MARKEL GROUP INC. (MKL) FY 2024 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 2023 to 2024 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 2022 to 2023 may be found in Part II Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K, which was filed with the U.S. Securities and Exchange Commission on February 23, 2024.

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, 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 operating income and comprehensive income to shareholders.

The increase in comprehensive income to shareholders in 2024 compared to 2023 was primarily due to pre-tax net investment gains of $1.8 billion on our equity securities in 2024 compared to $1.6 billion in 2023.

The components of comprehensive income to shareholders are discussed in further detail under "Insurance Results," "Investing Results," "Markel Ventures Results," "Other" and "Other Comprehensive Income (Loss) to Shareholders."

Insurance Results

Our Insurance operations include our underwriting, program services 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 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 ILS operations produce revenues primarily through fees earned for fronting services and investment management services. 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, and the results of our run-off life and annuity reinsurance business.

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The following table presents the components of our Insurance operations gross premium volume and operating revenues.

(1)    Substantially all gross premiums from our fronting operations were ceded to third parties for the years ended December 31, 2024 and 2023.

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. Due to the unique characteristics of these events, there is inherent variability as to the timing or amount of the loss, 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 typically 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 in most cases 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. 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 fronting operations.

(1)    Amounts may not reconcile due to rounding.

(2)    The point impact of catastrophes 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 2024 was driven by growth within both of our underwriting segments. Our gross premium volume growth moderated in 2024 as a result of corrective underwriting actions taken and our focus on pursuing business that we feel is adequately priced. We remain cautious in our selection of risks and are allowing business to lapse where we believe rates are inadequate.

In 2024, we continued to achieve modest rate increases across our diversified product portfolio. The primary exceptions, where we are seeing modest rate decreases, are within our workers' compensation, risk-managed professional liability, cyber and international energy portfolios, which is consistent with the broader market trends in these product classes. We examine each of our product classes regularly by evaluating pricing and exposure, underwriting terms and conditions, deal structure, including limits and attachment points, and our expectations around loss cost trends, among other things. We target premium growth only in product lines where we are most confident in the levels of rate adequacy.

We achieved rate increases within our personal lines and select marine and energy product lines throughout 2024, and we believe these product lines continue to be priced at a level that will earn appropriate returns on capital. As a result, we are continuing to increase our premium writings in these lines. Our property product lines achieved rate increases at the beginning of 2024 before softening during the year and turning slightly negative in the second half of 2024. Additionally, we achieved high single digit rate increases within many of our general liability product lines with U.S. exposures, and these rate increases are generally in line with, or better than, our assumptions on loss cost trends. We are being cautious in selecting which risks to pursue and how much limit to deploy within certain subclasses of our general liability portfolio as we rebalance our general liability portfolio and focus on growth in areas of the portfolio that we project will meet our profitability requirements.

Within our professional liability product lines, we saw modest rate decreases driven by the continued rate decreases within our risk-managed professional liability product lines. Within these lines, we are contracting our new premium writings and reducing limits deployed and are also allowing business to lapse when we believe rates are inadequate. In other professional liability product lines, particularly within our international portfolio and our U.S. commercial products, we are generally seeing small rate decreases; however, we believe these pockets of the portfolio are adequately priced overall, and we are continuing to pursue growth opportunities.

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Net retention of gross premium volume for our underwriting operations was 79% in 2024 compared to 82% in 2023. The decrease was driven by lower retention 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 2024 was primarily attributable to higher gross premium volume in recent periods.

Combined Ratio

Excluding losses attributed to natural catastrophes, the improvement in our consolidated combined ratio was primarily attributable to more favorable development on prior accident years loss reserves in 2024 compared to 2023 within our Insurance segment.

