Markel Corporation has reported a 10% rise in reinsurance gross written premiums (GWP) in 2021 to roughly $1.3 billion, as the improved underwriting performance of the company’s insurance operation helped the group-wide combined ratio improve by 8 percentage points to 90%.
Alongside solid GWP growth, Markel’s reinsurance division reported a 17% rise in net written premiums (NWP) to $1.2 billion and a 12% increase in earned premiums to more than $1 billion.
Markel attributes the premium growth to new business and increases on renewals within its professional liability and general liability product lines. The increase on renewals, explains the company, were primarily due to increased exposures arising from growth in underlying portfolios and more favorable rates.
While the reinsurance book expanded in 2021, the segment did suffer a $55 million underwriting loss, against an underwriting loss of $34 million in 2020. The reinsurance combined ratio totalled 105.3% in 2021, comprised of a 73.9% loss ratio and a 31.4% expense ratio. In comparison, the reinsurance combined ratio hit 103.7% in 2020, and consisted of a loss ratio of 69.8% and an expense ratio of 33.9%.
The reinsurance business was hit by catastrophe events in the year, with current accident year losses and loss adjustment expenses in 2021 including $100.3 million of net losses and loss adjustment expenses attributed to 2021 events. However, this was somewhat offset by $21.7 million of favorable reinstatement premiums in 2021 attributed to these events.
Markel says that catastrophe losses and reinstatement premiums in 2021 were primarily attributed to its retrocessional reinsurance property business, a portion of which was ceded to Lodgepine Re effective July 1, 2021, and its property reinsurance product lines, both of which Markel has discontinued writing on a risk-bearing basis.
Additionally, the reinsurance segment’s combined ratio included $19.9 million of adverse development on prior accident years loss reserves.
More than offsetting the unprofitable reinsurance underwriting experience in 2021, is Markel’s primary insurance business, which reported a 312% rise in underwriting profit to over $696 million, against $169 million in 2020.
In this part of the business, GWP jumped by 20%, year-on-year, to $7.3 billion, NWP by 21% to almost $6 billion, and earned premiums by 17% to $5.5 billion.
“The increase in gross premium volume in our Insurance segment in 2021 was driven by growth across all of our product lines, most notably within our professional liability and general liability product lines,” says Markel.
The much improved underwriting result has produced an insurance segment combined ratio of 87.3% in 2021, which is a 9.1 percentage point improvement on the prior year. In 2021, the combined ratio included a 51.3% loss ratio and a 35.9% expense ratio, against a loss ratio of 60.1% and an expense ratio of 36.3% in 2020.
The insurance arm’s current accident year losses and loss adjustment expenses in 2021 included $94.7 million of net losses and loss adjustment expenses from the 2021 cat events. Additionally, the unit’s combined ratio included $506.3 million of favorable development on prior accident years loss reserves.
Across the business, Markel has reported GWP growth of 19% to $8.5 billion in 2021, alongside NWP growth of 20% to $7 billion, and earned premium growth of 16% to $6.5 billion.
The underwriting result improved drastically, year-on-year, from $127 million in 2020 to $628 million in 2021.
The combined ratio improved from 97.7% in 2020 to 90.3% in 2021. Last year, the combined ratio included a 55.1% loss ratio and a 35.3% expense ratio, compared with 61.8% and 36%, respectively, in 2020.
The 2021 underwriting result included $195 million of net losses and loss adjustment expenses attributed to natural catastrophes, including Winter Storm Uri, the floods in Europe and Hurricane Ida, as well as $15.7 million of net losses and loss adjustment expenses resulting from an increase in the firm’s net estimate of ultimate losses and loss adjustment expenses attributed to COVID-19.
Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers, commented: “Our 2021 results show what we can achieve when all three of our operating engines – insurance, investments and Markel Ventures – power us forward. Each contributed in meaningful ways to a record-setting 2021 across many financial metrics, including operating revenues and operating income, among others.
“Our underwriting operations delivered a 90% combined ratio, which reflected the impact of recent underwriting actions we’ve taken to enhance our profitability while growing gross premium volume to $8.5 billion.
“We added two tremendous companies, Buckner and Metromont, to our Markel Ventures family of companies during a year in which revenues and EBITDA far surpassed previous record levels. Our investment portfolio provided strong returns on the back of the terrific performance of our equity portfolio.
“We thank our employees, trading partners and customers, all of whom have played a tremendous role in our record-setting year as we continue our efforts to build shareholder value. We are especially grateful for our employees, who performed admirably in 2021 and continue to show their dedication to building Markel into one of the world’s great companies.”
