 3,422 5,236 
Life and annuity541 1,063 — 378 1,789 — 
Other886 639 3,579 7,250 6,009 650 
63,493 89,943 18,426 91,419 57,343 15,497 
Underwriting operations10,376 9,841 
Total$63,493 $89,943 $28,802 $91,419 $57,343 $25,338 

Nine Months Ended September 30,
20202019
(dollars in thousands)Services and other revenuesServices and other expensesAmortization of intangible assetsServices and other revenuesServices and other expensesAmortization of intangible assets
Other operations:
Insurance-linked securities$146,265 $183,814 $28,836 $158,570 $159,006 $33,748 
Program services74,561 16,073 15,703 79,395 14,300 15,704 
Life and annuity1,071 12,613 — 1,145 14,284 — 
Other15,612 13,731 4,918 24,868 20,425 2,019 
237,509 226,231 49,457 263,978 208,015 51,471 
Underwriting operations31,520 29,518 
Total$237,509 $226,231 $80,977 $263,978 $208,015 $80,989 

Insurance-Linked Securities

For the quarter ended September 30, 2020, the decrease in operating revenues in our insurance-linked securities operations was driven by lower revenues from our Nephila operations, primarily due to lower investment management fees as a result of increases in development class assets, or capital held in a side-pocket for which management fees are not earned, and redemptions in 2020. The decrease in operating revenues for the quarter ended September 30, 2020 was also attributable to lower revenues from our Markel CATCo operations, primarily due to lower assets under management during 2020 compared to 2019 and, effective January 1, 2020, a further reduction in the management fee rate.

For the nine months ended September 30, 2020, the decrease in operating revenues in our insurance-linked securities operations was driven by lower revenues from our Markel CATCo operations, as described above, partially offset by higher revenues from our Nephila operations. Higher revenues from our Nephila operations for the nine months ended September 30, 2020 were primarily due to growth in our managing general agent operations, partially offset by lower investment management fees, as described above.

Nephila's net assets under management were $9.4 billion and $10.4 billion as of noncontrolling interests.

September 30, 2020 and December 31, 2019, respectively. MCIM's net assets under management were $1.2 billion and $2.8 billion as of September 30, 2020 and December 31, 2019, respectively, a portion of which is attributable to our investments in the Markel CATCo Funds.
51
 Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands)2017 2016 2017 2016
Net income (loss) to shareholders$(259,141) $83,796
 $(39,612) $322,963
(Income) loss before income taxes from other Markel operations362,425
 (96,708) 117,458
 (365,806)
Income tax expense (benefit) from other Markel operations(99,462) 26,402
 (39,477) 92,363
Markel Ventures net income to shareholders3,822
 13,490
 38,369
 49,520
Interest expense (1)
5,315
 4,005
 11,738
 11,610
Income tax expense215
 9,368
 19,688
 28,431
Depreciation expense9,092
 8,247
 26,760
 24,075
Amortization of intangible assets6,425
 6,690
 19,247
 20,206
Markel Ventures EBITDA - Total$24,869
 $41,800
 $115,802
 $133,842
        
Markel Ventures EBITDA - Manufacturing$25,362
 $35,082
 $82,037
 $105,600
Markel Ventures EBITDA - Non-Manufacturing(493) 6,718
 33,765
 28,242
Markel Ventures EBITDA - Total$24,869
 $41,800
 $115,802
 $133,842
(1)
Interest expense for the quarters ended September 30, 2017 and 2016 includes intercompany interest expense of $3.7 million and $2.7 million, respectively. Interest expense for the nine months ended September 30, 2017 and 2016 includes intercompany interest expense of $7.7 million and $7.4 million, respectively.

The increase in services and other expenses in our insurance-linked securities operations for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 was primarily due to a legal settlement at our Markel CATCo operations. See note 15 of the notes to consolidated financial statements for further details around developments in our Markel CATCo operations. Services and other expenses at our Nephila operations increased for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 due to growth in our managing general agent operations in 2020. For the nine months ended September 30, 2020, higher managing general agent expenses were partially offset by a favorable impact from transaction-related costs in 2019 that did not recur in 2020. Services and other expenses in 2020 also reflect start-up costs associated with our new retrocessional insurance-linked securities fund manager, Lodgepine.

Program Services

The decrease in operating revenues in our program services operations for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 was primarily due to lower gross premium volume. Gross written premiums in our program services operations were $536.6 million and $1.5 billion for the quarter and nine months ended September 30, 2020, respectively, and $619.2 million and $1.8 billion for the quarter and nine months ended September 30, 2019, respectively. The decrease in gross premium volume for both periods 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 resulting in a one-time unfavorable premium adjustment of $55.0 million associated with the return of unearned premium, which was recognized in the first quarter of 2020. For the nine months ended September 30, 2020, these decreases were partially offset by gross written premiums from new program business in 2020.

Interest Expense, Loss on Early Extinguishment of Debt and Income Taxes


Interest Expense and Loss on Early Extinguishment of Debt


Interest expense was $31.8$42.7 million and $97.0$133.2 million for the quarter and nine months ended September 30, 2017,2020, respectively, compared to $33.2$47.5 million and $97.7$129.0 million for the same periods of 2016.2019. The decreasechange in interest expense for the quarter and nine months ended September 30, 20172020 was primarily due toa result of the repaymentfollowing transactions:
•the purchase and redemption of our 7.20%6.25% and 5.35% unsecured senior notes in the secondthird and fourth quarters of 2019
•the repayment of our 7.125% unsecured senior notes in the third quarter of 2017. 2019
•the issuance of our 3.35% and 4.15% unsecured senior notes in the third quarter of 2019
The decreasechange in interest expense for the nine months ended September 30, 20172020 was due toalso impacted by the partial purchaseissuance of our 7.125% unsecured senior notes and our 7.35% unsecured senior notes in the second quarter of 2016 and the repayment of our 7.20% unsecured senior notes in the second quarter of 2017, partially offset by interest expense associated with our 5.0% unsecured senior notes which were issued in the second quarter of 2016.2019.


In September 2019, we purchased $125.2 million of principal on our 6.25% unsecured senior notes due September 30, 2020 and $97.8 million of principal on our 5.35% unsecured senior notes due June 1, 2021 through a tender offer at a total purchase price of $130.1 million and $103.0 million, respectively. In connection with the partialtender offer and purchase, of our 7.125% unsecured senior notes and our 7.35% unsecured senior notes in the second quarter of 2016, we recognized a loss on early extinguishment of debt of $44.1$6.7 million during the quarter and nine months ended September 30, 2016.2019. See "Financial Condition" for further discussion of our other 2019 senior long-term debt transactions.



Income Taxes


The effective tax rate was 32% and 27% for the nine months ended September 30, 2017 and 2016, respectively. For the nine months ended September 30, 2017, the effective tax rate differs from the U.S. statutory tax rate of 35% primarily as a result of tax-exempt investment income, partially offset by a reduced tax benefit from losses attributable to our foreign operations. For the nine months ended September 30, 2016, the effective tax rate differs from the U.S. statutory tax rate of 35% primarily as a result of tax-exempt investment income. The increase in the effective tax rate for the nine months ended September 30, 2017 compared2020 was not meaningful due to the same period of 2016 was primarily attributable to the impact during the third quarter of having a small pre-tax loss in the period. The effective tax rate was 22% for the nine months ended September 30, 2017, which magnified the effect of certain tax adjustments.

