US re/insurer Markel Corporation has reported a comprehensive loss of $367.4 million for the third quarter of 2022, due mainly to investment losses and unrealized losses on its fixed maturity portfolio.
The loss compares to a positive result of $80.2 million for the same period last year, and brings Markel’s overall loss for the first nine months of the year to $2.2 billion.
But the company did manage to maintain its combined ratio at a stable 93%, despite incurring substantial losses from Hurricane Ian and other catastrophe events in Q3.
The underwriting impact of Hurricane Ian was $70.0 million, or four points on the combined ratio, Markel disclosed.
For comparison, underwriting results last year included $114.4 million, or seven points on the combined ratio, of net losses and loss adjustment expenses attributed to Hurricane Ida and the floods in Europe.
Markel’s management also noted that the company’s insurance business generated double-digit top line growth and underwriting profits of $490 million through the first three quarters of 2022.
Net investment losses amounted to $281.5 million for Q3, versus a $25.8 million loss for the same period last year. For the 9M period, investment losses now total $2.2 billion, tracking directly with Markel’s comprehensive loss.
The company explained that its investment losses in 2022 reflect a substantial decrease in the fair value of its equity portfolio resulting from significant declines in the public equity markets, meaning all of its net investment losses in 2022 were unrealized.
“We hold our investments over longer periods of time, where investment returns generally reflect less volatility than quarterly and annual results,” it assured.
On a more positive note, earned premiums increased to $2.0 billion for the quarter and to $5.5 billion for the 9M period, while operating revenues at Markel Ventures also increased significantly to $1.2 billion and to $3.5 billion for the two periods, respectively.
“Within our investment engine, we are beginning to see the benefit of higher interest rates on our net investment income through our recent purchases of higher yielding securities, which will also have a positive impact on our future interest income cash flows,” commented Thomas S. Gayner and Richard R. Whitt, Markel’s Co-Chief Executive Officers.
“The higher interest rate environment negatively impacted our comprehensive income and book value due to decreases in the fair value of our bond portfolio this year. However, we typically hold our bonds to maturity and would generally expect those unrealized losses to reverse as the bonds mature in future periods,” they continued.
“Given the magnitude of our equity portfolio, we believe this approach creates volatility in revenues and net income that can obscure the strong operating performance of our businesses and does not align with our long-term investment philosophy. Our long-term investment performance is better reflected in the cumulative unrealized gains of $3.9 billion in the fair value of our equity portfolio as of September 30, 2022.”
