MARKEL GROUP INC. (MKL) FY 2023 MD&A

Item 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis includes discussion of changes in our results of operations and financial condition from 2022 to 2023 and should be read in conjunction with the consolidated financial statements and related notes included under Item 8, Item 1 Business, Item 1A Risk Factors and "Safe Harbor and Cautionary Statement" under Item 7. The accompanying consolidated financial statements and related notes have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and include the accounts of our holding company, Markel Group Inc. (Markel Group), and its consolidated subsidiaries, as well as any variable interest entities that meet the requirements for consolidation (the Company). A discussion of changes in our results of operations and financial condition from 2021 to 2022 may be found in Part II Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission on February 17, 2023.

Item 7 is divided into the following sections:

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Estimates

•Safe Harbor and Cautionary Statement

For a discussion of our significant accounting policies, as well as recently issued accounting pronouncements that we have not yet adopted and their expected effects on our consolidated financial position, results of operations and cash flows, see note 1 of the notes to consolidated financial statements included under Item 8.

Results of Operations

The following table presents the components of operating revenues.

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

(1)     Amortization of intangible assets includes all amortization attributable to our insurance operations. Amortization of intangible assets attributable to our underwriting segments was $37.1 million and $38.5 million for the years ended December 31, 2023 and 2022, respectively; however, we do not allocate amortization of intangible assets between the Insurance and Reinsurance segments. Amortization of intangible assets attributable to our program services and other fronting, insurance-linked securities and other insurance operations was $61.2 million for the years ended December 31, 2023 and 2022.

(2)     Impairment of goodwill for the year ended December 31, 2022 was attributable to our Nephila ILS operations.

(3)     Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures.

The change in comprehensive income (loss) to shareholders in 2023 compared to 2022 was primarily due to pre-tax net investment gains of $1.5 billion in 2023 compared to pre-tax net investment losses of $1.6 billion in 2022, as well as pre-tax net unrealized gains on our fixed maturity securities of $389.5 million in 2023 compared to pre-tax net unrealized losses of $1.5 billion in 2022.

The components of net income (loss) to shareholders and comprehensive income (loss) to shareholders are discussed in further detail under "Insurance Results," "Investing Results," "Markel Ventures Results," "Interest Expense, Net Foreign Exchange Gains (Losses) and Income Taxes" and "Comprehensive Income (Loss) to Shareholders and Book Value per Common Share."

Insurance Results

Our Insurance engine includes our underwriting, program services and other fronting and insurance-linked securities (ILS) operations. We have a suite of capabilities through which we can access capital to support our customers' risks, which includes our own capital through our underwriting operations and third-party capital through our program services and other fronting and ILS operations. Our underwriting operations, which are primarily comprised of our Insurance and Reinsurance segments, produce revenues primarily by underwriting insurance contracts and earning premiums in the specialty insurance market. Our program services and other fronting and insurance-linked securities operations produce revenues primarily through fees earned for fronting services and investment management services, respectively. Our insurance operations also include the underwriting results of run-off lines of business that were discontinued prior to, or in conjunction with, insurance acquisitions,

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and the results of our run-off life and annuity reinsurance business. The following table presents the components of our Insurance engine gross premium volume and operating revenues.

(1)    Substantially all gross premiums from our program services and other fronting operations were ceded to third parties for the years ended December 31, 2023 and 2022.

Underwriting Results

Underwriting profits are a key component of our strategy to build shareholder value. 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 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. The combined ratio is the sum of the loss ratio and the expense ratio. 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.

In addition to the U.S. GAAP combined ratio, loss ratio and expense ratio, we also evaluate our underwriting performance using measures that exclude the impacts of certain items on these ratios. We believe these adjusted measures, which are non-GAAP measures, provide financial statement users with a better understanding of the significant factors that comprise our underwriting results and how management evaluates underwriting performance.

When analyzing our combined ratio, we exclude current accident year losses and loss adjustment expenses attributed to natural catastrophes and certain other significant, infrequent loss events, for example, the on-going military conflict between Russia and Ukraine that began following Russia's invasion of Ukraine in February 2022. Due to the unique characteristics of these events, there is inherent variability as to the timing or loss amount, which cannot be predicted in advance. We believe measures that exclude the effects of such events are meaningful to understand the underlying trends and variability in our underwriting results that may be obscured by these items.

When analyzing our loss ratio, we evaluate losses and loss adjustment expenses attributable to the current accident year separate from losses and loss adjustment expenses attributable to prior accident years. Prior accident year reserve development, which can either be favorable or unfavorable, represents changes in our estimates of losses and loss adjustment expenses related to loss events that occurred in prior years. We believe a discussion of current accident year loss ratios, which exclude prior accident year reserve development, is helpful since it provides more insight into estimates of current underwriting performance and excludes changes in estimates related to prior year loss reserves. We also analyze our current accident year loss ratio excluding losses and loss adjustment expenses attributable to catastrophes and, in 2022, the Russia-Ukraine conflict. The current accident year loss ratio excluding the impact of catastrophes and other significant, infrequent loss events is also commonly referred to as an attritional loss ratio within the property and casualty insurance industry.

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The following table presents summary data for our consolidated underwriting operations, which are comprised predominantly of our Insurance and Reinsurance segments. Our consolidated underwriting results also include results from discontinued lines of business and the retained portion of our program services and other fronting operations.

(1)    Amounts may not reconcile due to rounding.

(2)    The point impact of catastrophes and the Russia-Ukraine conflict is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums.

Premiums

The increase in gross premium volume in our underwriting operations in 2023 was driven by growth within our Insurance segment, partially offset by lower gross premium volume within our Reinsurance segment. Net retention of gross premium volume for our underwriting operations was 82% in 2023 compared to 83% in 2022. The decrease was driven by lower retention in 2023 compared to 2022 across both of our underwriting segments. Within our underwriting operations, we purchase reinsurance and retrocessional reinsurance to manage our net retention on individual risks and overall exposure to losses and to enable us to write policies with sufficient limits to meet policyholder needs. The increase in earned premiums in 2023 was primarily attributable to higher gross premium volume in recent periods.

Throughout 2023, we achieved an overall modest rate increase across the landscape of our diversified product portfolio. However, rate trends by product class were more divergent in 2023 in contrast to the past few years, where we experienced rate increases across most of our product lines. These more nuanced rate trends, coupled with increases in loss cost trends due to heightened economic and social inflation, have forced us to examine each of our product classes more closely and target premium growth only in product lines where we are most confident in the levels of rate adequacy.

During 2023, we achieved significant rate increases on our property coverages and select marine and energy product lines, due to recent industry loss experience and the increasing cost of obtaining reinsurance protection, which led us to pursue opportunistic growth within these product lines. Additionally, within our general liability product lines, we continued to achieve modest rate increases across most product classes and saw the level of rate increases improve over the course of the year. We maintained modest growth in these product lines, while carefully selecting risks, managing limits and adjusting attachment points in response to heightened loss cost trends within general liability lines.

Within our insurance and reinsurance professional liability product lines, overall, we saw modest rate decreases driven by notable rate decreases within our public directors and officers product, consistent with broader trends across the industry, and,

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to a lesser extent, within our errors and omissions coverages. Within these products, we are contracting our new premium writings when we believe rates are inadequate and are also allowing business to lapse. In other professional liability product lines, particularly within our international portfolio, we are generally seeing consistency in rates and are continuing to pursue growth opportunities where we find the business to be adequately priced. We also saw rate decreases globally within our cyber product line as that market matures, following several years of significant rate increases and strong industry underwriting performance. Despite these current trends, we view cyber as a long-term growth opportunity. Finally, we continued to realize low single digit rate decreases within our workers' compensation product line and are reacting accordingly on a state-by-state basis to maintain profitability.

Combined Ratio

In 2023, underwriting results included $40.1 million of net losses and loss adjustment expenses attributed to the Hawaiian wildfires and Hurricane Idalia (2023 Catastrophes). The net losses and loss adjustment expenses from the 2023 Catastrophes were net of ceded losses of $9.3 million. In 2022, underwriting results included $46.2 million and $35.7 million of net losses and loss adjustment expenses attributed to Hurricane Ian and the Russia-Ukraine conflict, respectively. The net losses and loss adjustment expenses from Hurricane Ian and the Russia-Ukraine conflict were net of ceded losses of $115.3 million and $44.3 million, respectively. Excluding these losses, the increase in our consolidated combined ratio in 2023 compared to 2022 was primarily driven by a higher attritional loss ratio across both of our underwriting segments.

Insurance Segment

(1)    Amounts may not reconcile due to rounding.

(2)    The point impact of catastrophes and the Russia-Ukraine conflict is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums.

Premiums

The increase in gross premium volume in our Insurance segment in 2023 was driven by more favorable rates and new business growth across many of our product lines, most notably within our personal lines and property product lines. The increase was partially offset by lower premium volume within select lines of our professional liability and general liability product lines, where we are adjusting our writings in response to changes in market conditions and downward pressure on rates. We continue to focus on rate adequacy, particularly within certain classes of our casualty and professional liability product lines, and will not write business that we believe will not meet our underwriting profit targets.