Our effective tax rate, which is based upon2019. We use the estimated annual effective tax rate may fluctuatemethod 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 period to period based on the relative mix of income or loss reported by jurisdictionestimated annual effective tax rate, and the varyingrelated tax ratesexpense or benefit is reported in each jurisdiction.

Comprehensive Income (Loss) to Shareholders

Comprehensive loss to shareholders was $19.9 million for the third quarter of 2017 compared to comprehensive income to shareholders of $89.2 million for the same period as the related item. The estimated annual effective tax rate was 21% for both the nine months ended September 30, 2020 and 2019. 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 2016. Comprehensive loss to shareholders for the third quarter of 2017 included a net loss to shareholders of $259.1 million, an increase in net unrealized gains on investments, net of taxes, of $222.2 million and favorable foreign currency translation adjustments, net of taxes, of $16.3 million. Comprehensive income to shareholders for the third quarter of 2016 included net income to shareholders of $83.8 million and an increase in net unrealized gains on investments, net of taxes, of $13.3 million.

Comprehensive income to shareholders was $545.7 milliondiscrete items for the nine months ended September 30, 2017 compared2020 was magnified due to $696.1 million for the same periodsmall pre-tax loss during the period.

52
Comprehensive Income to Shareholders

The following table summarizes the components of comprehensive income to shareholdersshareholders.
Quarter Ended September 30,Nine Months Ended September 30,
(dollars in thousands)2020201920202019
Net income (loss) to shareholders$452,726 $205,637 $(31,269)$1,279,362 
Other comprehensive income
Change in net unrealized gains on available-for-sale investments, net of taxes61,087 48,518 297,927 329,873 
Other, net of taxes6,294 (4,144)(6,961)(3,640)
Other comprehensive (income) loss attributable to noncontrolling interest(18)58 (24)49 
Other comprehensive income to shareholders67,363 44,432 290,942 326,282 
Comprehensive income to shareholders$520,089 $250,069 $259,673 $1,605,644 

Book Value per Common Share and Total Shareholder Return

Book value per common share was $819.71 as of September 30, 2020, which reflects an increase of 2% from $802.59 at December 31, 2019. Our stock price per share, or total shareholder return, decreased 15% for the nine months ended September 30, 2017 included an increase in net unrealized gains on investments, net2020.

53

The increase in net unrealized gains on investments for both the quarter and nine months ended September 30, 2016 were net of an adjustment of $9.6 million and $57.5 million, respectively, to reclassify unrealized gains on the investments supporting future policy benefits to life and annuity benefit reserves. No adjustment was required for the quarter or nine months ended September 30, 2017. See note 11 of the notes to consolidated financial statements for further discussion of this adjustment.

Financial Condition


Investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) were $20.0$23.6 billion at September 30, 20172020 compared to $19.1$22.3 billion at December 31, 2016. Net unrealized gains on investments, net of taxes, were $2.3 billion at September 30, 2017 compared to $1.7 billion at December 31, 2016.2019. Equity securities were $5.7$6.2 billion, or 29%26% of invested assets, at September 30, 2017,2020, compared to $4.7$7.6 billion, or 25%34% of invested assets, at December 31, 2016.2019. The decrease in equity securities from December 31, 2019 to September 30, 2020 was attributable to sales of equity securities as well as a decrease in fair value, which was driven by net unfavorable market value movements during the nine months ended September 30, 2020. Fixed maturity securities were 43% of invested assets at September 30, 2020 compared to 45% at December 31, 2019.


Net cash provided by operating activities was $598.7 million$1.3 billion for the nine months ended September 30, 20172020 compared to $324.4$712.0 million for the same period of 2016. Net cash provided by operating activities for the nine months ended September 30, 2017 and 2016 was net of cash payments of $45.8 million and $51.9 million, respectively, made in connection with commutations that were completed during the respective periods.2019. Net cash flows from operating activities for the nine months ended September 30, 20172020 reflected higher net premium collections in the U.S.our Insurance segment, lower claims settlement activity across all of our underwriting segments and lower payments for income taxes and employee profit sharing compared to the same period of 2016. Cash flows for the nine months ended September 30, 2016 also included payments totaling $47.0 million to settle contingent purchase consideration obligations, of which $32.9 million was included in operating activities.segment.



Net cash usedprovided by investing activities was $94.2$22.5 million for the nine months ended September 30, 20172020 compared to $1.1 billion for the same period of 2016. The decrease in net cash used by investing activities was primarily a result of a decrease in our holdings in short-term investments during$657.2 million for the same period of 2019. During the nine months ended September 30, 2017 compared to an increase in the same period of 2016. During the first nine months of 2017, the proceeds2020, net cash provided by investing activities included $1.2 billion from the sales, maturities and calls of fixed maturities and sales of equity securities, were reinvestednet of cash used for purchases of equity securities. This was partially offset by cash used to increase our holdings of short-term investments in fixed maturities and equity securities.the period. See "Developments Related to COVID-19" for further discussion of actions we have taken in our investment portfolio in response to the pandemic. Net cash provided by investing activities duringin 2020 also was net of $547.9 million of net cash used for the acquisition of Lansing. During the nine months ended September 30, 2017 was2019, net of $592.0cash used by investing activities included $212.5 million of cash net of cash acquired, used to complete acquisitions.acquire a minority ownership interest in The Hagerty Group, LLC. Cash flowsflow from investing activities areis also 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 usedprovided by financing activities was $299.3$475.6 million for the nine months ended September 30, 20172020 compared to net cash provided by financing activities of $203.0$770.6 million for the same period of 2016.2019. In May 2020, we issued preferred shares with net proceeds of $591.9 million, as further discussed below. During the second quarternine months ended September 30, 2019, we issued unsecured senior notes with net proceeds of 2017, we$1.4 billion, before expenses. We used casha portion of $90.6 millionthese proceeds to repay the remaining outstanding balance of our 7.20%7.125% unsecured senior notes due April 14, 2017. Also during 2017, we used cash of $84.3September 30, 2019 ($234.8 million to repay debt assumed in connection with acquisitions. During the second quarter of 2016, we issued $500 million of 5.0% unsecured senior notes due April 5, 2046. Net proceeds were $493.1 million.aggregate principal outstanding at December 31, 2018). We used aan additional portion of these proceeds to purchase $70.2$223.0 million of principal on two additional series of our 7.35%other unsecured senior notes due 2034 and $108.8 million of principal on our 7.125% unsecured senior notes due 2019 through a tender offer at a total purchase price $95.0of $233.1 million. Cash of $23.9 million and $126.4 million, respectively. Cash of $84.4 million and $15.5$82.0 million was used to repurchase shares of our common stock during the first nine months of 20172020 and 2016,2019, respectively. We suspended repurchases of our shares in March 2020.


We seek to maintain prudent levels of liquidity and financial leverage for the protection of our policyholders, creditors and shareholders. Our debt to capital ratio was 22%23% at September 30, 20172020 and 23%24% at December 31, 2016.2019.


We have access to various capital sources, including dividends from certain of our insurance and Markel Ventures subsidiaries, holding company invested assets, undrawn capacity under our revolving credit facility and access to the debt and equity capital markets. We believe that we have sufficient liquidity to meet our capital needs. However, the availability of these sources of capital and the availability and terms of future financings will depend on a variety of factors, and could be adversely affected by, among other things, risks and uncertainties related to COVID-19. See "Developments Related to COVID-19" for further discussion of the potential impacts of COVID-19 on our liquidity and capital resources.


