Segment Reporting Disclosures

In conjunction with the continued integration of Alterra into the Company's insurance operations, during the first quarter of 2014, the Company changed the way it aggregates and monitors its ongoing underwriting results. Effective January 1, 2014, the Company monitors and reports its ongoing underwriting operations in the following three segments: U.S. Insurance, International Insurance and Reinsurance. In determining how to aggregate and monitor its underwriting results, the Company considers many factors, including the geographic location and regulatory environment of the insurance entity underwriting the risk, the nature of the insurance product sold, the type of account written and the type of customer served. The U.S. Insurance segment includes all direct business and facultative placements written by the Company's insurance subsidiaries domiciled in the United States. The International Insurance segment includes all direct business and facultative placements written by the Company's insurance subsidiaries domiciled outside of the United States, including the Company's syndicate at Lloyd's of London. The Reinsurance segment includes all treaty reinsurance written across the Company. Results for lines of business discontinued prior to, or in conjunction with, acquisitions, including the results attributable to the run-off of life and annuity reinsurance business previously written by Alterra, will continue to be reported in the Other Insurance (Discontinued Lines) segment. All investing activities related to the Company's insurance operations are included in the Investing segment.

The Company's non-insurance operations include the Company's Markel Ventures operations, which primarily consist of controlling interests in various industrial and service businesses. The Company's non-insurance operations also include the results of the Company's legal and professional consulting services, which were acquired through the acquisition of Abbey in January 2014. For purposes of segment reporting, the Company's non-insurance operations are not considered to be a reportable segment.

Segment profit for the Investing segment is measured by net investment income and net realized investment gains or losses. Segment profit or loss for each of the Company's underwriting segments is measured by underwriting profit or loss. 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. Underwriting profit or loss does not replace operating income or net income computed in accordance with U.S. GAAP as a measure of profitability. Underwriting profit or loss provides a basis for management to evaluate the Company's underwriting performance. Segment profit or loss for the Company's underwriting segments also includes other revenues and other expenses, primarily related to the run-off of managing general agent operations that were discontinued in conjunction with acquisitions. Other revenues and other expenses in the Other Insurance (Discontinued Lines) segment are comprised of the results attributable to the run-off of life and annuity reinsurance business.

For management reporting purposes, the Company allocates assets to its underwriting, investing and non-insurance operations. Underwriting assets are all assets not specifically allocated to the Investing segment or to the Company's non-insurance operations. Underwriting and investing assets are not allocated to the U.S. Insurance, International Insurance, Reinsurance or Other Insurance (Discontinued Lines) segments since the Company does not manage its assets by underwriting segment. The Company does not allocate capital expenditures for long-lived assets to any of its underwriting segments for management reporting purposes.

a)The following tables summarize the Company's segment disclosures. The segment disclosures for the prior period have been revised to be consistent with the new segment structure.



	Quarter Ended June 30, 2014
(dollars in thousands)	U.S. Insurance			International Insurance			Reinsurance			Other Insurance (Discontinued Lines)				Investing		Consolidated
Gross premium volume	$	681,371		$	359,120		$	302,950		$	(63	)		$	—	$	1,343,378
Net written premiums	560,282			270,552			253,085			412				—		1,084,331

Earned premiums	499,083			239,861			226,289			366				—		965,599
Losses and loss adjustment expenses:
Current accident year	(336,514		)	(171,930		)	(161,466		)	—				—		(669,910		)
Prior accident years	37,883			29,570			13,353			(21,302		)		—		59,504
Underwriting, acquisition and insurance expenses	(198,914		)	(88,442		)	(78,263		)	(368		)		—		(365,987		)
Underwriting profit (loss)	1,538			9,059			(87		)	(21,304		)		—		(10,794		)
Net investment income	—			—			—			—				92,169		92,169
Net realized investment gains	—			—			—			—				7,120		7,120
Other revenues (insurance)	660			4,357			1,032			143				—		6,192
Other expenses (insurance)	(1,464		)	(4,113		)	(1,097		)	(8,670		)		—		(15,344		)
Segment profit (loss)	$	734		$	9,303		$	(152	)	$	(29,831	)		$	99,289	$	79,343
Other revenues (non-insurance)																187,891
Other expenses (non-insurance)																(169,598		)
Amortization of intangible assets																(13,488		)
Interest expense																(29,789		)
Income before income taxes																$	54,359
U.S. GAAP combined ratio ⁽¹⁾	100		%	96		%	100		%	NM			⁽²⁾			101		%


⁽¹⁾	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.


⁽²⁾	NM – Ratio is not meaningful.



	Quarter Ended June 30, 2013
(dollars in thousands)	U.S. Insurance			International Insurance			Reinsurance			Other Insurance (Discontinued Lines)				Investing		Consolidated
Gross premium volume	$	611,504		$	310,310		$	179,152		$	14			$	—	$	1,100,980
Net written premiums	529,595			244,821			152,850			15				—		927,281

Earned premiums	418,941			192,871			172,992			15				—		784,819
Losses and loss adjustment expenses:
Current accident year	(288,427		)	(142,472		)	(130,789		)	—				—		(561,688		)
Prior accident years	79,911			32,500			6,432			439				—		119,282
Underwriting, acquisition and insurance expenses:
Transaction costs and other acquisition-related expenses ⁽¹⁾	(10,490		)	(11,820		)	(39,499		)	—				—		(61,809		)
All other expenses	(173,525		)	(76,441		)	(51,531		)	211				—		(301,286		)
Underwriting profit (loss)	26,410			(5,362		)	(42,395		)	665				—		(20,682		)
Net investment income	—			—			—			—				77,979		77,979
Net realized investment gains	—			—			—			—				11,546		11,546
Other revenues (insurance)	3,280			748			954			319				—		5,301
Other expenses (insurance)	(1,958		)	(1,237		)	—			(4,250		)		—		(7,445		)
Segment profit (loss)	$	27,732		$	(5,851	)	$	(41,441	)	$	(3,266	)		$	89,525	$	66,699
Other revenues (non-insurance)																152,124
Other expenses (non-insurance)																(133,314		)
Amortization of intangible assets																(11,292		)
Interest expense																(28,561		)
Income before income taxes																$	45,656
U.S. GAAP combined ratio ⁽²⁾	94		%	103		%	125		%	NM			⁽³⁾			103		%