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Net retention of gross premium volume was 81% in 2023 compared to 82% in 2022. The decrease was driven by higher cession rates on our personal lines product lines in 2023 compared to 2022. The increase in earned premiums in 2023 was primarily due to higher gross premium volume across most product lines in recent periods.

Combined Ratio

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. Current accident year losses in 2022 included $46.2 million and $23.0 million of net losses and loss adjustment expenses attributed to Hurricane Ian and the Russia-Ukraine conflict, respectively. Excluding these losses, the increase in the current accident year loss ratio in 2023 compared to 2022 was primarily attributable to higher attritional loss ratios within our general liability and professional liability product lines in 2023 compared to 2022. Based on the adverse prior accident year loss development trends on these long-tail lines of business and the uncertainty around future loss cost trends, as discussed in further detail below, we increased our attritional loss ratios on certain product classes within our general liability and professional liability product lines in 2023. Consistent with our loss reserving philosophy and to increase the likelihood that the reserves established for our in-force portfolio will ultimately prove to be adequate, we are taking a more cautious approach in our reserving, resulting in higher attritional loss ratios on this business.

Additionally, we recognized losses on our intellectual property collateral protection insurance written within our professional liability product line in 2023 due to higher than anticipated levels of claims and loss experience. Losses on this product line also included $65.0 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 we believe represents our full exposure to credit losses on the related reinsurance recoverables. 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 Insurance segment's 2023 combined ratio included $104.7 million of favorable development on prior accident years loss reserves, which was primarily attributable to favorable development on our property, marine and energy, international professional liability, personal lines and workers' compensation product lines, partially offset by adverse development on our U.S. and Bermuda general liability and professional liability product lines. In 2022, the combined ratio included $142.9 million of favorable development on prior accident years loss reserves, which was primarily attributable to favorable development on our workers' compensation, programs, property and credit and surety product lines. Favorable development in 2022 was partially offset by adverse development on our professional liability and general liability product lines, primarily on our U.S. and Bermuda business. See note 11 of the notes to consolidated financial statements included under Item 8 for more information on the Insurance segment's prior year loss reserve development.

Net favorable development in 2022 was net of $128.5 million, or two points, of adverse development on our U.S. and Bermuda professional liability and general liability product lines, which was primarily attributable to unfavorable claim settlements and increased claim frequency and severity on the 2016 to 2019 accident years. The adverse development was across a number of products, including directors and officers, errors and omissions and employment practices liability within professional liability and contractors and excess and umbrella within general liability. Development on prior years loss reserves within our U.S. and Bermuda professional liability and general liability product lines in 2022 was impacted by broader market conditions. The impact of economic and social inflation, including the rising cost to adjust and settle claims and the impact of more pervasive litigation financing trends, has contributed to the loss cost trends, leading to higher than anticipated losses in older accident years for these product lines. The impacts of social inflation were most significant on our large, risk-managed excess professional liability accounts, corresponding with a notable rise in the number of class action lawsuits on these years and the recent unfavorable legal environment. The development of this claims trend was influenced by state and federal court closures following the onset of the COVID-19 pandemic in 2020, which delayed court proceedings for claims on the impacted product lines.

In 2023, we continued to see an increased frequency of large claims and unfavorable loss cost trends on our U.S. and Bermuda general liability and professional liability product lines. In response to consecutive quarters of adverse loss 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. Adverse development in 2023 on our U.S. and Bermuda general liability and professional liability product lines totaled $330.7 million, or five points. This adverse development was most substantial on our primary casualty contractors' liability and excess and umbrella general liability product lines.

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A significant portion of our casualty portfolio is associated with construction business, which has grown meaningfully in recent years. Our study determined that the ultimate claim reporting tail on certain of our casualty construction lines is likely to be longer than we initially anticipated. Within our excess and umbrella general liability and risk-managed errors and omissions professional liability books, we determined that there was a greater than expected propensity for limits below our attachment point to erode, pushing more claims into our layers. Further, reporting of these claims has lagged historical loss development patterns due to the effect of court closures and claims backlogs arising from the COVID-19 pandemic, in addition to aggressive tactics by the plaintiffs' bar and delayed claims reporting trends. Although we have achieved significant rate increases since 2019 on many of these lines in response to heightened loss trends, the findings of our study led us to increase our loss development factors, and therefore our estimate of the ultimate loss ratios, on our primary casualty contractors' liability, excess and umbrella general liability and risk-managed errors and omissions professional liability product lines. This resulted in significant strengthening of reserves on the impacted lines, including on the 2020 to 2022 accident years where we determined that the incurred loss trends are following a similar loss development trend at the same stage as older accident years.

Consistent with our reserving philosophy to hold reserves that are more likely to be redundant than deficient, we increased reserves in areas where there were indications that our reserves may have been deficient, however, in instances where claims trends have been more favorable than we previously anticipated, we will wait to reduce loss reserves until those trends are observed over additional periods of time. For those lines in which we strengthened reserves, although we believe the gross and net reserves are adequate based on information available at this time, we continue to closely monitor reported claims, claim settlements, ceded reinsurance contract attachments and judicial decisions, among other things, and may adjust our estimates as new information becomes available.

The increase in the Insurance segment's expense ratio in 2023 was primarily due to higher personnel costs, professional fees and other general and administrative expenses, which were partially offset by the impact of higher earned premiums.

Reinsurance Segment

(1)    NM - Ratio is not meaningful.

(2)    Amounts may not reconcile due to rounding.

(3)    The point impact of the Russia-Ukraine conflict is calculated as the associated net losses and loss adjustment expenses divided by total earned premiums.

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Premiums

The decrease in gross premium volume in our Reinsurance segment in 2023 was driven by significantly lower gross premiums within our professional liability product lines, primarily attributable to unfavorable premium adjustments in 2023 compared to favorable premium adjustments in 2022, largely driven by transaction liability business, due to lower volume of deal activity, and the deterioration in the pricing environment on directors and officers liability. Lower premium volume within professional liability also reflects decreases on renewals, due to decreased exposures and participation. The decrease in professional liability premium volume was partially offset by higher gross premiums within our marine and energy product lines due to increases on renewals, arising from increased exposures and more favorable rates, as well as new business. Significant variability in gross premium volume can be expected in our Reinsurance segment due to individually significant contracts and multi-year contracts.

Net retention of gross premium volume was 92% in 2023 compared to 95% in 2022. The decrease in net retention was driven by changes in mix of gross premium volume, as our professional liability business is fully retained and our marine and energy business carries a higher cession rate than the rest of the segment.

The decrease in earned premiums in 2023 was primarily due to less favorable premium adjustments in 2023 compared to 2022, primarily attributable to our professional liability and credit and surety product lines, and the non-renewal of a large treaty within our workers' compensation product line.

Combined Ratio

The increase in the Reinsurance segment's current accident year loss ratio in 2023 compared to 2022 was primarily due to less favorable premium adjustments on prior accident years in 2023 compared to 2022, primarily on our professional liability and credit and surety product lines.

The Reinsurance 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, or nine points, of adverse development on our general liability product lines and $53.7 million, or five points, of adverse development on our public entity product line, as well as additional exposures recognized on prior accident years related to net favorable premium adjustments on our general liability product lines. These increases in prior accident year reserves in 2023 were partially offset by favorable development across several product lines, including our property and workers' compensation product lines, as well as reduced exposures recognized on prior accident years related to net unfavorable premium adjustments on our professional liability product lines.

Adverse development on our general liability product lines was primarily attributable to large reported loss claims and adverse loss development trends across multiple accident years. Substantially all of the adverse development on our public entity product line was attributable to a segment of this business that we discontinued writing in 2020, which experienced an increased frequency of large claims over the past several quarters, most significantly on the 2014 to 2019 accident years. Adverse development on both our general liability and public entity product lines included notable strengthening as a result of actions taken in the fourth quarter in response to changes in loss trends observed in the reserve study previously discussed under "Insurance Segment" and the expectation that those loss trends will ultimately emerge within comparable reinsurance product lines.

In 2022, the combined ratio included $26.1 million of favorable development on prior accident years loss reserves, which was primarily attributable to favorable development within our property product lines related to natural catastrophes and our credit and surety product lines. Favorable development on prior years loss reserves in 2022 was partially offset by additional exposures recognized on prior accident years related to net favorable premium adjustments on our general liability, credit and surety and professional liability product lines.

See note 11 of the notes to consolidated financial statements included under Item 8 for more information on the Reinsurance segment's prior year loss reserve development.

Program Services and Other Fronting, Insurance-linked Securities and Other Insurance

The following table presents the components of operating revenues and operating expenses attributable to our program services and other fronting, insurance-linked securities and other insurance operations, including our run-off block of life and annuity reinsurance contracts, none of which are included in a reportable segment.

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(1)    Investment income earned on the investments that support life and annuity policy benefit reserves are included in our Investing segment.

(2)    Results attributable to Markel CATCo Re were entirely attributable to noncontrolling interest holders in Markel CATCo Re.

(3)    Underwriting results attributable to our other insurance operations include results from discontinued lines of business and the retained portion of our program services and other fronting operations.

Program Services and Other Fronting

The increase in operating revenues in 2023 was due to modest increases at both our program services business and other fronting operations as a result of higher gross premium volume in 2023 compared to 2022. The following table summarizes gross premium volume in our program services and other fronting operations.