In May 2020, we issued 600,000 6.00% Fixed-Rate Reset Non-Cumulative Series A preferred shares, with no par value and a liquidation preference of $1,000 per share, for aggregate net proceeds after expenses of $591.9 million. Dividends, if declared by our Board of Directors, are payable semi-annually in arrears beginning in December 2020. If we do not declare and pay the full dividends for the latest completed dividend period on all outstanding Series A preferred shares, we may not (i) declare or pay a dividend on our common shares or (ii) purchase, redeem or otherwise acquire for consideration any common shares, subject to certain exceptions. See note 14 of the notes to consolidated financial statements.

Our holding company had $2.5$3.8 billion and $4.0 billion of invested assets at both September 30, 20172020 and December 31, 2016.2019, respectively. The decrease in invested assets was primarily due to a capital contribution to Markel Ventures for the acquisition of Lansing as well as interest payments associated with our unsecured senior notes and a decrease in the fair value of equity securities, partially offset by the proceeds from our preferred shares offering, as described above.

54
Shareholders' equity
Developments Related to COVID-19

On March 11, 2020, COVID-19, a novel coronavirus outbreak, was $8.9declared a pandemic by the World Health Organization. This pandemic has caused unprecedented social and economic disruption, increased volatility of capital markets and intervention by various governments and central banks around the world. In addition to the losses incurred in both our investing and underwriting operations during the first nine months of 2020, and the decreased demand for certain products and services within our Markel Ventures operations, we are experiencing significant impacts across our business operations. Most of the workforce in our insurance operations is working remotely from their homes, however, some of our offices have re-opened to the workforce at a reduced capacity. We have taken significant measures and developed new policies and procedures to protect the health and safety of our employees who are returning the office. While remote working continues to be the predominate approach, and is currently operating effectively, an extended period of remote work arrangements could strain our business continuity plans, introduce or increase operational and control risks, including but not limited to increased cybersecurity risks, and impact our ability to effectively manage our businesses. Within our Markel Ventures operations, most of our businesses are operating on their premises, however, their ability to continue to do so may be impacted as the pandemic evolves. For those employees in our insurance and Markel Ventures operations who are returning to work, or have continued work, on our premises, there is a risk that they will contract COVID-19, which could expose us to increased risk of employment related claims and litigation. Illnesses suffered by key employees, or a significant percentage of our workforce, also could prevent or delay the performance of critical business functions.

We are committed to serving the needs of our employees, customers, business partners and shareholders and continue to focus our efforts on safeguarding our people, supporting our front office and business operations and keeping our employees, customers, business partners and shareholders informed.

Other impacts we have experienced in our operations during the quarter and nine months ended September 30, 2020, including our consideration of these impacts on the valuation of our goodwill and intangible assets, as well as steps we are taking to respond to the economic disruption and dislocation caused by the pandemic, are discussed below, along with potential future impacts to our results of operations and 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. We began the year in a strong liquidity position, holding $4.0 billion of invested assets at our holding company, the highest level in our history, and at September 30, 2017 and $8.52020, our holding company held $3.8 billion of invested assets. Invested assets at December 31, 2016. Book value per share increased to $641.20 atthe holding company as of September 30, 20172020 include net proceeds from $606.30 at December 31, 2016, primarilyour May 2020 issuance of preferred stock totaling $591.9 million, and following two debt issuances in 2019 and the purchase and redemption of our unsecured senior notes due to $545.7mature in 2020 and 2021, we have no unsecured senior notes maturing until July 2022. We also have access to our $300 million revolving credit facility. We continue to maintain a fixed maturity portfolio comprised of comprehensive incomehigh credit quality, investment grade securities with an average rating of "AA." Despite a $242.8 million decrease in the fair value of our equity portfolio in the first nine months of 2020, unrealized gains on our equity portfolio were $3.4 billion as of September 30, 2020.

Given the dislocation in the financial markets and related uncertainty around the global credit markets, we have taken several steps within our investment portfolio to shareholdersincrease our allocation to cash. Initially, we were retaining cash proceeds from maturities of short-term investments and fixed maturity securities. However, we subsequently have been reallocating cash to purchase short-term investments and fixed maturity securities. We also paused our purchases of equity securities and sold certain equity securities based on our views of the underlying fundamentals of these positions and where pricing was deemed appropriate. We also suspended repurchases of our shares in March 2020 and are focusing on expense reductions across our company.

Declines in the fair value of our equity securities and underwriting losses arising from COVID-19, as well as the 2020 Catastrophes, have reduced the capital held by our insurance subsidiaries. Our insurance operations may require additional capital to support premium writings, and we remain committed to maintaining adequate capital and surplus at each of our insurance subsidiaries. As of September 30, 2020, the statutory capital of all of our insurance subsidiaries exceeded required capital, and we believe we are well positioned to continue to pay claims, including those arising from the pandemic, promptly in accordance with the terms of our policies.

We continue to 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.

55
Underwriting Operations

As previously discussed, our underwriting results for the nine months ended September 30, 2017.2020 included $356.8 million of net losses and loss adjustment expenses directly attributed to COVID-19 (where COVID-19 was deemed the proximate cause of loss), including $31.8 million recognized during the third quarter. Due to the inherent uncertainty associated with the assumptions surrounding this pandemic, these estimates are subject to a wide range of variability. While we believe our net reserves for direct losses and loss adjustment expenses for COVID-19 as of September 30, 2020 are adequate based on information available at this time, we continue to closely monitor reported claims, government actions, judicial decisions and changes in local and worldwide social disruption arising from the pandemic and will adjust our estimates of gross and net losses as new information becomes available. See "Results of Operations - Underwriting Results" for further discussion on our estimate of direct losses and loss adjustment expenses attributed to COVID-19.


We also have underwriting exposure to loss impacts that are 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. During the quarter and nine months ended September 30, 2020, we recognized $15.0 million of net losses and loss adjustment expenses in our trade credit product line within our Insurance segment related to losses that were indirectly attributable to the pandemic. As the impacts of the pandemic continue to evolve, we expect that further losses indirectly related to the COVID-19 pandemic are likely to emerge. As an example, we provide liability coverage for health and medical institutions and professions, as well as other professions, which have been strained or otherwise impacted by the pandemic. No other significant indirect losses have been reported at this time.

The widespread economic and social disruption caused by COVID-19 has created significant financial hardships for individuals and businesses worldwide. However, at this time, we do not believe there has been any material change in our exposure to credit losses. Our allowances for credit losses in both our insurance receivables and reinsurance recoverables were adjusted during the first quarter of 2020 to reflect the increased credit risk associated with the negative economic outlook, the impact of which was not material to our underwriting results.

The significant decline in economic activity occurring during the pandemic may have an unfavorable impact on our premium volume, due to business closures, reduced recreational activity and lower gross receipts, revenues and payrolls of our insureds, among other things. While premium volume for the quarter and nine months ended September 30, 2020 was impacted by these effects of the pandemic, the impact was not material to our underwriting results. For those policies where the underlying loss exposures have been reduced as a result of decreased economic activity or stay-at-home orders resulting from COVID-19, we also may be required to refund premiums to policyholders, however, there have been no material adjustments to date. These adverse impacts on our premium volume could be material.

Within our underwriting operations, we also are reviewing and analyzing the underwriting guidelines and procedures we use to underwrite and reinsure policies that provide coverages related to communicable diseases, viruses, pathogens and other similar risks. Where appropriate, we are taking steps to mitigate our exposure to additional or further losses related to these types of risks, including increasing pricing and adding policy terms and conditions, including exclusions. These actions may reduce premium volume in certain classes of business.