Natural Catastrophes

In 2024, underwriting results included $70.6 million of net losses and loss adjustment expenses attributed to Hurricane Helene and Hurricane Milton (2024 Catastrophes). The net losses and loss adjustment expenses from the 2024 Catastrophes were net of ceded losses of $60.4 million. In 2023, underwriting results included $40.1 million of net losses and loss adjustment expenses attributed to 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. The net losses and loss adjustment expenses attributed to the 2024 Catastrophes as of December 31, 2024 represent our best estimate based upon information currently available. Our estimate for these losses is based on industry loss estimates and output from industry, broker and proprietary models, as well as policy level reviews and analysis of ceded reinsurance contracts. This estimate is based on various assumptions about coverage and liability and is therefore subject to change. While we believe our net reserves for the 2024 Catastrophes as of December 31, 2024 are adequate, we continue to closely monitor reported claims and may adjust our estimate of net losses as new information becomes available.

In January 2025, there was a series of wildfires in southern California. Based on information currently available, we estimate our range of underwriting losses, including the impact of reinstatement premiums, from these events to be between $90 million and $130 million, before income taxes. This estimated range of losses was derived based on a review of in-force contracts and an analysis of ceded reinsurance contracts, as well as preliminary industry loss estimates. Due to the inherent uncertainty associated with the nature of these wildfire events and limited claims activity, our underwriting loss estimates are subject to a wide range of variability. We will refine our estimate of net losses, which will be recorded in the first quarter of 2025, as more details about these events and actual level of claims emerge.

Intellectual Property Collateral Protection Insurance

In 2024 and 2023, we recognized losses on our discontinued intellectual property collateral protection insurance (IP CPI) product in our Insurance segment. The following table summarizes the losses recognized and their impact on our Insurance segment and consolidated combined ratios.

(1)    The impact on the combined ratio is calculated as associated net losses and loss adjustment expenses divided by total Insurance segment or consolidated earned premiums, as applicable. Amounts may not reconcile due to rounding. Earned premiums on our IP CPI product for the years ended December 31, 2024 and 2023 were not material.

(2)    Current accident year losses and loss adjustment expenses for the year ended December 31, 2023 included $65.0 million of credit losses in connection with a fraudulent letter of credit that was provided by an affiliate of Vesttoo Ltd. as collateral for reinsurance purchased on one of the policies that resulted in a claim.

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Beginning in the second half of 2023, we began to observe higher than expected levels of defaults on loans collateralized by intellectual property, for which we provide coverage to the lenders through our IP CPI product line. Furthermore, for loans that are in default, the intellectual property that serves as security for the loans has proven to be less valuable than we initially anticipated.

In response to these adverse developments and the product's ultimate inability to meet our profitability targets, we discontinued writing this product at the beginning of 2024. However, we have continued to recognize losses on our IP CPI product line in 2024 as additional claim events occurred, which result from both a default on the loan and impairment of the underlying intellectual property. As of December 31, 2024, all losses on probable claims have been recognized, however, we believe the potential for additional claims in 2025 is reasonably possible, and such amounts could be material to our results of operations and cash flows. However, we believe the amount of such losses in 2025 is likely to be less than what we recognized in 2024.

Insurance Segment

(1)    Amounts may not reconcile due to rounding.

(2)    The point impact of catastrophes 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 2024 was driven by new business growth and more favorable rates within our personal lines, programs, marine and energy and credit and surety product lines, partially offset by lower premium volume within select lines of our U.S. general liability and professional liability product lines. Gross premium volume within our U.S. general liability and professional liability product lines decreased $317.2 million in 2024 compared to 2023, which reflects decreased writings within our brokerage contractors, brokerage excess and umbrella and risk-managed excess casualty general liability products and our risk-managed professional liability products as part of targeted underwriting actions aimed at achieving greater profitability within these product lines.

Net retention of gross premium volume was 77% in 2024 compared to 81% in 2023. The decrease was driven by higher cession rates on our professional liability product lines in 2024 compared to 2023, as well as changes in mix of business as we decreased writings on select lines of our U.S. general liability product lines, which have lower cession rates than most other products within the segment. The increase in earned premiums in 2024 was primarily due to higher gross premium volume in recent periods.