The increase in gross premium volume within our program services operations in 2023 was attributable to expansion of existing programs and growth from new programs. The increase in gross premium volume in our other fronting operating in 2023 was driven by expansion of our property catastrophe programs with Nephila Reinsurers and achieving more favorable rates on this business, as well as growth from a new specialty program with Nephila Reinsurers.

In June 2023, we sold Independent Specialty Insurance Company, a subsidiary within our program services operations, which resulted in a gain of $16.9 million.

Insurance-Linked Securities

The decrease in operating revenues and operating expenses in our Nephila insurance-linked securities operations in 2023 was primarily due to the disposition of our Velocity managing general agent operations in February 2022, which resulted in a gain of $107.3 million, and our Volante managing general agent operations in October 2022, which resulted in a gain of $118.5 million. Following these sales, our Nephila ILS operations are solely comprised of our fund management operations. In 2023, the increase in operating revenues within our fund management operations was primarily due to $31.1 million of management fees recognized upon the release of capital from side pocket reserves. Nephila's net assets under management were $6.8 billion as of December 31, 2023.

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Additionally, in 2022, we recognized a goodwill impairment charge of $80.0 million attributable to our Nephila fund management operations. See note 8 of the notes to consolidated financial statements included under Item 8 for more information about this goodwill impairment.

Markel CATCo

In March 2022, we completed a buy-out transaction with Markel CATCo Re Ltd. (Markel CATCo Re) and Markel CATCo Reinsurance Fund Ltd. (the Markel CATCo Funds) that provided for an accelerated return of all remaining capital to investors in the Markel CATCo Funds and resulted in the consolidation of Markel CATCo Re upon completion of the transaction. In order to complete the transaction, we made $101.9 million in payments, net of insurance proceeds, to or for the benefit of investors that were recognized as an expense during the first quarter of 2022. See note 17 of the notes to consolidated financial statements for further details regarding our Markel CATCo operations, the buy-out transaction and the consolidation of Markel CATCo Re.

Investing Results

We measure our investment performance by analyzing net investment income earned on our investment portfolio, which reflects the recurring interest and dividend earnings on our investment portfolio. We also analyze net investment gains, which include unrealized gains and losses on our equity portfolio. Based on the potential for volatility in the financial markets, we understand that the level of gains or losses may vary from one period to the next, and therefore believe that our investment performance is best analyzed over longer periods of time.

The following table summarizes our consolidated investment performance, which consists predominantly of the results of our Investing segment. Net investment gains or losses in any given period are typically attributable to changes in the fair value of our equity portfolio due to market value movements. The change in net unrealized gains (losses) on available-for-sale investments in any given period is typically attributable to changes in the fair value of our fixed maturity portfolio due to changes in interest rates during the period.

(1)    Yield reflects the applicable interest income as a percentage of the applicable monthly average invested assets at amortized cost.

(2)    Return on equity securities is calculated by dividing dividends and the change in fair value of equity securities by the monthly average equity securities at fair value and considers the timing of net purchases and sales.

(3)    Other income or losses within our investing operations primarily relate to equity method investments in our investing segment, which are managed separately from the rest of our investment portfolio.

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The increase in net investment income in 2023 was primarily attributable to higher interest income on cash equivalents, fixed maturity securities and short-term investments due to higher yields during 2023 compared to 2022. Throughout 2023, we increased our allocation of cash to money market funds in response to increases in short-term interest rates. Additionally, interest income on our fixed maturity securities increased in part due to higher average holdings of fixed maturity securities in 2023 compared to 2022. See note 4(d) of the notes to consolidated financial statements included under Item 8 for details regarding the components of net investment income.

Markel Ventures Results

We measure Markel Ventures' results by its operating income, as well as earnings before interest, income taxes, depreciation and amortization (EBITDA). We consolidate the results of our Markel Ventures subsidiaries on a one-month lag, with the exception of significant transactions or events that occur during the intervening period. The following table summarizes the results from our Markel Ventures segment.

The increase in operating revenues in 2023 was driven by higher revenues at our construction services businesses and transportation-related businesses, due to a combination of increased demand, higher prices, and growth, as well as increased production at one of our equipment manufacturing businesses compared to 2022. The increase also reflected a full-year contribution from Metromont, compared to an 11-month contribution in 2022 following its acquisition. These increases in operating revenues were partially offset by the impact of decreased demand at our consumer and building products businesses, consulting services businesses and one of our construction services businesses.

The increases in operating income and EBITDA in 2023 were driven by our products businesses, particularly our consumer and building products businesses, which had higher margins in 2023 compared to 2022. In 2022, the operating margins at many of our products businesses were impacted by increased costs of materials, freight and labor, which reflected the impact of broader economic conditions. As conditions stabilized throughout 2023, particularly in regard to materials and freight costs, our operating margins for those businesses improved. The increases in operating income and EBITDA at many of our businesses were partially offset by the impact of lower revenues and operating margins at one of our construction services businesses due to decreased demand.

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 income, to monitor and evaluate the performance of our Markel Ventures 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 or amortization resulting from purchase accounting. The following table reconciles Markel Ventures operating income to Markel Ventures EBITDA.

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The following tables present condensed financial information reflecting the financial position, results of operations and cash flows of Markel Ventures, Inc., and also summarizing the amounts recognized in the consolidated financial statements included under Item 8 for the Markel Ventures segment, unless otherwise noted.

(1)     Debt as of December 31, 2023 and 2022 included $738.0 million and $808.1 million, respectively, of debt due to other subsidiaries of Markel Group, which was eliminated in consolidation and is guaranteed by Markel Group.

(2)     Shareholders' equity as of both December 31, 2023 and 2022 included $1.4 billion of common stock, which represents Markel Group's investment in Markel Ventures, Inc. and which was eliminated in consolidation.

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(1)    Interest expense for the years ended December 31, 2023 and 2022 included intercompany interest expense of $26.5 million and $27.4 million, respectively, which was eliminated in consolidation.

(1)    Net cash provided (used) by financing activities for the years ended December 31, 2023 and 2022 included net repayments of intercompany debt of $70.0 million and $44.9 million, respectively, which were eliminated in consolidation.

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Interest Expense, Net Foreign Exchange Gains (Losses) and Income Taxes

Interest Expense

Interest expense was $185.1 million in 2023 compared to $196.1 million in 2022. The decrease in interest expense was attributable to the impact of the retirement of our 3.625% unsecured senior notes in March 2023 and our 4.9% unsecured senior notes in July 2022. See note 14 of the notes to consolidated financial statements included under Item 8 for further details regarding the retirement of our senior long-term debt.

Net Foreign Exchange Gains (Losses)

Net foreign exchange gains (losses) included in net income (loss) were losses of $90.0 million in 2023 compared to gains of $137.8 million in 2022. Net foreign exchange gains (losses) are primarily due to the remeasurement of our foreign currency denominated insurance reserves to the U.S. Dollar. The U.S. Dollar moderately weakened against the Euro and British Pound, the predominant foreign currencies within our insurance operations, during 2023, while it strengthened against the Euro and British Pound in 2022. Pre-tax net foreign exchange gains and losses attributed to changes in exchange rates on available-for-sale securities supporting our insurance reserves, which are included in the changes in net unrealized gains (losses) on available-for-sale investments in other comprehensive income (loss), were gains of $74.0 million in 2023 compared to losses of $79.5 million in 2022.

Income Taxes

The effective tax rate was 21% in 2023 compared to 32% in 2022. The effective tax rate for 2022 differs from the effective tax rate for 2023, and the statutory rate of 21%, due to the impact of various immaterial items resulting in a net tax benefit that was magnified due to the small pre-tax loss in 2022. See note 15 of the notes to consolidated financial statements included under Item 8 for further discussion of our income taxes.

The Inflation Reduction Act of 2022 (the IRA), which implemented a 15% corporate minimum tax based on adjusted financial statement income, became effective in 2023. The IRA did not have a material impact on our results of operations, financial conditions or cash flows in 2023, and is not expected to have a material impact on our results of operations, financial condition or cash flows in future periods. However, we will continue to evaluate the impacts of the IRA as additional guidance is issued by the U.S. Treasury.

The Organization for Economic Co-operation and Development (OECD) recently introduced rules, commonly referred to as Pillar Two, to establish a 15% global corporate minimum tax on large, multi-national enterprises. Certain countries in which we have operations, including the United Kingdom, have enacted legislation consistent with Pillar Two, which generally became effective on January 1, 2024. Additionally, in response to Pillar Two, in December 2023, Bermuda enacted the Corporate Income Tax Act of 2023 (the Bermuda CIT Act) effective January 1, 2025, which imposes a 15% corporate income tax on certain Bermuda businesses of large, multi-national enterprises. We do not expect Pillar Two or the Bermuda CIT Act to have a material impact on our results of operations, financial condition or cash flows, however, we will continue to evaluate these tax law changes as additional guidance is issued by the OECD and relevant tax authorities.

Comprehensive Income (Loss) to Shareholders and Book Value per Common Share

The following table summarizes the components of comprehensive income (loss) to shareholders.

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Book value per common share increased 17% from $935.65 at December 31, 2022 to $1,095.95 as of December 31, 2023.