Markel Ventures Operations

Beginning in the second quarter of 2020, the economic and social disruption created by the pandemic impacted the results of operations, financial position and cash flows of our Markel Ventures operations. Revenues across many of our businesses decreased due to changes in consumer behavior and the overall impact of current economic conditions on commercial and consumer spending, all of which impacted demand for certain products and services within our businesses. We have also seen orders and contracts canceled or postponed, and as a result of reduced demand, we have temporarily reduced capacity at certain of our operations for which the duration is currently uncertain. As the social and economic disruption caused by the pandemic is ongoing, we expect that revenues from our Markel Ventures operations will continue to be impacted, and these impacts may continue to be material.

In July 2017,order to partially mitigate the impact of decreased revenues, certain of our businesses have taken actions to reduce expenses, including, but not limited to, elimination of non-essential expenses, cancellation or deferral of open positions, salary reductions and workforce furloughs and reductions. Our businesses may increase borrowings, if needed, to maintain the cash flow required to operate.

56
Continued loss of revenues in certain of our products and services businesses, the extent of which we entered intoare currently unable to reasonably estimate, could also impact the carrying value of inventory, goodwill and intangible assets and other long-lived assets, which may become impaired. See further discussion below for considerations regarding the valuation of our goodwill and intangible assets as of September 30, 2020. In certain cases, revenue declines also could result in ongoing cash and working capital constraints and could impact the companies' liquidity and their ability to comply with debt covenants, and, in response, we may take steps necessary to support these operations.

As a definitive merger agreementresult of the economic hardship experienced by our customers, we may modify our payment terms or offer discounts to acquire State National Companies, Inc. State National is a leading specialty providerour customers, and we also are exposed to increased credit risk. Our allowances for credit losses on our receivables were adjusted during the first quarter of property2020 to reflect the increased credit risk associated with the negative economic outlook, the impact of which was not material to our results of operations.

Insurance-Linked Securities and casualtyProgram Services

Through our insurance-linked securities operations, we receive management fees for investment and insurance management services that includes both fronting servicesbased on the net asset value of the accounts we manage, and, collateral protection insurance coverage. Underfor certain funds, incentive fees based on the merger agreement, State National stockholders will receive $21.00annual performance of the funds managed.

For the nine months ended September 30, 2020, investment losses attributed to COVID-19 within the investment funds we manage have not been significant; however, uncertainty around potential COVID-19 loss exposures, has reduced, and may further reduce, the net asset value on which our management fees are based. Deferred or reduced investment management fees and the associated decline in cash flows, the extent of which we are currently unable to reasonably estimate, also could impact the carrying value of our goodwill and intangible assets, which may become impaired. See further discussion below for each outstanding shareconsiderations regarding the valuation of State National common stock (other than restricted shares that do not vest in connection with the transaction). The aggregate merger consideration, which includes net cash payments for State National stock optionsour goodwill and restricted stock, is estimated to be $919 million. The merger was approved by State National's stockholders on October 24, 2017. The transaction remains subject to customary closing conditions, including regulatory approvals, and is expected to closeintangible assets as of September 30, 2020.

Volatility in the fourth quartercapital markets and investor uncertainty regarding insurance industry exposure to COVID-19 also has impacted, and may continue to impact, our ability to raise additional third party capital for the funds we manage. We also have experienced, and may continue to experience, higher than anticipated investor redemptions from our funds. These impacts could have a material impact on our results of 2017.operations and financial condition.



Our program services business generates fee income, in the form of ceding (program service) fees. This fee income is calculated based on the gross premium volume of the insurance programs we support. Similar to our underwriting operations, the significant decline in economic activity may have an unfavorable impact on premium volume, which may result in a reduction in fee income.

Goodwill and Intangible Assets

Our consolidated balance sheet as of September 30, 2020 included goodwill and intangible assets of $4.4 billion, as follows:
 September 30, 2020
(dollars in millions)UnderwritingMarkel Ventures
Other (1)
Total
Goodwill$892.9 $904.7 $807.0 $2,604.6 
Intangible assets460.0 637.0 723.5 1,820.5 
Total$1,352.9 $1,541.7 $1,530.5 $4,425.1 
(1)Amounts included in Other reflect our operations that are not included in a reportable segment, including our insurance-linked securities operations and our program services operations.

57
Through September 30, 2020, we considered whether a quantitative assessment of goodwill and intangible assets for impairment was required as a result of the significant economic disruption caused by the COVID-19 pandemic. After considering qualitative factors regarding the actual and expected impacts of the pandemic on our operations, as well as the amount by which the fair value of our reporting units exceeded their respective carrying values at the date of the last quantitative assessment, we determined these conditions did not indicate that it is more likely than not that the carrying value of any of our reporting units exceeded their fair value as of September 30, 2020 based on information available to us at this time. Similar factors were considered to determine if these circumstances were an indicator requiring an assessment of the recoverability of our intangible assets, and we concluded they were not based on information available to us at this time. However, delayed recovery or further deterioration in market conditions related to the general economy and the specific industries in which we operate, a sustained trend of weaker than anticipated financial performance within a reporting unit, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in future goodwill or intangible asset impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.

For additional risks to our businesses related to COVID-19, see the risk factor titled "The COVID-19 pandemic has had, and may continue to have, material adverse effects on us."
58
Brexit Developments


On June 23, 2016, the U.K.United Kingdom (U.K.) voted to exit the European Union (E.U.) (Brexit), and on March 29, 2017,. A Withdrawal Agreement was agreed between the U.K. government delivered formal notice to the other E.U. member countries that it is leaving the E.U. A two-year period has now commenced during which the U.K. and the E.U. will negotiatein October 2019 and was approved by the futureU.K. Parliament on January 23, 2020. Under the Withdrawal Agreement, the U.K. left the E.U. on January 31, 2020. The effect of the Withdrawal Agreement is that E.U. laws continue to have effect in the U.K. during a transition period until December 31, 2020. The final terms of the U.K.'sfuture relationship with the E.U., including the terms of trade between the U.K. and the E.U. Unless this period is extended, the U.K. will automatically exit the E.U., with or without an agreement in place, after two years. During this period the U.K. will remain a part of the E.U. After Brexit terms are agreed, Brexit couldto be implemented in stages over a multi-year period. No member country has left the E.U., and the rules for exit (contained in Article 50 of the Treaty on European Union) are brief.

Accordingly, there are significant uncertainties related to the political, monetary and economic impacts of Brexit, including related tax, accounting and financial reporting implications. Brexit could also lead to legal uncertainty and potentially a large number of new and divergent national laws and regulations, including new tax rules, as the U.K. determines which E.U. laws to replace or replicate.

negotiated. The effects of Brexit will depend in part on agreements, if any, agreements the U.K. makes to retain access to E.U. markets either duringmarkets. Ultimately, all Brexit terms also must be ratified by the legislative bodies of the 27 E.U. member states.