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Combined Ratio

The Insurance segment's current accident year losses and loss adjustment expenses in 2024 included $67.2 million of net losses and loss adjustment expenses attributed to the 2024 Catastrophes. Current accident year losses in 2023 included $39.6 million of net losses and loss adjustment expenses attributed to the 2023 Catastrophes. Excluding these losses, the improvement in the current accident year loss ratio in 2024 compared to 2023 was primarily attributable to lower attritional loss ratios within our international product lines, largely offset by higher attritional loss ratios across our U.S. product lines, driven largely by our professional liability product lines. In 2024, we increased our attritional loss ratios on certain product classes within our U.S. professional liability product lines in response to unfavorable loss development trends in recent years and to include an increase in the level of caution on our U.S. professional liability and general liability product lines.

The Insurance segment's 2024 combined ratio included $451.0 million of favorable development on prior accident years loss reserves compared to $104.7 million in 2023. The increase in favorable development was primarily attributable to modest favorable development on our U.S. general liability product lines in 2024 compared to significant adverse development in 2023. In 2024, favorable development was primarily attributable to our international professional liability product lines, as well as our general liability, property, marine and energy, programs and credit and surety product lines. Favorable development in 2023 was primarily attributable to our property, marine and energy, international professional liability, personal lines and workers' compensation product lines, partially offset by adverse development on our U.S. general liability and professional liability product lines. 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.

The increase in the Insurance segment's expense ratio in 2024 was primarily attributable to higher personnel costs, including profit sharing expenses and investments in underwriting talent within our international operations, as well as other general and administrative expenses, including investments in technology across our global operations to drive future growth and operational efficiencies. The increase is also partially attributable to general cost inflation trends outpacing premium growth, as a result of the underwriting actions taken on our U.S. general liability and professional liability product lines, as previously discussed.

Reinsurance Segment

(1)    Amounts may not reconcile due to rounding.

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

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Premiums

The increase in gross premium volume in our Reinsurance segment in 2024 was driven by increases on renewals and new business within our marine and energy product lines, as well as new business and favorable timing differences on our workers' compensation product line. 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 90% in 2024 compared to 92% in 2023. The decrease in net retention was driven by the increased premium volume in our marine and energy business, which carries a higher cession rate than the rest of the segment. The increase in earned premiums in 2024 was primarily due to the impact of higher gross premium volume within our marine and energy and general liability product lines in recent periods, partially offset by unfavorable premium adjustments in 2024 compared to favorable premium adjustments 2023.

Combined Ratio

The increase in the Reinsurance segment's current accident year loss ratio in 2024 compared to 2023 was primarily due to higher attritional loss ratios, which we increased in response to recent loss development trends within our professional liability and general liability product lines and to include an increase in the level of caution on these product lines. The increase also includes the impact of unfavorable premium adjustments on prior accident years in 2024 compared to favorable premium adjustments on prior accident years in 2023, as well as large losses on our credit and surety product line in 2024.

The Reinsurance segment's 2024 combined ratio included $12.3 million of favorable development on prior accident years loss reserves, which was primarily attributable to our property, workers' compensation and professional liability product lines, partially offset by adverse development on our public entity product line. Adverse development on our public entity product line in 2024 totaled $34.1 million, or three points on the Reinsurance segment's combined ratio.

In 2023, the 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 $55.7 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 public entity product line in 2023 was due to increased frequency of large claims over several quarters on a segment of business that we discontinued writing in 2020. In 2024, we observed similar unfavorable claims trends across the remaining public entity contracts in the more recent accident years. In response to these adverse trends and the product's ultimate inability to meet our profitability targets, we discontinued writing the public entity product line in the fourth quarter of 2024.

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.

Other Insurance Operations

The following table presents the components of operating revenues and operating income attributable to our other insurance operations, which are not included in a reportable segment. We do not allocate amortization of acquired intangible assets to our operating segments, including our other insurance operations.

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

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

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

The following table summarizes gross premium volume fronted through our program services and ILS operations.

Program Services

Our program services operations represent the contribution to our insurance results from our State National division's fronting operations. The increase in operating revenues and gross premium volume from our program services operations in 2024 was attributable to expansion of existing programs and new business.