Liquidity and Capital Resources

We seek to maintain prudent levels of liquidity and financial leverage for the benefit and protection of our policyholders, creditors and shareholders. Our consolidated debt to capital ratio was 20% at December 31, 2023 and 24% at December 31, 2022, both of which are within the range of our target capital structure. The decrease reflects the retirement of our 3.625% unsecured senior notes due March 30, 2023 and an increase in shareholder's equity, primarily attributable to an increase in the fair value of equity securities.

Holding Company

Our holding company had $3.5 billion and $3.7 billion of investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) at December 31, 2023 and December 31, 2022, respectively. The decrease was primarily due to repurchases of our common stock and the retirement of our 3.625% unsecured senior notes due March 30, 2023, partially offset by dividends received from insurance subsidiaries and an increase in the fair value of equity securities held by our holding company. See note 23 of the notes to consolidated financial statements included under Item 8 for condensed financial information for our holding company.

The following table presents the composition of our holding company's invested assets.

After satisfying our interest and principal obligations on our senior long-term debt and paying dividends on our preferred stock when declared by our Board of Directors, as well as any other holding company obligations, capital at Markel Group is available to, among other things, allocate to our existing businesses, complete acquisitions, build our portfolio of equity securities or repurchase shares of our common stock.

In November 2023, our Board of Directors approved a new share repurchase program that replaced the previous share repurchase program. The program provides for the repurchase of up to $750 million of common stock. The program has no expiration date but may be terminated by the Board of Directors at any time. As of December 31, 2023, $713.0 million remained available for repurchases under the program.

We may from time to time seek to prepay, retire or repurchase our outstanding senior notes or preferred shares, through open market purchases, privately negotiated transactions or otherwise. Those prepayments, retirements or repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors.

The holding company has historically primarily relied on dividends from its insurance subsidiaries to meet its obligations. Under the insurance laws of the various states in which our domestic insurance subsidiaries are incorporated, an insurer is restricted in the amount of dividends it may pay without prior approval of regulatory authorities. There are also regulatory restrictions on the amount of dividends that certain of our foreign insurance subsidiaries may pay based on applicable laws in their respective jurisdictions. At December 31, 2023, our domestic insurance subsidiaries and Markel Bermuda Limited could pay ordinary dividends of $1.2 billion during the following twelve months under these laws.

In June 2023, we entered into an amended and restated credit agreement for our corporate revolving credit facility, which provides up to $300 million of capacity for future acquisitions, investments and stock repurchases, and for other working capital and general corporate purposes. At our discretion, up to $200 million of the total capacity may be used for letters of credit. We may increase the capacity of the facility by up to $200 million subject to obtaining commitments for the increase and certain other terms and conditions. Markel Group guaranteed the obligations under the facility of the insurance subsidiaries that are also parties to the credit agreement. This facility expires in June 2028. As of December 31, 2023 and 2022, there were no borrowings outstanding under this revolving credit facility. We were in compliance with all covenants contained in our corporate revolving credit facility at December 31, 2023. To the extent that we are not in compliance with our

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covenants, access to the revolving credit facility could be restricted. While we believe this to be unlikely, the inability to access the revolving credit facility could adversely affect our liquidity. See note 14 of the notes to consolidated financial statements included under Item 8 for further discussion of our revolving credit facility.

We have access to various capital sources, including dividends from our subsidiaries, holding company invested assets, undrawn capacity under our revolving credit facility and access to the debt and equity capital markets. We believe we have, or have access to, adequate liquidity to meet our capital and operating needs, including that which may be required to support the operating needs of our subsidiaries. However, the availability of these sources of capital and the availability and terms of future financings will depend on a variety of factors. See the "Access to Capital" risk factors under Item 1A Risk Factors for more discussion regarding our access to capital sources.

Operating Subsidiaries

Insurance

Within our insurance subsidiaries, our primary source of cash inflows is the collection of premiums, and our primary cash outflow is the subsequent payment of claims, reinsurance costs and operating expenses. Premiums collected by our underwriting operations are invested primarily in short-term investments and fixed maturity securities. Short-term investments held by our insurance subsidiaries provide liquidity for payment of projected claims, reinsurance costs and operating expenses. Fixed maturity securities are held by our insurance subsidiaries to support our loss reserves and the eventual payment of claims, and therefore have maturities that generally match the duration of the underlying net loss reserves.

We seek to maintain capital in each of our insurance subsidiaries that exceeds required capital levels, as prescribed by applicable regulators. Capital held at our insurance subsidiaries beyond that which we anticipate will be needed to cover payment of claims and operating expenses is typically invested in equity securities, which over the long run, have produced higher returns relative to fixed maturity securities and short-term investments. At least annually, when capital at an insurance subsidiary exceeds our target levels, it is typically paid to Markel Group in the form of dividends. In certain instances, an insurance subsidiary may require additional capital to meet our target capital levels. In these instances, Markel Group has historically contributed capital to the insurance subsidiary to restore capital to our target levels.

In 2023 and 2022, our insurance subsidiaries paid dividends totaling $310.0 million and $130.0 million, respectively, to Markel Group. Additionally, in 2022, as a result of unfavorable market value movements in the public equity markets, the portion of capital held in equity securities at our insurance subsidiaries declined significantly. Therefore, in order to maintain our target levels of excess capital within the impacted insurance subsidiaries, our holding company made capital contributions totaling $973.5 million in 2022. There were no capital contributions from our holding company to our insurance subsidiaries in 2023.

Markel Ventures

Our Markel Ventures operating subsidiaries include a diverse portfolio of businesses in a variety of industries. The nature of the cash inflows and outflows generated by each of the individual operating businesses varies based on their individual industries and business strategies. In general, these businesses operate using limited long-term debt and rely primarily on revolving lines of credit for their operational financing needs. Markel Ventures, Inc. may also provide loans or make contributions to these operating subsidiaries to fund strategic growth investments and projects. Capital used by Markel Ventures, Inc. to complete acquisitions consists of profits generated by Markel Ventures, as well as capital contributions from Markel Group and loans from our insurance subsidiaries.

Operating cash flows from our Markel Ventures operations was $568.1 million in 2023 and $260.3 million in 2022. After satisfying the obligations on their debt, along with any capital expenditures, operating cash flows from our Markel Ventures subsidiaries are available to be allocated across the Company by Markel Group. Historically, cash flows generated by our Markel Ventures operating subsidiaries have been retained by Markel Ventures, Inc., at Markel Group's direction, to fund growth opportunities within Markel Ventures or repay loans with our insurance subsidiaries, rather than making distributions to Markel Group. In 2023 and 2022, Markel Ventures, Inc. repaid $70.0 million and $44.9 million, respectively, of principle on debt with our insurance subsidiaries. As of December 31, 2023 and 2022, Markel Ventures, Inc.'s outstanding intercompany debt with our insurance subsidiaries was $738.0 million and $808.1 million, respectively, all of which is guaranteed by Markel Group.

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As of December 31, 2023 and 2022, redeemable noncontrolling interests attributable to Markel Ventures, Inc. totaled $469.7 million and $523.2 million, respectively, which represents the obligation for Markel Ventures, Inc. to purchase the remaining equity interests in Markel Ventures businesses that are not wholly owned. Of the total balance at December 31, 2023, $82.6 million is available for redemption in 2024, with the remainder becoming redeemable between 2025 and 2030.

Various of our Markel Ventures subsidiaries maintain revolving credit facilities or lines of credit, which provide up to $680 million of aggregate capacity for working capital and other general operational purposes. A portion of the capacity on certain of these credit facilities may be used as security for letters of credit and other obligations. At December 31, 2023 and 2022, $169.5 million and $238.1 million, respectively, of borrowings were outstanding under these credit facilities. At December 31, 2023, all of our Markel Ventures subsidiaries were in compliance with all covenants contained in their respective credit facilities. To the extent our Markel Ventures subsidiaries are not in compliance with their respective covenants, access to their credit facilities could be restricted, which could adversely affect their operations.

Cash Flows and Invested Assets

Net cash provided by operating activities was $2.8 billion in 2023 compared to $2.7 billion in 2022. The increase was primarily due to an increase in operating cash flows from Markel Ventures and investments, partially offset by a decrease in operating cash flows from our insurance operations.

Net cash used by investing activities was $2.7 billion in 2023 compared to $1.7 billion in 2022. In 2023, net cash used by investing activities included net purchases of fixed maturity securities and equity securities of $2.2 billion and $339.7 million, respectively, and net sales of short-term investments of $202.9 million. In 2022, net cash used by investing activities included net purchases of fixed maturity securities, short-term investments and equity securities of $959.7 million, $846.0 million and $201.0 million, respectively. In 2022, net cash used by investing activities was net of $630.0 million of net cash and restricted cash acquired as part of our consolidation of Markel CATCo Re, of which $169.4 million was subsequently distributed to Markel CATCo investors for shares that were redeemed in conjunction with the buy-out transaction. Cash flow from investing activities is 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.

In 2023, we continued to increase our allocation of cash and short-term investments to fixed maturity securities in response to higher interest rates and to support our growing underwriting business. Additionally, we increased our purchases of equity securities in 2023.