Without a transitional periodBrexit agreement on future terms of trade, U.K. based insurers may be prohibited from administering policies for, or more permanently. Brexit could impair or end the ability of bothpaying claims to, European Economic Area (EEA) policyholders post Brexit. In order to provide certainty for its EEA policyholders, our U.K. insurance company, Markel International Insurance Company Limited, (MIICL)transferred its legacy EEA exposures, claims and policies to our German insurance company, Markel Insurance SE. Lloyd's also has commenced its transfer of legacy EEA exposures. That transfer is expected to be completed prior to December 31, 2020, however it may take longer, and there is no assurance that approval of that transfer will be granted or on what terms and conditions. Lloyd's has indicated that it intends to honor contractual commitments, including the payment of valid claims, and expects that its approach will be respected by EEA regulators pending the completion of its transfer of legacy EEA exposures. The European Insurance and Occupational Pensions Authority has issued its recommendation to E.U. member states that they adopt legislation to permit the orderly run-off of legacy EEA exposures, claims and policies by U.K. insurers. While some E.U. member states have adopted such legislation, no E.U. member state is obligated to do so, and the terms of any such legislation may vary significantly among the E.U. member states. Without an orderly run-off regime for legacy business in every E.U. member state, Lloyd's, and in turn, our Lloyd's syndicate, to transactmay be impaired in running-off business, including paying claims, in E.U. countries from our U.K. offices and MIICL's ability to maintain its current branches inthe E.U. member countries and in Switzerland. We have started the processstates.

For additional risks related to obtain regulatory approval to establish an insurance company in Germany in order to continue transacting E.U. business if U.K. access to E.U. markets ceases or is materially impaired. The Society of Lloyd's has announced that it will be setting up a new European insurance company in Brussels in order to maintain access to E.U. business for Lloyd's syndicates. Access to E.U. markets through a solution devised by the Society of Lloyd's may supplement, or serve as an alternative to, a new E.U.-based insurance carrier for business we transact in the E.U.


Disclosure of Certain Activities Relating to Iran

Under the Iran Threat Reduction and Syria Human Rights Act of 2012, non-U.S. entities owned or controlled by U.S. persons have been prohibited from engaging in activities, transactions or dealings with Iran to the same extent as U.S. persons. Effective January 16, 2016, the Office of Foreign Assets ControlBrexit, see "The exit of the U.S. DepartmentUnited Kingdom from the European Union could have a material adverse effect on us." under Risk Factors in our 2019 Annual Report on Form 10-K.

59

Section 13(r) of the Securities Exchange Act of 1934 requires reporting of certain Iran-related activities that are now permitted under General License H, including underwriting, insuring and reinsuring certain activities related to the importation of refined petroleum products by Iran and vessels involved in the transportation of crude oil from Iran.

Certain of our non-U.S. insurance operations underwrite global marine hull policies and global marine hull war policies that provide coverage for vessels or fleets navigating into and out of ports worldwide, potentially including Iran. Under a global marine hull war policy, the insured is required to give notice before entering designated areas, including Iran. During the quarter ended September 30, 2017 we have received notice that one or more vessels covered by a global marine hull war policy were entering Iranian waters. However, no additional premium is required under global marine hull policies or global marine hull war policies for calling into Iran. During the quarter ended September 30, 2017, we have not been asked to cover a specific voyage into or out of Iran that would result in a separate, allocable premium for that voyage.

Certain of our non-U.S. reinsurance operations underwrite marine, energy, aviation and trade credit liability treaties on a worldwide basis and, as a result, it is possible that the underlying insurance portfolios may have exposure to the Iranian petroleum industry and its related products and service providers.

We provide two energy construction reinsurance contracts in Iran, two Iran-related marine liability contracts, two Iran-related marine cargo contracts and one Iran-related hull war contract. These contracts have been underwritten through our syndicate at Lloyd's and one of our non-U.S. insurance companies. We expect our portion of the annual premium for these contracts to be approximately $1 million in the aggregate. Except for these contracts, we are not aware of any premium apportionment with respect to underwriting, insurance or reinsurance activities of our non-U.S. insurance subsidiaries reportable under Section 13(r). Should any such risks have entered into the stream of commerce covered by the insurance portfolios underlying our reinsurance treaties, we believe that the premiums associated with such business would be immaterial.

Our non-U.S. insurance subsidiaries intend to continue to provide insurance and reinsurance for coverage of Iran-related risks, if at all, only to the extent permitted under, and in accordance with, General License H or other applicable economic or trade sanctions requirements or licenses.


Item 3. Quantitative and Qualitative Disclosures About Market Risk


Market Risk Disclosures


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 have been equity price risk associated with investments in equity securities, interest rate risk associated with investments in fixed maturitiesmaturity securities and foreign currency exchange rate risk associated with our international operations. Various companiesSome businesses within our Markel Ventures operations are subjectexposed to commodity price risk;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 materials, parts and other component prices.


As of September 30, 2017, the carrying value of goodwill and intangible assets denominated in foreign currency, which is not matched or hedged, was $243.5 million, compared to $208.7 million as of December 31, 2016. The increase is primarily due to the impact of the strengthening of the United Kingdom Sterling and Canadian Dollar against the U.S. Dollar during 2017. During the nine months ended September 30, 2017,2020, there were no other material changes to the market risk components described in our Annual Report on Form 10-K for the year ended December 31, 2016.2019.


The estimated fair value of our investment portfolio at September 30, 20172020 was $20.0$23.6 billion, 71%43% of which was invested in fixed maturities, short-term investments, cashmaturity securities and cash equivalents and restricted cash and cash equivalents and 29%26% of which was invested in equity securities. At December 31, 2016,2019, the estimated fair value of our investment portfolio was $19.1$22.3 billion, 75%45% of which was invested in fixed maturities, short-term investments, cashmaturity securities and cash equivalents and restricted cash and cash equivalents and 25%34% of which was invested in equity securities.


Our fixed maturity portfolio includes corporate bonds, mortgage-backed securities and securities issued by municipalities, foreign governments and non-sovereign foreign institutions. Credit risk isexists 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 nine months ended September 30, 2020, there were no material changes in our corporate bond, mortgage-backed security, municipal bond or foreign government fixed maturity holdings.

We monitorbelieve that our investmentfixed maturity portfolio to ensure that credit risk does not exceed prudent levels.is highly diversified and is comprised of high quality securities. We have consistently invested in high credit quality, investment grade securities. Our fixed maturity portfolio has an average rating of "AA," with 98% 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 maturitiesmaturity securities that are unrated or rated below investment grade. At September 30, 2017,2020, less than 1% of our fixed maturity portfolio was unrated or rated below investment grade. Our fixed maturity portfolio includes securities issued with financial guaranty insurance. We purchase fixed maturitiesmaturity securities based on our assessment of the credit quality of the underlying assets without regard to insurance.


Our fixed maturity portfolio includes securities issuedWe 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, 2019, all of our ten largest reinsurers within our underwriting operations were rated "A" or better by foreign governmentsA.M. Best and non-sovereign foreign institutions. General concern exists aboutwithin our program services business, six of our ten largest reinsurers were rated "A" or better by A.M. 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 financial difficulties facing certain foreign countries in lightmajority of the adverse economic conditions experienced over the past several years. We monitor developments in foreign countries, currencies and issuers that could pose risks to our fixed maturity portfolio, including ratings downgrades, political and financial changes and the widening of credit spreads. We believe that our fixed maturity portfolio is highly diversified and is comprised of high quality securities.reinsurance recoverable balances are fully collateralized. During the nine months ended September 30, 2017,2020, 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 foreign government fixed maturity holdings.Annual Report on Form 10-K for the year ended December 31, 2019.


General concern also exists about municipalities that experience financial difficulties during periods
60

Our fixed maturities, equity securities and short-term investments are recorded at fair value, which is measured based upon quoted prices in active markets, if available. We determine fair value for these investments after considering various sources of information, including information provided by a third-party pricing service. The pricing service provides prices for substantially all of our fixed maturities and equity securities. In determining fair value, we generally do not adjust the prices obtained from the pricing service. We obtain 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. We validate prices provided by the pricing service by reviewing prices from other pricing sources and analyzing pricing data in certain instances.