In 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

Our ILS operations represent the overall contribution to our insurance results from our Nephila division and are comprised of Nephila's fund management operations and its related fronting operations through which we earn ceding fees for premiums fronted by our underwriting subsidiaries on behalf of entities managed by Nephila. The increase in operating revenues from our ILS operations in 2024 was primarily attributable to the impact of a higher effective management fee rate in 2024 compared to 2023, as well as growth in premiums fronted. These increases were partially offset by $31.1 million of investment management fees recognized in 2023 upon the release of capital from side pocket reserves with no comparable activity in 2024. The increase in gross premium volume fronted through our ILS operations in 2024 was primarily due to growth of Nephila's property catastrophe and specialty programs.

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Underwriting

The underwriting operating loss in 2024 on our other insurance operations was primarily attributable to loss adjustment expenses related to asbestos and environmental exposures. Development on asbestos and environmental loss reserves is monitored separately from our ongoing underwriting operations and is not included in a reportable segment.

Investing Results

We measure our investment performance by analyzing net investment income, 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 significantly 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 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 results primarily relate to equity method investments in our Investing segment, which are managed separately from the rest of our investment portfolio.

Net investment income increased in 2024, primarily driven by higher interest income on fixed maturity securities due to a higher yield and higher average holdings during 2024 compared to 2023, as well as higher yields on cash and short-term investments. In 2024, we continued to allocate cash to money market funds, short-term investments and fixed maturity securities to take advantage of higher interest rates. See note 4(d) of the notes to consolidated financial statements included under Item 8 for details regarding the components of net investment income.

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Markel Ventures Results

We measure the operating performance of our Markel Ventures segment 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.

In June 2024, we acquired 98% of Valor Environmental (Valor), an environmental services company providing erosion control and related services to commercial development sites and homebuilders throughout the U.S. In September 2024, we acquired a 68% ownership interest in Educational Partners International (EPI), a company that sponsors international teachers for placements in schools in the U.S. Through December 2024, our investment in EPI was accounted for under the equity method, as we did not have control over the business due to pending regulatory approval. We received regulatory approval in January 2025 and will consolidate EPI beginning in the first quarter of 2025. See note 3 of the notes to consolidated financial statements included under Item 8 for additional details related to these acquisitions.

The following table summarizes the results from our Markel Ventures segment.

The increase in operating revenues in 2024 was driven by higher revenues at our consumer building products businesses due to a combination of higher prices, increased demand and the contribution from an acquisition made by one of these businesses in the first quarter of 2024. The increase in operating revenues also reflects the contribution from Valor and increased demand at our equipment manufacturing businesses. These increases in operating revenues were largely offset by the impact of decreased demand and lower prices across a number of our other businesses, most notably at one of our transportation-related businesses.

Segment operating income in 2024 was consistent with 2023. The impact of higher revenues and operating margins at our consumer and building products businesses and our equipment manufacturing businesses was offset by the impact of lower revenues and operating margins at one of our transportation-related businesses and lower operating margins at our construction services businesses.

Markel Ventures segment EBITDA is a non-GAAP financial measure. We use Markel Ventures segment 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 segment operating income to 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 its consolidated subsidiaries, and also summarizing the amounts recognized in the consolidated financial statements included under Item 8, unless otherwise noted.

(1)     Debt as of December 31, 2024 and 2023 included $788.0 million and $738.0 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 December 31, 2024 and 2023 included $1.6 billion and $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, 2024 and 2023 included intercompany interest expense of $27.7 million and $26.5 million, respectively, which was eliminated in consolidation.

(1)    Net cash used by financing activities for the year ended December 31, 2024 included net additions to intercompany debt of $50.0 million, which were eliminated in consolidation. Net cash used by financing activities for the year ended December 31, 2023 included net repayments of intercompany debt of $70.0 million, which were eliminated in consolidation.

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Other

The following table presents the components of consolidated net income that are not allocated to our operating segments.