Invested assets were $30.9 billion at December 31, 2023 compared to $27.4 billion at December 31, 2022, reflecting an increase of 13% in 2023. The increase was primarily attributable to operating cash flows, as well as an increase in the fair value of our equity portfolio. The following table presents the composition of our invested assets.

The change in the composition of the investment portfolio from December 31, 2022 to December 31, 2023 reflects our increased allocation of cash and short-term investments to fixed maturity and equity securities, as well as an increase in the fair value of our equity portfolio.

Net cash used by financing activities was $999.7 million in 2023, which included $250.0 million to retire our 3.625% unsecured senior notes due March 30, 2023. Net cash used by financing activities was $595.3 million in 2022, which included $350.0 million to retire our 4.90% unsecured senior notes due July 1, 2022. Financing activities in 2023 and 2022 also reflected borrowings and repayments at certain our Markel Ventures businesses, primarily on revolving lines of credit. Cash of $445.5 million and $290.8 million was used to repurchase shares of our common stock during 2023 and 2022, respectively.

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Cash Obligations

As of December 31, 2023, our primary contractual cash obligations were unpaid losses and loss adjustment expenses, senior long-term debt and other debt and related interest payments, life and annuity benefits, lease liabilities and purchase obligations. These cash obligations, as presented in the following table, represent our estimate of total future cash payments and may differ from the corresponding liabilities on our consolidated balance sheet due to present value discounts and other adjustments required for presentation in accordance with U.S. GAAP. The following table summarizes our estimated contractual cash obligations at December 31, 2023 and the estimated amount expected to be paid in 2024.

(1)    The actual cash payments for settled claims will vary, possibly significantly, from these estimates. As of December 31, 2023, the average duration of our reserves for unpaid losses and loss adjustment expenses was 3.8 years. See note 11 of the notes to consolidated financial statements included under Item 8 for further details on our loss reserve estimates.

(2)    See note 14 of the notes to consolidated financial statements included under Item 8 for further details on the scheduled maturity of principal payments on our senior long-term debt and other debt.

(3)    Interest expense is accrued in the period incurred and therefore, only a portion of the future interest payments presented in this table represents a liability on our consolidated balance sheet as of December 31, 2023.

(4)    There is inherent uncertainty in the process of estimating the timing of payments for life and annuity benefits and actual cash payments for settled contracts could vary significantly from these estimates. We expect $631.3 million of our cash obligation for life and annuity benefits to be paid beyond five years. See note 13 of the notes to consolidated financial statements included under Item 8 for further details on our estimates for life and annuity benefit reserves.

(5)    See note 9 of the notes to consolidated financial statements included under Item 8 for further details on our lease obligations and the expected timing of future payments.

(6)    Purchase obligations are primarily related to open purchase order commitments with subcontractors and suppliers under contracts in our insurance and Markel Ventures operations.

Restricted Assets and Capital

At December 31, 2023, we had $5.0 billion of invested assets held in trust or on deposit for the benefit of policyholders or ceding companies or to support underwriting activities. Additionally, we have pledged investments and cash and cash equivalents totaling $450.5 million at December 31, 2023 as security for letters of credit that have been issued by various banks on our behalf. These invested assets and the related liabilities are included in our consolidated balance sheet. See note 4(f) of the notes to consolidated financial statements included under Item 8 for further discussion of restrictions over our invested assets.

Our insurance operations require capital to support premium writings, and we remain committed to maintaining adequate capital and surplus at each of our insurance subsidiaries. The National Association of Insurance Commissioners (NAIC) developed a model law and risk-based capital formula designed to help regulators identify domestic property and casualty insurers that may be inadequately capitalized. Under the NAIC's requirements, a domestic insurer must maintain total capital and surplus above a calculated threshold or face varying levels of regulatory action. Capital adequacy of our foreign insurance subsidiaries is regulated by applicable laws of the United Kingdom, Bermuda and Germany. At December 31, 2023, the capital and surplus of each of our insurance subsidiaries significantly exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements.

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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. These estimates, by necessity, are based on assumptions about numerous factors. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements. Our accounts with accounting policies that involve critical accounting estimates are unpaid losses and loss adjustment expenses and goodwill and intangible assets.

Unpaid Losses and Loss Adjustment Expenses

Our consolidated balance sheets included estimated unpaid losses and loss adjustment expenses of $23.5 billion and reinsurance recoverables on unpaid losses of $8.8 billion at December 31, 2023 compared to $20.9 billion and $8.0 billion, respectively, at December 31, 2022. Included in these balances were unpaid losses and loss adjustment expenses and reinsurance recoverables on unpaid losses attributable to our program services business and other fronting arrangements totaling $5.2 billion as of both December 31, 2023 and 2022. Additionally, consolidated unpaid losses and loss adjustment expenses as of December 31, 2023 and December 31, 2022 included $185.0 million and $347.9 million, respectively, of fully collateralized reserves attributable to Markel CATCo Re, which we consolidate following the Markel CATCo buy-out. See note 17 of the notes to consolidated financial statements for further details regarding the consolidation of Markel CATCo Re. Our consolidated balance sheets do not include reserves for losses and loss adjustment expenses attributed to unconsolidated subsidiaries or affiliates that we manage through our Nephila insurance-linked securities operations.

We accrue liabilities for unpaid losses and loss adjustment expenses based upon estimates of the ultimate amounts payable. We maintain reserves for specific claims incurred and reported (case reserves) and reserves for claims incurred but not reported (IBNR reserves).

Reported claims are in various stages of the settlement process, and the corresponding reserves for reported claims are based upon all information available to us. Case reserves consider our estimate of the ultimate cost to settle the claims, including investigation and defense of lawsuits resulting from the claims, and may be subject to adjustment for differences between costs originally estimated and costs subsequently re-estimated or incurred. Claims are settled based upon their merits, and some claims may take years to settle, especially if legal action is involved. As of any balance sheet date, all claims have not yet been reported, and some claims may not be reported for many years. As a result, the liability for unpaid losses and loss adjustment expenses includes significant estimates for incurred but not reported claims.

There is normally a time lag between when a loss event occurs and when it is reported to us. The actuarial methods that we use to estimate losses have been designed to address the lag in loss reporting as well as the delay in obtaining information that would allow us to more accurately estimate future payments. There is also often a time lag between cedents establishing case reserves or re-estimating their reserves and notifying us of those new or revised case reserves. As a result, the reporting lag is more pronounced in our reinsurance contracts than in our insurance contracts. On reinsurance transactions, the reporting lag will generally be 60 to 90 days after the end of a reporting period but can be longer in some cases. There may also be a more pronounced reporting lag, as well as reliance on third-party claims handling practices and reserve estimates, on insurance contracts for which we are not the primary insurer and participate only in excess layers of loss. Based on the experience of our actuaries and management, we select loss development factors and trending techniques to mitigate the difficulties caused by reporting lags. At least annually, we evaluate our loss development factors and trending assumptions using our own loss data, as well as cedent-specific and industry data, and update them as needed.

U.S. GAAP requires that IBNR reserves be based on the estimated ultimate cost of settling claims, including the effects of inflation and other social and economic factors, using past experience adjusted for current trends and any other factors that would modify past experience. IBNR reserves are calculated by subtracting paid losses and loss adjustment expenses and case reserves from estimated ultimate losses and loss adjustment expenses. IBNR reserves were 72% of total unpaid losses and loss adjustment expenses at December 31, 2023 compared to 70% at December 31, 2022.

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The following table summarizes case reserves and IBNR reserves for our underwriting, program services and other fronting operations, which excludes $185.0 million and $347.9 million of fully collateralized reserves attributable to Markel CATCo Re as of December 31, 2023 and December 31, 2022, respectively. The amounts in the following table exclude the unamortized portion of any fair value adjustments for unpaid losses and loss adjustment expenses assumed in conjunction with an acquisition and any adjustments to discount reserves.

(1)    Substantially all of the premium written in our program services and other fronting business is ceded, resulting in reinsurance recoverables on unpaid losses of $5.2 billion as of both December 31, 2023 and 2022.

Each quarter, our actuaries prepare estimates of the ultimate liability for unpaid losses and loss adjustment expenses based on established actuarial methods. Management reviews these estimates, supplements the actuarial analyses with information provided by claims, underwriting and other operational personnel and determines its best estimate of loss reserves, which is recorded in our consolidated financial statements. Our procedures for determining the adequacy of loss reserves at the end of the year are substantially similar to the procedures applied at the end of each interim period.

Any adjustments to reserves resulting from our interim or year-end reviews, including changes in estimates, are recorded as a component of losses and loss adjustment expenses in the period of the change. Reserve changes that increase previous estimates of ultimate claims cost are referred to as unfavorable or adverse development, or reserve strengthening. Reserve changes that decrease previous estimates of ultimate claims cost are referred to as favorable development.

Program Services and Other Fronting

For our program services business and other fronting arrangements, case reserves are generally established based on reports received from the general agents or reinsurers with whom we do business. Our actuaries review the case loss reserve data received for sufficiency, consistency with historical data and for consistency with other programs we write that have similar characteristics. Ultimate losses and loss adjustment expenses are calculated using either our program experience or, where the program data is not credible, industry experience for similar products or lines of business. Substantially all of the premium written in our program services business and other fronting arrangements is ceded, and net reserves for unpaid losses and loss adjustment expenses as of December 31, 2023 and December 31, 2022 were $10.1 million and $10.0 million, respectively.