Item 4. Controls and Procedures


As of the end of the period covered by this quarterly report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15 (Disclosure Controls). This evaluation was conducted under the supervision and with the participation of our management, including the PrincipalCo-Principal Executive Officer (PEO)Officers (Co-PEOs) and the Principal Financial Officer (PFO).


Our management, including the PEOCo-PEOs and PFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.


Based upon our controls evaluation, the PEOCo-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 Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

During the third quarter of 2017, we implemented a new treasury system to process and administer certain of our cash management activities. This system eliminates certain manual processes, automates and streamlines certain tasks, and enhances cash management processes and reporting.


There were no other changes in our internal control over financial reporting during the third quarter of 20172020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


61
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"Factors," and "Safe Harbor"Management's Discussion and Cautionary Statement"Analysis of Financial Condition and Results of Operations" in our 20162019 Annual Report on Form 10-K and under "Item 5. Other Information""Developments Related to COVID-19" and "Risk Factors" in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017,this report, or are included in the items listed below:

•current global economic, market and industry conditions, as well as significant volatility, uncertainty and disruption caused by the COVID-19 pandemic, including governmental, legislative, judicial or regulatory actions or developments affecting our businesses;
•our anticipated premium volume isexpectations about future results of our underwriting, investing, Markel Ventures and other operations are based on current knowledge and assumesassume 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 reinsurance markets;other markets in which we operate;
•actions by competitors, including the applicationuse of new or "disruptive" technologies or businesstechnology and innovation to simplify the customer experience, increase efficiencies, redesign products, alter models and consolidation,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 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;
the frequency and severity of man-made and natural catastrophes (including earthquakes, fires and weather-related catastrophes) may exceed expectations, are unpredictable and, in the case of fires and weather-related catastrophes, may be exacerbated if, as many forecast, conditions in the oceans and atmosphere result in increased hurricane, flood, drought or other adverse weather-related activity;
•emerging claim and coverage issues, changing legal and social trends, and inherent 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 are often based on limited information, are dependent on broad assumptions about the failure or inadequacynature and extent of any loss limitation methods we employ;losses, coverage, liability and reinsurance, and those losses may ultimately differ materially from our expectations;
62
•changes in the availability, costs, quality and qualityproviders of reinsurance coverage, which may impact our ability to write or continue to write certain lines of business;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, can affect the ability or willingness of reinsurersand collateral we hold, if any, may not be sufficient to pay balances due;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;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 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 impacts that health epidemics and pandemics, including the COVID-19 pandemic, as well as actions of local, state and federal authorities in response thereto, may have on our business operations and claims activity;
•the impact on our businesses in the event of thea repeal, in part or in whole, or modification of U.S. health care reform legislation and regulations;
•changes in U.S. tax laws, regulations or interpretations, or in the tax laws, regulations or interpretations of other jurisdictions in which we operate;operate, and adjustments we may make in our operations or tax strategies in response to those changes;
we are dependent upon operational effectiveness and security•a failure of our enterprise information technology systems and those maintained by third parties; if oneparties upon which we may rely, or more of those systemsa failure to comply with data protection or privacy regulations;
•outsourced providers may fail to perform as we anticipate or suffer a securitymay breach their obligations to us;
•our businesses or reputation could be adversely impacted;
our acquisition of insurance and non-insurance businessesacquisitions may increase our operational and 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, operational and economic risks, including foreign currency exchange rate and credit risk;
•the vote bypolitical, legal, regulatory, financial, tax and general economic impacts, and other impacts we cannot anticipate, related to the United Kingdom to leaveKingdom'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;
63
•our compliance, or failure to comply, with covenants and other requirements under our revolving credit facility, senior debt and other indebtedness;
•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 ever increasingfuture 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 or debt 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; 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 market;and commercial construction markets; liability for environmental matters; volatility in the market prices for their products; and volatility in commodity prices and interest and foreign currency exchange rates; andrates.
adverse changes in our assigned financial strength or debt ratings could adversely impact us, including our ability to attract and retain business and the availability and cost of capital.


Our premium volume, underwriting and investment results and results from our non-insuranceother operations have been and will continue to be potentially materially affected by these factors. In addition, with respect to previously reported developments at MCIM and the decision to place both the Markel CATCo Funds and Markel CATCo Re into run-off:
•the inquiries by the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Re (the Markel CATCo Inquiries) may result in adverse findings, reputational damage, the imposition of sanctions, increased costs, litigation and other negative consequences; and
•management time and resources may be diverted to address the Markel CATCo Inquiries, as well as related litigation.

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.



64
PART II. OTHER INFORMATION


Item 1. Legal Proceedings


Thomas YeransianMarkel CATCo Inquiries

We previously reported that the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority (together, the Governmental Authorities) are conducting inquiries into loss reserves recorded in late 2017 and early 2018 at our Markel CATCo operations. Those reserves are held at Markel CATCo Re, an unconsolidated subsidiary of MCIM. The Markel CATCo Inquiries are limited to MCIM and its subsidiaries (together, Markel CATCo) and do not involve other Markel subsidiaries.

We retained outside counsel to conduct an internal review of Markel CATCo's loss reserving in late 2017 and early 2018. The internal review was completed in April 2019 and found no evidence that Markel CATCo personnel acted in bad faith in exercising business judgment in the setting of reserves and making related disclosures during late 2017 and early 2018. Our outside counsel has met with the Governmental Authorities and reported the findings from the internal review. At this time, we are unable to predict the duration, scope or result of the Markel CATCo Inquiries.

Belisle Arbitration

On February 21, 2019, Anthony Belisle filed a lawsuit, Anthony Belisle v. Markel CorporationCATCo Investment Management Ltd and Markel Corp. (U.S. District Court for the District of Delaware)New Hampshire), which suit was amended on March 29, 2019. As amended, the complaint alleged claims for, among other things, breach of contract, defamation, invasion of privacy, indemnification, intentional interference with contractual relations and deceptive and unfair acts and sought relief of, among other things, $66 million in incentive compensation, enhanced compensatory damages, consequential damages, damages for emotional distress and injury to reputation, exemplary damages and attorneys' fees. In June 2019, MCIM, Markel Corporation, and Mr. Belisle agreed to commence binding arbitration to finally, fully and confidentially resolve the claims and counterclaims alleged in the action, and the Belisle suit was dismissed with prejudice in July 2019. In late July 2020, the parties commenced settlement discussions and reached a final agreement on July 28, 2020. 

Thomas Yeransian v. Markel Corporation

In October 2010, we completed ourthe acquisition of Aspen Holdings, Inc. (Aspen). As part of the consideration for that acquisition, Aspen shareholders received contingent value rights (CVRs),. Based on a valuation of the CVRs as of their December 31, 2017 maturity date, we paid $9.9 million to the CVR holders on June 5, 2018, which we currently expect will result inrepresents 90% of the paymentundisputed portion of additional cash consideration to CVR holders. Absent the litigation described below, the final amount we believe we are required to be paidpay under the CVR agreement.

Prior to CVR holders would be determined afterthe December 31, 2017 the CVR maturity date, based on, among other things, adjustments for the development of pre-acquisition loss reserves and loss sensitive profit commissions.
The CVR holder representative, Thomas Yeransian, hashad disputed our prior estimation of the value of the CVRs. On September 15, 2016, Mr. Yeransian filed a suit, Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), alleging, among other things, that we are in default under the CVR agreement. The holder representativesuit seeks: $47.3 million in damages, which represents the unadjusted value of the CVRs; plus interest ($11.118.8 million through September 30, 2017)2020) and default interest (up to an additional $9.7$15.7 million through September 30, 2017,2020, depending on the date any default occurred); and an unspecified amount of punitive damages, costs, and attorneys’attorneys' fees.