Interest Expense

The increase in interest expense for the year ended 2024 was primarily attributable to the issuance of our 6.0% unsecured senior notes in May 2024. See note 14 of the notes to consolidated financial statements included under Item 8 for further details regarding our senior long-term debt.

Net Foreign Exchange Gains and Losses

Net foreign exchange gains and losses are primarily due to the remeasurement of our foreign currency denominated insurance loss reserves to the U.S. Dollar. The predominant foreign currencies of these loss reserves are the Euro and the British Pound. The U.S. Dollar strengthened against the Euro and British Pound during 2024, while it weakened against these currencies during 2023. Our exposure to foreign currency exchange rates is largely hedged through our available-for-sale investment portfolio, where we hold securities that generally match the currencies of our loss reserves. We also purchase foreign currency forward contracts to further manage unmatched foreign currency exposures. 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 losses of $93.2 million in 2024 compared to gains of $74.0 million in 2023. See "Foreign Currency Exchange Rate Risk" under Item 7A Quantitative and Qualitative Disclosures About Market Risk for additional information about how we manage foreign currency exchange rate risk.

Income Taxes

See note 15 of the notes to consolidated financial statements included under Item 8 for further details on our income taxes.

The Organization for Economic Co-operation and Development (OECD) introduced rules, commonly referred to as Pillar Two, that, if adopted, would establish a 15% global corporate minimum tax on certain large, multi-national enterprises. Certain countries in which we have operations, including the United Kingdom, have enacted legislation to adopt Pillar Two, which generally became effective on January 1, 2024. Additionally, in response to Pillar Two, 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. Pillar Two and the Bermuda CIT Act did not have a material impact on our results of operations, financial condition or cash flows in 2024, and we do not expect either to have a material impact on our results of operations, financial condition or cash flows in future periods, however, we will continue to evaluate these tax law changes as additional guidance is issued by the OECD and relevant tax authorities.

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Other Comprehensive Income (Loss) to Shareholders

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

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, 2024 and 2023, which is within the range of our target capital structure.

Holding Company

Our holding company had $4.3 billion and $3.5 billion of investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) at December 31, 2024 and December 31, 2023, respectively. The increase was primarily due to net proceeds from our May 2024 debt offering, dividends received from our subsidiaries and an increase in the fair value of equity securities held by our holding company, partially offset by cash used to repurchase shares of our common stock and service our senior long-term debt. See note 23 of the notes to consolidated financial statements included under Item 8 for condensed financial information for our holding company.

In May 2024, we issued $600 million of 6.0% unsecured senior notes due May 2054 with net proceeds of $592.6 million, before expenses. We intend to use these proceeds for general corporate purposes, which may include the redemption of our outstanding preferred shares. As of December 31, 2024, we had 600,000 preferred shares issued and outstanding, which we have the option to redeem, in whole or in part, on June 1, 2025, at $1,000 per preferred share, plus accrued and unpaid dividends.

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.

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In November 2024, 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 $2 billion 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, 2024, $1.9 billion 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 relied on dividends from its insurance subsidiaries as an important source of capital 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, 2024, our domestic insurance subsidiaries and Markel Bermuda Limited could pay ordinary dividends of $1.3 billion during the following twelve months under these laws.

We maintain a 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 guarantees 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, 2024 and 2023, 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, 2024. To the extent that we are not in compliance with our 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.

Historically, when capital at an insurance subsidiary exceeded our target levels, it was paid to Markel Group in the form of dividends, and if an insurance subsidiary required additional capital to meet our target capital levels, Markel Group contributed capital to the insurance subsidiary to restore capital to our target levels. Following our formation of an insurance operations holding company, Markel Insurance Group (MIG), a portion of the capital needed to support our insurance operations in certain stress scenarios is now held at MIG, rather than Markel Group. At least annually, if capital at an insurance subsidiary exceeds our target levels, it may be paid in the form of dividends to MIG, to the extent it is deemed necessary to support target capital levels across our insurance operations, or to Markel Group.

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In 2024, our insurance subsidiaries paid dividends totaling $1.2 billion to MIG, of which $465.0 million was paid as dividends to Markel Group. In 2023, our insurance subsidiaries paid dividends totaling $310.0 million to Markel Group.