Underwriting

For our insurance operations, we are generally notified of insured losses by our insureds, their brokers or the primary insurer in instances in which we participate in excess layers of insured losses on a contract. Based on this information, we establish case reserves by estimating the expected ultimate losses from the claim, including any administrative or legal costs associated with settling the claim. Our claims personnel use their knowledge of the policy provisions and details specific to the claim, along with information provided by internal and external experts, including underwriters, actuaries and legal counsel, to estimate the expected ultimate losses.

For our reinsurance operations, case reserves are generally established based on reports received from ceding companies or their brokers. For excess of loss contracts, we are typically notified of insurance losses on specific contracts and record a case reserve for the estimated expected ultimate losses from the claim. For quota share contracts, we typically receive aggregated claims information and record a case reserve based on that information. As with insurance business, we evaluate this information and estimate the expected ultimate losses.

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Our liabilities for unpaid losses and loss adjustment expenses can generally be categorized into two distinct groups, short-tail business and long-tail business. Short-tail business refers to lines of business, such as property, accident and health, automobile, watercraft and marine hull exposures, for which losses are usually known and paid shortly after the loss actually occurs. Long-tail business refers to lines of business for which specific losses take much longer to emerge and may not be known and reported for some time. Given the time frame over which long-tail exposures are ultimately settled, there is greater uncertainty and volatility in these lines than in short-tail lines of business. Our long-tail coverages consist of most casualty lines, including professional liability, products liability, general and excess liability and excess and umbrella exposures, as well as workers' compensation insurance, many of which have been a significant source of growth in premium volume in recent years. Some factors that contribute to the uncertainty and volatility of long-tail business, and thus require a significant degree of judgment in the reserving process, include the effects of unanticipated levels of economic inflation, the impact of social inflation, the inherent uncertainty as to the length of reporting and payment development patterns, the possibility of judicial interpretations or legislative changes, including changes in workers' compensation benefit laws, that might impact future loss experience relative to prior loss experience and the potential lack of comparability of the underlying data used in performing loss reserve analyses.

Our ultimate liability may be greater or less than current reserves. Changes in our estimated ultimate liability for loss reserves generally occur as a result of the emergence of unanticipated loss activity, the completion of specific actuarial or claims studies or changes in internal or external factors. We closely monitor new information on reported claims and use statistical analyses prepared by our actuaries to evaluate the adequacy of our recorded reserves. We are required to exercise considerable judgment when assessing the relative credibility of loss development trends. Our philosophy is to establish loss reserves that are more likely redundant than deficient. This means that we seek to establish loss reserves that will ultimately prove to be adequate. As a result, if new information or trends indicate an increase in frequency or severity of claims in excess of what we initially anticipated, we generally respond quickly and increase loss reserves. If, however, frequency or severity trends are more favorable than initially anticipated, we often wait to reduce our loss reserves until we can evaluate experience in additional periods to confirm the credibility of the trend. In addition, for long-tail lines of business, trends develop over longer periods of time, and as a result, we give credibility to these trends more slowly than for short-tail or less volatile lines of business.

Actuarial Methods and Analysis

In establishing our liabilities for unpaid losses and loss adjustment expenses, our actuaries estimate an ultimate loss ratio, by accident year or underwriting year, for each of our product lines with input from our underwriting and claims personnel. For product lines in which loss reserves are established on a underwriting year basis, we have developed a methodology to convert from underwriting year to accident year for financial reporting purposes. In estimating an ultimate loss ratio for a particular line of business, our actuaries may use one or more actuarial reserving methods and select from these a single point estimate. To varying degrees, these methods include detailed statistical analysis of past claim reporting, settlement activity, claim frequency and severity, policyholder loss experience, industry loss experience and changes in market and economic conditions, policy forms and exposures. The actuarial methods we use include:

Initial Expected Loss Ratio Method – This method multiplies earned premiums by an expected loss ratio. The expected loss ratio is selected utilizing industry data, our historical data, frequency-severity and rate level forecasts and professional judgment.

Paid Loss Development – This method uses historical loss payment patterns to estimate future loss payment patterns. Our actuaries use the historical loss patterns to develop factors that are applied to current paid loss amounts to calculate expected ultimate losses.

Incurred Loss Development – This method uses historical loss reporting patterns to estimate future loss reporting patterns. Our actuaries use the historical loss patterns to develop factors that are applied to current reported losses to calculate expected ultimate losses.

Bornhuetter-Ferguson Paid Loss Development – This method divides the projection of ultimate losses into the portion that has already been paid and the portion that has yet to be paid. The portion that has yet to be paid is estimated as the product of three amounts: the premium earned for the exposure period, the expected loss ratio and the estimated percentage of ultimate losses that are still unpaid. The expected loss ratio is selected by considering historical loss ratios, adjusted for any known changes in pricing, loss trends, adequacy of case reserves, changes in administrative practices and other relevant factors.

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Bornhuetter-Ferguson Incurred Loss Development – This method is identical to the Bornhuetter-Ferguson paid loss development method, except that it uses the estimated percentage of ultimate losses that are still unreported, instead of the estimated percentage of ultimate losses that are still unpaid.

Frequency/Severity – Under this method, expected ultimate losses are equal to the product of the expected ultimate number of claims and the expected ultimate average cost per claim. Our actuaries use historical reporting patterns and severity patterns to develop factors that are applied to the current reported amounts to calculate expected ultimate losses.

Other Methods – There are certain instances when traditional actuarial methods may not be appropriate for estimating unpaid losses and loss adjustment expenses. In these instances, we may employ other actuarial methods.

Each actuarial method has its own set of assumptions and its own strengths and limitations, with no one method being better than the others in all situations. Our actuaries select the reserving methods that they believe will produce the most reliable estimates for the class of business being evaluated. Greater judgment may be required when we introduce new product lines or when there have been changes in claims handling practices, as the statistical data available may be insufficient. In these instances, we may rely upon assumptions applied to similar lines of business, rely more heavily on industry experience, take into account changes in underwriting guidelines and risk selection or review the impact of changes in claims reserving practices with claims personnel. Greater judgment also may be required for product lines that experience a low frequency of high severity claims, particularly when we are reliant on third party case reserve estimates and claims handling practices. In these instances, we may perform detailed claims reviews, analyzing the characteristics of each individual claim, with input from both actuarial and claims personnel to assess the adequacy of the case and IBNR reserves on the underlying product line. Our claims personnel use their knowledge of the specific claims along with internal and external experts, to estimate the expected ultimate losses. While we use our best judgment in establishing our estimate for loss reserves, applying different assumptions and variables could lead to significantly different loss reserve estimates.

A key assumption in most actuarial analyses is that past development patterns will repeat themselves in the future, absent a significant change in internal or external factors that influence the ultimate cost of our unpaid losses and loss adjustment expenses. Our estimates reflect implicit and explicit assumptions regarding the potential effects of external factors, including economic and social inflation, judicial decisions, changes in law, general economic conditions and recent trends in these factors. Our actuarial analyses are based on statistical analysis but also consist of reviewing internal factors that are difficult to analyze statistically, including changes in underwriting and claims handling practices, as well as rate changes. In the London market, and where we act as a reinsurer or participate only in excess layers of insured losses, the timing and amount of information reported about underlying claims are in the control of third parties. This can also affect estimates and require re-estimation as new information becomes available.

We cannot estimate losses from widespread catastrophic events, such as hurricanes and earthquakes, as well as pandemics and wars, using the traditional actuarial methods previously described. In the initial months after a catastrophic event occurs, our actuaries estimate losses and loss adjustment expenses based on claims received to date, industry loss estimates and output from industry, broker and proprietary models, as well as analysis of our ceded reinsurance contracts. We may also perform detailed policy and reinsurance contract level reviews. The availability of data from these procedures varies depending on the timing of the event relative to the point at which we develop our estimate. We also consider loss experience on historical events that may have similar characteristics to the underlying event and current market conditions, including the level of economic inflation. In the period shortly after an event occurs, more weight is put on modeling and industry estimates, whereas with the passage of time, greater reliance is placed on incurred claims data and historical claim patterns. Due to the inherent uncertainty in estimating such losses, these estimates are subject to variability, which increases with the severity and complexity of the underlying event. As additional claims are reported and paid, and industry loss estimates are revised, we incorporate this new information into our analysis and adjust our estimate of ultimate losses and loss adjustment expenses as appropriate.

Management's Best Estimate

Loss reserves are established at management's best estimate, which is developed using the actuarially calculated point estimate as the starting point. The actuarial point estimate represents our actuaries' estimate of the most likely amount that will ultimately be paid to settle the losses that have occurred at a particular point in time; however, there is inherent uncertainty in the point estimate as it is the expected value in a range of possible reserve estimates. Similarly, the point estimate for ceded losses is calculated based on the ultimate gross loss amount expected to be paid, as well as the frequency and severity of the underlying claims, which ultimately determines coverage under the applicable ceded reinsurance contracts. Therefore, ceded loss estimates are subject to many of the same judgments and assumptions as the gross loss estimates. In some cases, actuarial

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analyses, which are generally based on statistical analysis, cannot fully incorporate all of the subjective factors that affect development of losses. In other cases, management's perspective of these more subjective factors may differ from the actuarial perspective. Subjective factors influencing the development of management's best estimate include: the credibility and timeliness of claims and loss information received from cedents and other third parties; and the impacts of economic and social inflation, judicial decisions, changes in law, changes in underwriting or claims handling practices, general economic conditions, the risk of moral hazard and other current and developing trends within the insurance and reinsurance markets, including the effects of competition. For example, our loss experience in recent years has reflected higher than anticipated levels of economic inflation, as well as the impacts of social inflation, including the rising cost to adjust and settle claims and the impact of more pervasive litigation financing trends.