At the initial hearing held February 21, 2017, the court stayed the proceedings and ordered the parties to discuss resolving the dispute pursuant to the independent CVR valuation procedure under the CVR agreement. The parties met on April 5, 2017, but were unsuccessful in reaching agreement on a process for resolving the dispute. We subsequently filed a motion to stay the litigation and compel arbitration, and, on July 31, 2017, the court issued an order granting that motion.

On September 20, 2018, a new judge was assigned to the case. On October 12, 2018, the court denied both Mr. Yeransian's motion to reconsider the order staying the litigation and compelling arbitration and our motion for sanctions against Mr. Yeransian hasfor violating the confidentiality of mediation proceedings. The court subsequently (1) on December 3, 2018 ordered Mr. Yeransian to provide the court and us with the identity of an actuarial firm to participate in the selection of independent experts for the CVR valuation process under the CVR agreement and (2) on December 11, 2018 denied Mr. Yeransian's motion for judgment that we had waived our right to require Mr. Yeransian's participation in the CVR valuation process. On July 8, 2019, the Court granted our motion for instructions as to how the independent experts are to conduct the CVR valuation process and denied Mr. Yeransian's motion to have a hearing officer appointed to oversee the valuation process. The independent experts, who were jointly selected by the parties, have been engaged and are conducting the valuation process.

65
On November 13, 2018, Mr. Yeransian filed a second suit, Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), which also alleges that the Company is in default under the CVR agreement. The second suit seeks the same monetary damages and relief as the original suit. We filed a motion requestingto stay this suit until the arbitration for the original suit has concluded and the CVR holders have received the remainder of the final amount due under the CVR Agreement. The court granted that motion on August 6, 2019.

On June 5, 2020, Yeransian filed a third suit, Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware). Similar to the first and second suits, the third suit alleges that the court reconsider that order.Company is in default under the CVR agreement and, in addition, has interfered with the current, on-going arbitration for the CVR valuation. The third suit seeks the same monetary damages and relief as the original suit and the second suit, as well as other declaratory and non-monetary judgments and orders. We filed a motion to stay this suit.

We believe the holder representative’s suitMr. Yeransian's suits to be without merit and will vigorously defend against it.merit. We further believe that any material loss resulting from the holder representative’s suitsuits to be remote. We do not believe the contractual contingent consideration payments related to the CVRs, as ultimately determined by the independent experts in the valuation process, will have a material impact on ourthe Company's liquidity.


Item 2. Unregistered Sales1A. Risk Factors

Other than the risk factor discussed below, or as discussed elsewhere in this report, including under note 15 (Commitments and Contingencies) and note 16 (Developments Related to COVID-19) of Equity Securitiesthe notes to consolidated financial statements or under "Management's Discussion and UseAnalysis of ProceedsFinancial Condition and Results of Operations," including "Developments Related to COVID-19" and "Brexit Developments," or under "Legal Proceedings" in this report, there have been no material changes with regard to the risk factors previously disclosed in our 2019 Annual Report on Form 10-K.


The COVID-19 pandemic has had, and may continue to have, material adverse effects on us. The effects of the COVID-19 pandemic, and U.S. and international responses, are wide-ranging, costly, disruptive and rapidly changing. The COVID-19 pandemic has had, and may continue to have, material adverse effects on our underwriting, investment, Markel Ventures and other operations, and on our results of operations and financial condition. Factors that give rise, or may give rise, to those effects include, or may include, the following, table summarizesas well as others that we cannot predict:
•Executive, legislative or regulatory mandates or judicial decisions that require retroactive coverage of business interruption claims stemming from the COVID-19 pandemic or to expand the scope of other types of insurance or reinsurance coverages, for example, workers' compensation insurance;
•Regulatory actions:
◦prohibiting or postponing the cancellation or non-renewal of insurance policies in accordance with policy terms or requiring renewals on current terms and conditions;
◦requiring the coverage of losses irrespective of policy terms or exclusions;
◦relaxing policyholder reporting requirements for claims, which may affect coverage under our common stock repurchasesclaims made and claims made and reported policies;
◦requiring or encouraging premium refunds;
◦granting extended grace periods for premium payments; and
◦extending due dates to pay past due premiums;
•Rapidly and dramatically changing business conditions and compliance obligations, including as a result of federal and state executive orders and regulatory guidance;
•Disruptions, delays and increased costs and risks related to working remotely, having limited or no access to our facilities, workplace re-entry, employee safety concerns and reductions or interruptions of critical or essential services. Those effects may include, among others:
◦an inability, or a decreased ability, to provide our insurance and non-insurance products and services, provide customer service, pay third parties in a timely manner or perform other necessary business functions; and
◦exposure to additional and increased risks related to internal controls, data security and information privacy, both for the quarter ended September 30, 2017.Company and for our suppliers, vendors and other third-parties with whom we do business;

•Illnesses suffered by key employees, or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or outsourcing providers, which could prevent or delay the performance of critical business functions;
Issuer Purchases•Illnesses suffered by employees who have continued to work, or who have or will return to work, in our facilities may expose us to increased risk of Equity Securitiesemployment related claims and litigation;
66
 (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)
July 1, 2017 through July 31, 201711,200
 $988.13
 11,200
 $167,086
August 1, 2017 through August 31, 20177,715
 $1,053.06
 7,715
 $158,962
September 1, 2017 through September 30, 20175,605
 $1,039.13
 5,605
 $153,138
Total24,520
 $1,020.22
 24,520
 $153,138
•Lawsuits and other legal actions challenging the promptness of coverage determinations or the coverage determinations themselves on claims under applicable insurance or reinsurance policies, including, among others, business interruption claims, resulting in increased claims, litigation and related expenses;
(1)
The Board of Directors approved the repurchase of up to $300 million of our common stock pursuant to a share repurchase program publicly announced on November 21, 2013 (the Program). Under the Program, we may repurchase outstanding shares of our common stock from time to time in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934. The Program has no expiration date but may be terminated by the Board of Directors at any time.

•Delays in the reporting of non-COVID-19 claims, and the settlement of those claims, due to a variety of factors, including "stay-at-home" and similar orders instituted by many governmental authorities, potentially increasing the severity of those claims and reducing the predictability of the underlying statistical data used in establishing reserves, particularly for longer-tailed lines of business;