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. Certain businesses also utilize term debt to finance capital asset acquisitions. 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 $497.0 million in 2024 and $568.1 million in 2023. Cash generated by our Markel Ventures operating subsidiaries is regularly distributed to Markel Ventures, Inc., with dividends totaling $307.7 million and $252.5 million in 2024 and 2023, respectively. After satisfying the obligations on its debt, evaluating capital expenditure needs at its subsidiaries and making contractual purchases of noncontrolling interests in our Markel Ventures businesses, excess cash is available to be allocated across the Company by Markel Group. In any given year, this excess capital may be used to fund Markel Ventures growth opportunities, make discretionary noncontrolling interest purchases, repay loans from our insurance subsidiaries, return capital to Markel Group or any combination of these options.

In 2024, Markel Ventures, Inc. repaid $110.0 million of principle on debt to our insurance subsidiaries and paid dividends totaling $110.0 million to Markel Group. Additionally, in 2024, Markel Ventures, Inc. received loans totaling $160.0 million from our insurance subsidiaries and a capital contribution of $170.0 million from Markel Group to fund acquisitions. In 2023, Markel Ventures, Inc. repaid $70.0 million of principle on debt to our insurance subsidiaries. As of December 31, 2024 and 2023, Markel Ventures, Inc.'s outstanding intercompany debt with our insurance subsidiaries was $788.0 million and $738.0 million, respectively, all of which is guaranteed by Markel Group.

As of December 31, 2024 and 2023, redeemable noncontrolling interests attributable to Markel Ventures, Inc. totaled $540.0 million and $469.7 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, 2024, $111.5 million is available for redemption in 2025, with the remainder becoming redeemable between 2026 and 2032. In 2024 and 2023, Markel Ventures, Inc. purchased noncontrolling interests totaling $46.5 million and $63.4 million, respectively.

Various of our Markel Ventures subsidiaries maintain revolving credit facilities or lines of credit, which provide up to $692 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, 2024 and 2023, $150.0 million and $169.5 million, respectively, of borrowings were outstanding under these credit facilities. At December 31, 2024, 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 $2.6 billion in 2024 compared to $2.8 billion in 2023. The decrease was primarily due to a decrease in operating cash flows from our insurance and Markel Ventures operations, partially offset by an increase in operating cash flows from investments. The decrease in operating cash flows from our insurance operations reflected higher net claims payments in 2024 compared to 2023.

Net cash used by investing activities was $2.4 billion in 2024 compared to $2.7 billion in 2023. In 2024, net cash used by investing activities included net purchases of fixed maturity securities and equity securities of $1.5 billion and $394.8 million, respectively, and net sales of short-term investments of $152.0 million, as well as investments in Valor and EPI. 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. 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.

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Invested assets were $34.2 billion at December 31, 2024 compared to $30.9 billion at December 31, 2023, reflecting an increase of 11% in 2024. The increase was primarily attributable to operating cash flows and an increase in the fair value of our equity portfolio. The following table presents the composition of our invested assets.

Net cash used by financing activities was $297.9 million in 2024 compared to $999.7 million in 2023. Cash of $572.7 million and $445.5 million was used to repurchase shares of our common stock during 2024 and 2023, respectively. In 2024, we received net proceeds of $592.6 million from our May 2024 debt offering. In 2023, we used $250.0 million to retire our unsecured senior notes due March 30, 2023. Financing activities in 2024 and 2023 also reflected borrowings and repayments at certain our Markel Ventures businesses, primarily on revolving lines of credit.

Cash Obligations

As of December 31, 2024, 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, 2024 and the estimated amount expected to be paid in 2025.

(1)    The actual cash payments for settled claims will vary, possibly significantly, from these estimates. As of December 31, 2024, the average duration of our reserves for unpaid losses and loss adjustment expenses was 4.0 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, 2024.

(4)    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.

(5)    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 $553.6 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.