In developing its best estimate of loss reserves, management's philosophy is to establish loss reserves that are more likely to be redundant rather than deficient, and therefore, will ultimately prove to be adequate. Management's approach to establishing loss reserves typically results in loss reserves that exceed the calculated actuarial point estimate. Management also considers the range, or variability, of reasonably possible loss outcomes determined by our actuaries when establishing its best estimate for loss reserves. The actuarial ranges represent our actuaries' estimate of a likely lowest amount and likely highest amount that could ultimately be paid to settle the losses that have occurred at a particular point in time. The range determinations are based on estimates and actuarial judgements and are intended to encompass reasonably likely changes in one or more of the factors that were used to determine the point estimates. Using statistical models, our actuaries establish a range of reasonable reserve estimates for each of our underwriting segments. Additionally, following an acquisition of insurance operations, acquired reserves initially are recorded at fair value, and therefore our recorded loss reserves may be closer to the actuarial point estimate until we build total loss reserves that are consistent with our historic level of confidence. Management's best estimate of net reserves for unpaid losses and loss adjustment expenses exceeded the actuarially calculated point estimate by $683.4 million, or 5.0%, at December 31, 2023, compared to $688.4 million, or 5.8%, at December 31, 2022.

The difference between management's best estimate and the actuarially calculated point estimate in both 2023 and 2022 is primarily associated with our long-tail business due to the subjective factors previously described that affect the development of losses. The decrease in 2023 resulted from significant strengthening of reserves following increases in our actuaries' best estimate of ultimate losses on certain general liability and professional liability product lines, which management believes already considers the subjective factors that may impact the development of underlying losses on the impacted product lines. Certain subjective factors, particularly the credibility and timeliness of claims information, are more pronounced within our reinsurance operations, as previously discussed, and therefore, the percentage difference between management's best estimate and the actuarially calculated point estimate is more significant in our Reinsurance segment than our Insurance segment.

Changes in Estimates

Loss frequency and loss severity are two key measures of loss activity that often result in adjustments to actuarial assumptions relative to ultimate loss reserve estimates. Loss frequency measures the number of claims per unit of insured exposure. When the number of newly reported claims is higher than anticipated, loss reserves are generally increased. Conversely, loss reserves are generally decreased when fewer claims are reported than expected. Loss severity measures the average size of a claim. When the average severity of reported claims is higher than originally estimated, loss reserves are typically increased. When the average claim size is lower than anticipated, loss reserves are typically decreased.

Our underwriting results in 2023 included $38.6 million of net favorable development on prior years loss reserves compared to $167.4 million in 2022. Favorable development on prior years loss reserves in 2023 and 2022 reflected significant favorable loss experience across several product lines, largely offset by adverse development on certain long-tail general liability and professional liability product lines following the emergence of multiple factors that impacted the claims and loss trends on those lines.

Favorable development in 2023 was most notable on our property, international professional liability, marine and energy and workers' compensation product lines. Favorable development in 2022 was most significant on our property and workers' compensation product lines. Favorable development on our property product lines in 2023 and 2022 was driven by lower loss severity than previously anticipated, as well as net favorable development on our reserves for natural catastrophes that occurred in prior years. On our workers' compensation product line, the actuarial methods we used indicated a continued decline in the loss severity trend on prior accident years in 2023 and 2022, consistent with our experience in recent years. Within our international operations, our professional liability and marine and energy product lines experienced lower loss severity than initially expected. As actual losses on these product lines continued to be lower than anticipated in 2023 and 2022, it became more likely that the underwriting results would prove to be better than originally estimated. Management gave greater credibility to the favorable trends experienced on earlier accident years and upon incorporating these favorable trends

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into its best estimate, reduced prior years loss reserves on more recent accident years accordingly. While we believe it is likely that there will be additional favorable development on prior years loss reserves in 2024, we caution readers not to place undue reliance on this favorable trend.

The favorable development in 2023 and 2022 was largely offset by adverse development on certain long-tail general liability and professional liability product lines. Beginning in the latter half of 2022, select lines within our U.S. and Bermuda general liability and professional liability portfolio were impacted by consecutive quarters of unfavorable loss cost trends and increased claim frequency and severity, resulting in adverse development on these lines in both 2023 and 2022.

Net favorable development in 2022 was net of $128.5 million of adverse development on our U.S. and Bermuda professional liability and general liability product lines within our Insurance segment, which was primarily attributable to unfavorable claim settlements and increased claim frequency and severity on the 2016 to 2019 accident years. The adverse development was across a number of products, including directors and officers, errors and omissions and employment practices liability within professional liability and contractors and excess and umbrella within general liability. Development on prior years loss reserves within our U.S. and Bermuda professional liability and general liability product lines in 2022 was impacted by broader market conditions. The impact of economic and social inflation, including the rising cost to adjust and settle claims and the impact of more pervasive litigation financing trends, has contributed to the loss cost trends, leading to higher than anticipated losses in older accident years for these products lines. The impacts of social inflation were most significant on our large, risk-managed excess professional liability accounts, corresponding with a notable rise in the number of class action lawsuits on these years and the recent unfavorable legal environment. The development of this claims trend was influenced by state and federal court closures following the onset of the COVID-19 pandemic in 2020, which delayed court proceedings for claims on the impacted product lines.

In 2023, we continued to see an increased frequency of large claims and unfavorable loss cost trends on certain of our U.S. and Bermuda general liability and professional liability product lines. In response to consecutive quarters of adverse loss 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. Adverse development in 2023 on our U.S. and Bermuda general liability and professional liability product lines within our Insurance segment totaled $330.7 million. This adverse development was most substantial on our primary casualty contractors' liability and excess and umbrella general liability product lines.

A significant portion of our casualty portfolio is associated with construction business, which has grown meaningfully in recent years. Our study determined that the ultimate claim reporting tail on certain of our casualty construction lines is likely to be longer than we initially anticipated. Within our excess and umbrella general liability and risk-managed errors and omissions professional liability books, we determined that there was a greater than expected propensity for limits below our attachment point to erode, pushing more claims into our layers. Further, reporting of these claims has lagged historical loss development patterns due to the effect of court closures and claims backlogs arising from the COVID-19 pandemic, in addition to aggressive tactics by the plaintiffs' bar and delayed claims reporting trends. Although we have achieved significant rate increases since 2019 on many of these lines in response to heightened loss trends, the findings of our study led us to increase our loss development factors, and therefore our estimate of the ultimate loss ratios, on our primary casualty contractors' liability, excess and umbrella general liability and risk-managed errors and omissions professional liability product lines. This resulted in significant strengthening of reserves on the impacted lines, including on the 2020 to 2022 accident years, where we determined that the incurred loss trends are following a similar loss development trend at the same stage as older accident years.

Additionally, we experienced $149.2 million of adverse development on our general liability and public entity product lines within our Reinsurance segment. Adverse development on our general liability product lines was primarily attributable to large reported claims and adverse loss development trends across multiple accident years. Substantially all of the adverse development on our public entity product line was attributable to a segment of this business that we discontinued writing in 2020, which experienced an increased frequency of large claims over the past several quarters, most significantly on the 2014 to 2019 accident years. Adverse development on both our general liability and public entity product lines included notable strengthening as a result of actions taken in the fourth quarter in response to changes in loss trends observed in the reserve study and the expectation that those loss trends will ultimately emerge within comparable reinsurance product lines.

The loss trends observed over the past two years have created more uncertainty around the ultimate losses that will be incurred to settle claims on these longer-tail product lines. Consistent with our reserving philosophy, we are responding quickly to increase loss reserves following any indication of increased claims frequency or severity in excess of our previous expectations, whereas in instances where claims trends are more favorable than we previously anticipated, we are often

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waiting to reduce loss reserves and will evaluate our experience over additional periods of time. For those lines in which we strengthened reserves, although we believe the gross and net reserves are adequate based on information available at this time, we continue to closely monitor reported claims, claim settlements, ceded reinsurance contract attachments and judicial decisions, among other things, and may adjust our estimates as new information becomes available.

Changes in prior years loss reserves, including the trends and factors that impacted loss reserve development in 2023 and 2022, as well as further details regarding the historical development of reserves for losses and loss adjustment expenses and changes in assumptions used to calculate reserves for unpaid losses and loss adjustment expenses are discussed in further detail in note 11 of the notes to consolidated financial statements included under Item 8.