⁽¹⁾

In connection with the acquisition of Alterra, the Company incurred transaction costs of $16.0 million for the quarter ended June 30, 2013, which primarily consist of due diligence, legal and investment banking costs. Additionally, the Company incurred severance costs of $28.2 million, stay bonuses of $6.1 million and other compensation costs totaling $11.5 million related to the acceleration of certain long-term incentive compensation awards and restricted stock awards that were granted by Alterra prior to the acquisition.


⁽²⁾	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.


⁽³⁾	NM – Ratio is not meaningful.



	Six Months Ended June 30, 2014
(dollars in thousands)	U.S. Insurance			International Insurance			Reinsurance			Other Insurance (Discontinued Lines)				Investing		Consolidated
Gross premium volume	$	1,256,604		$	653,356		$	792,911		$	264			$	—	$	2,703,135
Net written premiums	1,034,336			499,672			689,082			552				—		2,223,642

Earned premiums	982,818			462,008			469,604			544				—		1,914,974
Losses and loss adjustment expenses:
Current accident year	(648,927		)	(335,309		)	(335,366		)	—				—		(1,319,602		)
Prior accident years	81,437			71,867			41,553			(27,964		)		—		166,893
Underwriting, acquisition and insurance expenses	(392,443		)	(168,451		)	(160,235		)	(363		)		—		(721,492		)
Underwriting profit (loss)	22,885			30,115			15,556			(27,783		)		—		40,773
Net investment income	—			—			—			—				178,884		178,884
Net realized investment gains	—			—			—			—				24,514		24,514
Other revenues (insurance)	2,770			11,705			3,168			186				—		17,829
Other expenses (insurance)	(3,111		)	(7,708		)	(1,097		)	(17,285		)		—		(29,201		)
Segment profit (loss)	$	22,544		$	34,112		$	17,627		$	(44,882	)		$	203,398	$	232,799
Other revenues (non-insurance)																362,425
Other expenses (non-insurance)																(337,909		)
Amortization of intangible assets																(27,487		)
Interest expense																(59,488		)
Income before income taxes																$	170,340
U.S. GAAP combined ratio ⁽¹⁾	98		%	93		%	97		%	NM			⁽²⁾			98		%


⁽¹⁾	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.


⁽²⁾	NM – Ratio is not meaningful.



	Six Months Ended June 30, 2013
(dollars in thousands)	U.S. Insurance			International Insurance			Reinsurance			Other Insurance (Discontinued Lines)				Investing		Consolidated
Gross premium volume	$	1,056,768		$	546,185		$	241,292		$	35			$	—	$	1,844,280
Net written premiums	931,144			446,498			212,591			36				—		1,590,269

Earned premiums	774,082			371,063			204,225			36				—		1,349,406
Losses and loss adjustment expenses:
Current accident year	(523,098		)	(263,334		)	(147,994		)	—				—		(934,426		)
Prior accident years	142,315			55,500			5,453			856				—		204,124
Underwriting, acquisition and insurance expenses:
Transaction costs and other acquisition-related expenses ⁽¹⁾	(10,490		)	(11,820		)	(39,499		)	—				—		(61,809		)
All other expenses	(324,308		)	(146,215		)	(59,735		)	299				—		(529,959		)
Underwriting profit (loss)	58,501			5,194			(37,550		)	1,191				—		27,336
Net investment income	—			—			—			—				142,596		142,596
Net realized investment gains	—			—			—			—				29,463		29,463
Other revenues (insurance)	10,543			4,710			954			319				—		16,526
Other expenses (insurance)	(8,155		)	(2,595		)	—			(4,250		)		—		(15,000		)
Segment profit (loss)	$	60,889		$	7,309		$	(36,596	)	$	(2,740	)		$	172,059	$	200,921
Other revenues (non-insurance)																313,642
Other expenses (non-insurance)																(278,076		)
Amortization of intangible assets																(20,907		)
Interest expense																(52,135		)
Income before income taxes																$	163,445
U.S. GAAP combined ratio ⁽²⁾	92		%	99		%	118		%	NM			⁽³⁾			98		%

⁽¹⁾

In connection with the acquisition of Alterra, the Company incurred transaction costs of $16.0 million for the six months ended June 30, 2013, which primarily consist of due diligence, legal and investment banking costs. Additionally, the Company incurred severance costs of $28.2 million, stay bonuses of $6.1 million and other compensation costs totaling $11.5 million related to the acceleration of certain long-term incentive compensation awards and restricted stock awards that were granted by Alterra prior to the acquisition.


⁽²⁾	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.


⁽³⁾	NM – Ratio is not meaningful.


b)	The following table reconciles segment assets to the Company's consolidated balance sheets.



(dollars in thousands)	June 30, 2014		December 31, 2013
Segment assets:
Investing	$	18,183,025	$	17,550,332
Underwriting	5,994,004		5,468,731
Total segment assets	24,177,029		23,019,063
Non-insurance operations	989,245		936,448
Total assets	$	25,166,274	$	23,955,511