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

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Restricted Assets and Capital

At December 31, 2024, we had $4.7 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 $419.1 million at December 31, 2024 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, 2024, the capital and surplus of each of our insurance subsidiaries significantly exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements.

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. 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 $26.6 billion and reinsurance recoverables on unpaid losses of $11.1 billion at December 31, 2024 compared to $23.5 billion and $8.8 billion, respectively, at December 31, 2023. Included in these balances were unpaid losses and loss adjustment expenses and reinsurance recoverables on unpaid losses attributable to business that was fronted through our program services and ILS operations totaling $6.5 billion and $5.2 billion as of December 31, 2024 and 2023, respectively. Additionally, consolidated unpaid losses and loss adjustment expenses as of December 31, 2024 and December 31, 2023 included $25.0 million and $185.0 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). There is normally a time lag between when a loss event occurs and when it is reported to us, 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.

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. The reporting lag can be more pronounced in our reinsurance contracts than in our insurance contracts due to a time lag between cedents establishing case reserves or re-estimating their reserves and notifying us of those new or revised case reserves. 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 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.

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The following table summarizes case reserves and IBNR reserves for our underwriting operations, as well as reserves attributed to business fronted through our program services and ILS operations. IBNR reserves are calculated by subtracting paid losses and loss adjustment expenses and case reserves from estimated ultimate losses and loss adjustment expenses. The amounts in the following table exclude $25.0 million and $185.0 million of fully collateralized reserves attributable to Markel CATCo Re as of December 31, 2024 and December 31, 2023, respectively.

(1)    Substantially all of the premium fronted through our program services and ILS operations is ceded, resulting in reinsurance recoverables on unpaid losses for this business of $6.5 billion and $5.2 billion as of December 31, 2024 and 2023, respectively.

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.

Program Services and ILS Fronting

For our program services and ILS fronting operations, 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 and consistency with historical data and 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 fronted through our program services and ILS operations is ceded, and net reserves for unpaid losses and loss adjustment expenses as of December 31, 2024 and December 31, 2023 were $6.6 million and $10.1 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 and other third-party costs. 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.

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. Some factors that contribute to the uncertainty and volatility of long-tail business,

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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 and the possibility of judicial interpretations or legislative changes that might impact future loss experience relative to prior loss experience.

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 an 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.

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. 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.

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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, analysis of exposures in the impacted areas, industry loss estimates and output from industry, broker and proprietary models, as well as analysis of our ceded reinsurance contracts. 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. 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, individual contract exposures 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' best estimate of the most likely amount that will ultimately be paid to settle the losses that have occurred at a particular point in time. 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 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.

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 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.

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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, 2024 for our two underwriting segments.

(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.

Changes in Estimates

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. 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.

Consistent with our reserving philosophy, 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 favorable trends more slowly than for short-tail or less volatile lines of business.

Our underwriting results in 2024 included $455.3 million of net favorable development on prior years loss reserves compared to $38.6 million in 2023. Favorable development in 2024 included significant favorable development across many of our product lines, partially offset by adverse development on certain long-tail U.S. professional liability product lines. Favorable development in 2023 included significant favorable development across several product lines, largely offset by adverse development on certain long-tail U.S. general liability and professional liability product lines.

With the exception of our U.S. professional liability product lines, we experienced net favorable development across all major product lines within our Insurance segment, most notably on our international professional liability product lines. Our international professional liability product lines experienced both lower loss frequency and severity than initially anticipated, which resulted in significant favorable development on these product lines. Additionally, our other product lines with notable net favorable development benefited from the re-estimation of our ultimate incurred losses following more favorable loss experience compared to our previous expectations. As previously discussed, loss reserves are recorded at management's best estimate, which is higher than the corresponding actuarially calculated point estimate. As actual loss experience in 2024 continued to be more favorable than previously anticipated, it became more likely that the ultimate losses would prove to be lower than previously estimated. Management gave greater credibility to the favorable trends observed by our actuaries and, upon incorporating these favorable trends into our best estimate, we reduced prior years loss reserves accordingly. While we believe it is likely that there will be additional favorable development on prior years loss reserves in 2025, we caution readers not to place undue reliance on this favorable trend.