Actuarial Ranges

The following table summarizes our reserves for net unpaid losses and loss adjustment expenses and the actuarially established high and low ends of a range of reasonable reserve estimates at December 31, 2023. This table excludes the fully collateralized reserves attributable to Markel CATCo Re. As described in note 11 of the notes to consolidated financial statements included under Item 8, unpaid losses and loss adjustment expenses attributable to acquisitions are recorded at fair value as of the acquisition date, which generally consists of the present value of the expected net loss and loss adjustment expense payments plus a risk premium. The net loss reserves presented in this table represent our estimated future payments for losses and loss adjustment expenses, whereas the reserves for unpaid losses and loss adjustment expenses included on the consolidated balance sheet include the unamortized portion of fair value adjustments recorded in conjunction with an acquisition.

(1)    Due to the actuarial methods used to determine the separate ranges for each component of our business, it is not appropriate to aggregate the high or low ends of the separate ranges to determine the high and low ends of the actuarial range on a consolidated basis.

Undue reliance should not be placed on these ranges of estimates as they are only one of many points of reference used by management to determine its best estimate of ultimate losses. Further, actuarial ranges may not be a true reflection of the potential variability between loss reserves estimated at the balance sheet date and the ultimate cost of settling claims. Similar to the development of our estimate of ultimate losses, actuarial ranges are developed based on known events as of the valuation date, while ultimate paid losses are subject to events and circumstances that are unknown as of the valuation date.

During the years ended December 31, 2023 and 2022, we experienced favorable development on prior years loss reserves of 0.3% and 1.5%, respectively, of beginning of year net loss reserves. The magnitude of our historical trend of favorable loss reserve development, which ranged from 4.6% to 6.4% of beginning of year net loss reserves over the preceding five years, was disrupted in 2022 and 2023 as a result of the emergence of multiple factors that impacted the claims and loss trends on certain of our general liability and professional liability product lines, which resulted in net adverse loss development within the select product lines previously discussed. The impacts of economic and social inflation, among other factors previously discussed, have also created more uncertainty around the ultimate losses that will be incurred to settle claims on our longer-tail product lines. As a result, in instances where claims trends are more favorable than we previously anticipated we are approaching reductions to prior year loss reserves years cautiously. It is difficult for management to predict the duration and magnitude of a trend and, on a relative basis, it is even more difficult to predict the emergence of factors or trends that are unknown today but may have a material impact on loss reserve development. In assessing the likelihood of whether the trends previously discussed will continue and whether other trends may develop, we believe that a reasonably likely movement in prior years loss reserves during 2024 would range from adverse development of 1%, or $150 million, to favorable development of 5%, or $700 million, of December 31, 2023 net loss reserves.

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Goodwill and Intangible Assets

Our consolidated balance sheet as of December 31, 2023 included goodwill and intangible assets of $4.2 billion as follows:

(1)    Amounts included in Other reflect our operations that are not included in a reportable segment, including our program services and our insurance-linked securities operations.

Goodwill and intangible assets are recorded as a result of business acquisitions. Goodwill represents the excess of the amount paid to acquire a business over the net fair value of assets acquired and liabilities assumed at the date of acquisition. Indefinite-lived and other intangible assets are recorded at fair value as of the acquisition date. The determination of the fair value of certain assets acquired, including goodwill and intangible assets, and liabilities assumed involves significant judgment and the use of valuation models and other estimates, which require assumptions that are inherently subjective. We did not make any significant acquisitions during the years ended December 31, 2023 or 2022.

Intangible assets with definite lives are reviewed for impairment when events or circumstances indicate that their carrying value may not be recoverable. Goodwill and indefinite-lived intangible assets are tested for impairment annually, or when events or circumstances indicate that their carrying value may not be recoverable. A significant amount of judgment is required in performing impairment tests, including the optional assessment of qualitative factors for the annual impairment test, which is used to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This assessment serves as a basis for determining whether it is necessary to perform a quantitative impairment test. We completed our annual tests for impairment as of October 1, 2023 based upon results of operations through September 30, 2023. We elected to perform a quantitative assessment for one of our reporting units and a qualitative assessment for all of our other reporting units.

We performed a quantitative impairment assessment for one of our Markel Ventures reporting units, in which we estimated the fair value of the reporting unit using an income approach based on a discounted cash flow model. The cash flow projections included management's best estimate of future growth and margins. The discount rate was primarily based on a capital asset pricing model. Based on the results of our quantitative assessment, the estimated fair value of the reporting unit exceeded the carry value.

When performing our qualitative assessments, we considered macroeconomic factors such as industry conditions and market conditions. We also considered reporting unit-specific events, actual financial performance versus expectations and management's future business expectations, as well as the amount by which the fair value of the reporting unit exceeded its carrying value at the date of the last quantitative assessment. As part of our qualitative assessment of recently acquired reporting units with material goodwill, we considered the fact that the businesses had been acquired in orderly transactions between market participants, and our purchase price represented fair value at acquisition. We considered similar factors to determine if there were any indicators requiring an assessment of the recoverability of our definite lived intangible assets and concluded there were not. For recent acquisitions for which we elected to perform a qualitative assessment, there were no events since acquisition that had a significant adverse impact on the fair value of these reporting units through the assessment date. Based on the results of our qualitative assessments, we believe it is more likely than not that the fair value of each of the assessed reporting units exceeded its respective carrying amount.

Based on the results of our assessments, there were no impairments of goodwill in 2023, and none of our reporting units are at risk of a material impairment of goodwill. Additionally, there were no significant events or changes in circumstances impacting our reporting units between the assessment date and December 31, 2023. However, deterioration of market conditions related to the general economy or the specific industries in which we operate, a sustained trend of weaker than anticipated financial performance within a reporting unit beyond that which we considered or included in our assessments, or an increase in the market-based weighted average cost of capital, among other factors, could impact the impairment analysis and may result in future goodwill or intangible asset impairment charges.

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See the risk factor titled "Impairment in the value of our goodwill or other intangible assets could have a material adverse effect on our operating results and financial condition" within Item 1A Risk Factors for further discussion of risks associated with our goodwill and intangible assets.

We performed a quantitative impairment assessment for our Nephila reporting unit in 2022. Based on the results of the assessment, we reduced the carrying value of the goodwill of our Nephila reporting unit by $80.0 million to $221.8 million. We also evaluated our intangible assets within our Nephila reporting unit for impairment and determined they were not impaired. See note 8 of the notes to consolidated financial statements for further details.

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 Item 1 Business, Item 1A Risk Factors, Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 7A Quantitative and Qualitative Disclosures About Market Risk in this report or are included in the items listed below:

•the effect of cyclical trends or changes in market conditions on our underwriting, investing, Markel Ventures and other operations, including demand and pricing in the insurance, reinsurance and other markets in which we operate;

•actions by competitors, including the use of technology and innovation to simplify the customer experience, increase efficiencies, redesign products, alter models and 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, regulatory risk, increased expenditures);

•the frequency and severity of man-made, health-related and natural catastrophes may exceed expectations, are unpredictable and, in the case of some natural catastrophes, may be exacerbated by changing conditions in the climate, oceans and atmosphere, resulting in increased frequency and/or severity of extreme weather-related events;

•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;

•emerging claim and coverage issues, changing industry practices and evolving legal, judicial, social and other claims and coverage trends or conditions, can increase the scope of coverage, the frequency and severity of claims and the period over which claims may be reported; these factors, as well as 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 changes in our estimated loss reserves for that business;

•adverse developments in insurance coverage litigation or other legal or administrative proceedings could result in material increases in our estimates of loss reserves;

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•initial estimates for catastrophe losses and other significant, infrequent events are often based on limited information, are dependent on broad assumptions about the nature and extent of losses, coverage, liability and reinsurance, and those losses may ultimately differ materially from our expectations;

•changes in the availability, costs, quality and providers of reinsurance coverage, which may impact our ability to write or continue to write certain lines of 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, and collateral we hold, if any, may not be sufficient to 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, changes in U.S. government debt ratings 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 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, inflation and other 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 of liability, transaction and physical risks associated with climate change;

•the significant volatility, uncertainty and disruption caused by health epidemics and pandemics, as well as governmental, legislative, judicial or regulatory actions or developments in response thereto;

•changes in U.S. tax laws, regulations or interpretations, or in the tax laws, regulations or interpretations of other jurisdictions in which we operate, and adjustments we may make in our operations or tax strategies in response to those changes;

•a failure or security breach of, or cyberattack on, enterprise information technology systems that we, or third parties who perform certain functions for us, use or a failure to comply with data protection or privacy regulations;

•third-party providers may perform poorly, breach their obligations to us or expose us to enhanced risks;

•our acquisitions may increase our operational and internal 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 senior executive or other key personnel, or an inability to attract and retain qualified personnel, for our businesses 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, civil, operational and economic risks, including foreign currency exchange rate and credit risk;

•our ability to obtain additional capital for our operations on terms favorable to us;

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•the compliance, or failure to comply, with covenants and other requirements under our credit facilities, senior debt and other indebtedness and our preferred shares;

•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 future 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, debt or preferred share 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, commercial and industrial construction markets; liability for environmental matters; supply chain and shipping issues, including increases in freight costs; volatility in the market prices for their products; and volatility in commodity, wholesale and raw materials prices and interest and foreign currency exchange rates.

Results from our underwriting, investing, Markel Ventures and other operations have been and will continue to be potentially materially affected by these factors.

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 are based on our current knowledge and speak only as at their dates.

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