Markel reports 79% dip in underwriting profit for 2023

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Global re/insurer Markel Group has announced 2023 underwriting profit of $132.7 million compared with $626.6 million in 2022, driven by declines in both its insurance and reinsurance segments on the back of adverse development on prior year loss reserves.

For 2023, the Group recorded a 4% increase in the gross premiums volume to $10.27 billion compared to $9.84 billion in 2022. At the same time, net premiums written increased by 2% to $8.4 billion compared year over year to $8.2 billion.

The group combined ratio increased by 6.7% to 98.4% from 2022’s 91.7%, which was primarily attributable to a higher attritional loss ratio.

During the year, Markel’s underwriting result included $40.1 million of net losses and loss adjustment expenses attributed to the Hawaiian wildfires and Hurricane Idalia.

All in all, Markel has reported comprehensive income of $2.3 billion for 2023 compared with a loss of $1.2 billion a year earlier, supported by investment gains of $1.5 billion compared with investment losses of $1.6 billion in 2022.

Taking a closer look at the company’s results by segment, and the reinsurance division reported a combined ratio of 101.9% exhibiting an increase of 9.8% from last year’s 92.1%. This was attributed to a decrease in gross premium volume in the segment in 2023, along with less favourable premium adjustments on prior accident years in 2023 compared to 2022, primarily on professional liability and credit and surety product lines.

The reinsurance arm fell to an underwriting loss of $19.3 million in 2023 compared with a gain of $83.9 million a year earlier.

The segment’s 2023 combined ratio included $57.1 million of adverse development on prior accident years loss reserves, which was driven by $95.5 million of adverse development in the general liability product lines and $53.7 million of adverse development the public entity product line. Markel notes that these increases in prior accident year reserves in 2023 were partially offset by favourable development across several product lines, including property and workers’ compensation product lines.

Gross premium volume in the reinsurance segment was significantly lower than in 2022, at $1.046 billion. The firm attributes this to significantly lower gross premiums within its professional liability product lines, primarily attributable to unfavorable premium adjustments in 2023 compared to favorable premium adjustments in 2022.

In the insurance segment, there was an increase in gross premium volume of 7% to $9.2 billion, driven by more favourable rates and new business growth across product lines, most notably within Markel’s personal lines and property product lines.

The insurance combined ratio reported for the year reached 97.8% compared with 91.6% a year earlier, as the underwriting result fell to $162.2 million from $549.9 million.

The insurance segment’s current accident year losses and loss adjustment expenses in 2023 included $39.6 million of net losses and loss adjustment expenses attributed to the 2023 catastrophes.

Markel explains that during the year it recognized losses in its intellectual property collateral protection insurance written within its professional liability product line in 2023 due to higher than anticipated levels of claims and loss experience.

Losses on this product line included $65 million of credit losses recognized in connection with fraudulent letters of credit that were provided by an affiliate of Vesttoo Ltd. as collateral for reinsurance purchased on two policies, which represents its full exposure to credit losses on the related reinsurance recoverables.

The company stated, “We are actively pursuing remedies to make recoveries on the reinsurance recoverables impacted by the fraudulent letters of credit and do not have any other ceded reinsurance contracts with Vesttoo Ltd. or its affiliates.”

The company added, “In response to consecutive quarters of adverse development, in the fourth quarter of 2023, we conducted an extensive reserve study on selected general liability and professional liability product lines, which resulted in further increases to our prior accident year loss reserves in the fourth quarter of 2023.”

Thomas S. Gayner, Chief Executive Officer, Markel Group, commented, “We enjoyed excellent returns in 2023 from Markel Ventures, our investment operations, and many portions of our insurance business. While we remain focused on some areas of improvement for our insurance operations, our three-engine system continues to drive profitable growth. Strong operating cash flows from each of our insurance, investments, and Markel Ventures engines can now be reinvested to continue growing shareholder value.”

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