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Net favorable development in 2024 was net of $111.8 million of adverse development on our risk-managed U.S. professional liability product lines within our Insurance segment, which reflects a continuation of the unfavorable claims and loss trends on those lines in recent years, as further detailed below. In 2024, development on our U.S. general liability product lines stabilized, resulting in modest favorable development as management gave more credibility to the favorable trends observed by our actuaries.

Favorable development in 2023 was most notable on our property, international professional liability, marine and energy and workers' compensation product lines. The favorable development in 2023 was largely offset by adverse development on certain long-tail U.S. general liability and professional liability product lines. Beginning in the latter half of 2022, select lines within our U.S. general liability and professional liability portfolio were impacted by consecutive quarters of unfavorable loss cost trends and increased claim frequency and severity, resulting in significant adverse development on these lines in both 2023 and 2022. 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, contributed to the loss cost trends, leading to higher than anticipated losses. 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.

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. 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, as well as our risk-managed directors and officers, errors and omissions and employment practices liability within professional liability and excess and umbrella within general liability.

The loss trends observed over the past several years have created more uncertainty around the ultimate losses that will be incurred to settle claims on our longer-tail professional liability and general liability 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 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 2024 and 2023, 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.

During the year ended December 31, 2024, we experienced favorable development on prior years loss reserves of 3.1% of beginning of year net loss reserves. This followed favorable development of 0.3% and 1.5% of beginning of year net loss reserves during the years ended December 31, 2023 and 2022, respectively. 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 from 2016 to 2021, 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 U.S. general liability and professional liability product lines, which resulted in net adverse loss development within the select product lines previously discussed.

In 2024, the magnitude of our favorable development on prior years loss reserves increased, however, it still lagged our historical trend due to continued adverse trends in our U.S. professional liability product lines, as previously discussed. 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 2025 would be a range of favorable development of up to 5%, or $750 million, of December 31, 2024 net loss reserves.

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Goodwill and Intangible Assets

Our consolidated balance sheet as of December 31, 2024 included goodwill and intangible assets of $4.2 billion as follows:

(1)    Amounts included in Underwriting reflect the intangible assets associated with the Company's underwriting segments, which are not allocated between the Insurance and Reinsurance segments.

(2)    Amounts included in other insurance operations reflect our operations that are not included in a reportable segment, including our program services and 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. During the year ended December 31, 2024, we recorded $167.5 million of goodwill and intangible assets in connection with acquisitions. We did not make any significant acquisitions during the year ended December 31, 2023.

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, 2024 based upon results of operations through September 30, 2024. We elected to perform a quantitative assessment for certain of our reporting units and a qualitative assessment for all of our other reporting units.

When performing our quantitative assessments, we used an income approach based on a discounted cash flow model to estimate the fair value of each reporting unit. The cash flow projections included management's best estimate of future growth and margins. The discount rates used were primarily based on a capital asset pricing model. Based on the results of our quantitative assessments, the estimated fair value of each reporting unit exceeded its carrying 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 2024, 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, 2024. 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.

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 Insurance, Investments Markel Ventures operations, including demand and pricing in the 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, 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, may cost more or take longer than expected 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 all of our insurance 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;

•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;

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•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 affecting our insurance operations 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, transition 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 or regulations related to the use of artificial intelligence or machine learning technology;

•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 leaders to run any of our businesses could adversely impact one or more of our operations;

•the manner in which our businesses operate through independent local management teams could result in inconsistent management, governance and oversight practices;

•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;

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

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•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 for our insurance operations;

•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;

•disruptions resulting from a threatened proxy contest or other actions by activist shareholders;

•considerations and limitations relating to the use of intrinsic value as a performance metric, including the possibility that shareholders, analysts or other market participants may have a different perception of our intrinsic value, which may result in our stock price varying significantly from our intrinsic value calculations; and

•a number of additional factors may adversely affect our Markel Ventures businesses, 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 Insurance, Investments and Markel Ventures 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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