•Reduced demand for our insurance and non-insurance products and services due to reduced global economic activity, which could adversely impact our revenues and cash flows;
•Adverse impacts on our revenues and cash flows due to:
◦premium refunds or delayed receipt of premium payments;
◦delayed payment of reinsurance recoverables; and
◦expedited claims payments in response to regulatory requirements;
•Adverse effects on future cash flows or earnings of one or more of our underwriting, Markel Ventures or other acquired businesses, which could result in an impairment of goodwill or intangible assets and, in turn, a charge to net income;
•Increased needs for capital at our regulated insurance and reinsurance subsidiaries and non-insurance subsidiaries and the constraints that may be placed on our liquidity and other uses of holding company capital;
•Insured or reinsured losses from COVID-19-related claims could be greater than our reserves for those losses;
•Volatility and declines in global financial markets, defaults on fixed maturity securities (including corporate bonds, mortgage-backed securities and securities issued by municipalities, foreign governments and non-sovereign foreign institutions), and declines in interest rates and dividend payments, which have reduced, and could continue to reduce, future investment results and the fair market value of our invested assets;
•Deterioration in global financial and economic conditions, which have had, or could have, a broad range of material adverse effects on our businesses, and on our results of operations and financial condition, including, among others:
◦increased reinsurance costs and the inability to obtain the desired kinds and amounts of reinsurance;
◦furloughs and lay-offs of employees;
◦downgrades, or changes in outlook, by rating agencies of the financial strength or debt ratings of the Company or our insurance or reinsurance company subsidiaries;
◦reduced ability to access capital;
◦inability of our key vendors and contract counterparties to perform or pay the obligations required of them on a timely basis, or at all; and
◦increased credit risk, including credit risk related to our fixed maturity investments and receivables from insureds, reinsurers and customers;
•Delayed or reduced management and incentive fees from our insurance-linked securities operations, due to the resolution of COVID-19 related claims, adverse impacts on our ability to maintain or raise third party capital for existing or new investment vehicles and increased risks related to our management of third party capital;
•A failure to satisfy financial covenants under our revolving credit agreement, which can be adversely affected by a significant decline in our consolidated net worth, including due to the impact of changes in fair value of our equity investments and, to a lesser extent, impairments in our fixed maturity investment portfolio, or impairment of our goodwill and intangible assets. While we currently have no debt outstanding under our revolving credit facility, a failure to satisfy the financial covenants under the revolving credit agreement, unless waived or amended, would result in our inability to borrow or secure letters of credit under that facility;
•Increases in the number of consumer complaints challenging coverage or claims decisions under applicable insurance policies;
•Increases in the number of potential fraudulent claims made under insurance policies due to the economic hardships experienced by companies and individuals as a result of the COVID-19 pandemic; and
•Increases in local, state and federal taxes to pay for costs incurred by governmental expenditures associated with the COVID-19 pandemic.

67
One or more of these factors resulting from the COVID-19 pandemic, and others the Company cannot anticipate, could have material adverse effects on the Company's results of operations and financial condition; and the extent of these effects will depend, at least in part, on the scope, severity, duration and subsequent recurrences of the pandemic. In addition, the Company may take steps to mitigate potential risks or liabilities that may arise from the COVID-19 pandemic and related developments and some of those steps may have a material adverse effect on the Company's results of operations and financial condition. Even if an unfavorable outcome does not materialize, these factors, and actions the Company may take in response, may have a material adverse impact on the Company's reputation and result in substantial expense and disruption.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations," including "Developments Related to COVID-19," and the notes to consolidated financial statements in this report, including note 16 (Developments Related to COVID-19), for additional discussion of effects COVID-19 has had, and could have, on our businesses, results of operations and financial condition.

In addition, it is important to note and emphasize, the COVID-19 pandemic also may have the effect of triggering or intensifying many of the risks described under "Risk Factors" in our 2019 Annual Report on Form 10-K, including without limitation, the risks discussed under the following headings:
•We may experience losses or disruptions from catastrophes;
•The failure of any of the methods we employ to manage our loss exposures could have a material adverse effect on us;
•The effects of emerging claim and coverage issues on our business are uncertain;
•We use analytical models to assist our decision making in key areas such as pricing, reserving and capital modeling and actual results may differ materially from the model outputs and related analyses;
•Our results may be affected because actual insured or reinsured losses differ from our loss reserves;
•Changes in the assumptions and estimates used in establishing reserves for our life and annuity reinsurance book could result in material increases in our estimated loss reserves for such business;
•We may be unable to purchase reinsurance protection on terms acceptable to us, or we may be unable to collect on reinsurance we purchase;
•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;
•Our insurance companies and senior debt are rated by various rating agencies, and a downgrade or potential downgrade in one or more of these ratings could have a material adverse effect on us;
•The amount of capital that our insurance subsidiaries have and must hold to maintain their financial strength and credit ratings and meet other requirements can vary significantly from time to time and is sensitive to a number of factors, some of which are outside of our control;
•Our insurance subsidiaries are subject to supervision and regulation that may have a material adverse effect on our operations and financial condition;
•Our investment results may be impacted by changes in interest rates, U.S. and international monetary and fiscal policies as well as broader economic conditions;
•We invest a significant portion of our shareholders' equity in equity securities, which may result in significant variability in our investment results and net income and may have a material adverse effect on shareholders' equity. Additionally, our equity investment portfolio is concentrated, and declines in the value of these significant investments could have a material adverse effect on our financial results;
•We may require additional capital in the future, which may not be available or may only be available on unfavorable terms;
•Our failure to comply with covenants and other requirements under our revolving credit facility, senior debt and other indebtedness could have a material adverse effect on us;
•Our liquidity and our ability to make payments on debt or other obligations depend on the receipt of funds from our subsidiaries;
•The legal and regulatory requirements applicable to our businesses are extensive. Failure to comply could have a material adverse effect on us;
•Losses from legal and regulatory actions may have a material adverse effect on us;
•Employee error and misconduct may be difficult to detect and prevent and may result in significant losses;
•We manage our global operations through a network of business entities, which could result in inconsistent management, governance and oversight practices;
68
•We have substantial international operations and investments, which expose us to increased political, operational and economic risks;
•General economic, market or industry conditions could lead to investment losses, adverse effects on our businesses and limit our access to the capital markets;
•We may not find suitable acquisition candidates or new ventures;
•The integration of acquired companies may not be as successful as we anticipate;
•Impairment in the value of our goodwill or other intangible assets could have a material adverse effect on our operating results and financial condition;
•The loss of one or more key executives or an inability to attract and retain qualified personnel could have a material adverse effect on us;
•Information technology systems that we use could fail or suffer a security breach, which could have a material adverse effect on us or result in the loss of regulated or sensitive information; and
•Outsourced providers may perform poorly, breach their obligations to us or expose us to enhanced risks.

For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see "Safe Harbor and Cautionary Statement."

69
Table of Contents
Item 6. Exhibits
Exhibit No.Document Description
Exhibit No.Document Description
4.4
Form of Sixth Supplemental Indenture dated as of June 1, 2011 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 31, 2011)
4.5
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)
4.10
First Supplemental Indenture, dated as of September 27, 2010 between Alterra Finance LLC, Alterra Capital Holdings Limited and(as successor to The Bank of New York Mellon,Chase Manhattan Bank), as Trustee, including the form of the securities as Exhibit A (incorporated by reference from Exhibit 4.154.2 in the Registrant's report on Form 10-Q8-K filed with the Commission for the quarter ended June 30, 2013)November 2, 2017)
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.
70
Table of Contents

32.2
Certification of Principal Financial Officer furnished Pursuant to 18 U.S.C. Section 1350**
101The following consolidated financial statements from Markel Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2017,2020, filed on October 25, 2017,27, 2020, 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.**
104Cover Page Interactive Data File (embedded within the Inline XBRL document)

**Filed with this report.



* Indicates management contract or compensatory plan or arrangement
**    Filed with this report.

71
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 2527th day of October 2017.2020.


Markel Corporation
Markel CorporationBy:/s/ Thomas S. Gayner
Thomas S. Gayner
By:/s/ Alan I. KirshnerCo-Chief Executive Officer
Alan I. Kirshner(Co-Principal Executive Officer)
Executive Chairman
By:/s/ Richard R. Whitt, III
Richard R. Whitt, III
Co-Chief Executive Officer
(PrincipalCo-Principal Executive Officer)
By:/s/ Anne G. WaleskiJeremy A. Noble
Anne G. WaleskiJeremy A. Noble
ExecutiveSenior Vice President and Chief Financial Officer
(Principal Financial Officer)

5472