Segment Reporting Disclosures

Through December 31, 2017, the Company monitored and reported its ongoing underwriting operations in the following three segments: U.S. Insurance, International Insurance and Reinsurance. In conjunction with the Company's continued growth and diversification, beginning in the first quarter of 2018 the Company's chief operating decision maker changed the way it reviews the Company's ongoing underwriting results. Effective January 1, 2018, the chief operating decision maker reviews the Company's ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance. In determining how to allocate resources and assess the performance of its underwriting results, management considers many factors, including the nature of the insurance product sold, the type of account written and the type of customer served. The Insurance segment includes all direct business and facultative placements written across the Company. The Reinsurance segment includes all treaty reinsurance written across the Company. All investing activities related to the Company's insurance operations are included in the Investing segment.

Also during the first quarter of 2018, the Company's chief operating decision maker changed the way it assesses the performance of and allocates resources to its Markel Ventures operations. Historically, the Company’s chief operating decision maker reviewed and assessed the performance of each Markel Ventures business separately with no single business being individually significant. Following the continued growth in the Company’s Markel Ventures operations, effective January 1, 2018, the chief operating decision maker reviews and assesses Markel Ventures’ performance in the aggregate, as a single operating segment. The Markel Ventures segment primarily consists of controlling interests in a diverse portfolio of businesses that operate in various industries. Prior period amounts in the tables below have been recast for consistency with the current segment presentation.

The Company's other operations include the results of the Company's legal and professional consulting services and the results of the Company's investment management services attributable to MCIM and, beginning November 2018, Nephila. The Company's other operations also include results for lines of business discontinued prior to, or in conjunction with, acquisitions, including development on asbestos and environmental loss reserves and results attributable to the run-off of life and annuity reinsurance business, which are monitored separately from the Company's ongoing underwriting operations. Beginning November 2017, the Company's other operations also include the results of the program services business acquired as part of the State National transaction. For purposes of segment reporting, none of these other operations are considered to be reportable segments.

Segment profit for each of the Company's underwriting segments is measured by underwriting profit. The property and casualty insurance industry commonly defines underwriting profit as earned premiums net of losses and loss adjustment expenses and underwriting, acquisition and insurance expenses. Underwriting profit 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 for the Investing segment is measured by net investment income and net investment gains. Segment profit for the Markel Ventures segment is measured by operating income.

For management reporting purposes, the Company allocates assets to its underwriting, investing, Markel Ventures, and other operations. Underwriting assets are all assets not specifically allocated to the Investing or Markel Ventures segments, or to the Company's other operations. Underwriting and investing assets are not allocated to the Insurance and Reinsurance segments since the Company does not manage its assets by underwriting segment. The Company does not allocate capital expenditures for long-lived assets to either of its underwriting segments for management reporting purposes.

a) The following tables summarize the Company's segment disclosures.



	Year Ended December 31, 2018
(dollars in thousands)	Insurance			Reinsurance			Investing			Markel Ventures			Other ⁽¹⁾				Consolidated
Gross premium volume	$	4,749,166		$	1,050,870		$	—		$	—		$	2,064,433			$	7,864,469
Net written premiums	3,904,773			882,285			—			—			520				4,787,578

Earned premiums	3,783,939			928,574			—			—			(453		)		4,712,060
Losses and loss adjustment expenses:
Current accident year	(2,596,057		)	(775,642		)	—			—			—				(3,371,699		)
Prior accident years	502,260			42,982			—			—			5,742				550,984
Amortization of policy acquisition costs	(770,183		)	(239,120		)	—			—			—				(1,009,303		)
Other operating expenses	(691,186		)	(75,081		)	—			—			(1,941		)		(768,208		)
Underwriting profit (loss)	228,773			(118,287		)	—			—			3,348				113,834
Net investment income	—			—			433,702			513			—				434,215
Net investment losses ⁽²⁾	—			—			(437,596		)	—			—				(437,596		)
Products revenues	—			—			—			1,497,523			—				1,497,523
Services and other revenues	—			—			—			414,542			220,541				635,083
Products expenses ⁽³⁾	—			—			—			(1,413,248		)	—				(1,413,248		)
Services and other expenses ⁽³⁾	—			—			—			(366,739		)	(108,185		)		(474,924		)
Amortization of intangible assets ⁽⁴⁾	—			—			—			(40,208		)	(75,722		)		(115,930		)
Impairment of goodwill and intangible assets	—			—			—			(14,904		)	(184,294		)		(199,198		)
Segment profit (loss)	$	228,773		$	(118,287	)	$	(3,894	)	$	77,479		$	(144,312	)		$	39,759
Interest expense																	(154,212		)
Net foreign exchange gains																	106,598
Loss before income taxes																	$	(7,855	)
U.S. GAAP combined ratio ⁽⁵⁾	94		%	113		%							NM			⁽⁶⁾	98		%


⁽¹⁾	Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets and impairment of goodwill and intangible assets that are not allocated to a reportable segment.


⁽²⁾	Effective January 1, 2018, the Company adopted ASU No. 2016-01. As a result, the change in fair value of equity securities is no longer recognized in other comprehensive income; rather, all changes in the fair value of equity securities are now recognized in net investment losses within net income. Prior periods have not been restated to conform to the current presentation. See note 1.


⁽³⁾	Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $52.2 million for the year ended December 31, 2018.


⁽⁴⁾	Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to any other reportable segments.


⁽⁵⁾	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.


⁽⁶⁾	NM - Ratio is not meaningful



	Year Ended December 31, 2017
(dollars in thousands)	Insurance			Reinsurance			Investing			Markel Ventures			Other ⁽¹⁾				Consolidated
Gross premium volume	$	4,141,201		$	1,112,101		$	—		$	—		$	253,658			$	5,506,960
Net written premiums	3,439,796			978,160			—			—			(169		)		4,417,787

Earned premiums	3,314,033			934,114									(169		)		4,247,978
Losses and loss adjustment expenses:
Current accident year	(2,442,344		)	(924,879		)	—			—			—				(3,367,223		)
Prior accident years	500,627			(7,803		)	—			—			8,638				501,462
Amortization of policy acquisition costs	(675,470		)	(218,883		)	—			—			—				(894,353		)
Other operating expenses	(611,749		)	(82,567		)	—			—			(795		)		(695,111		)
Underwriting profit (loss)	85,097			(300,018		)	—			—			7,674				(207,247		)
Net investment income	—			—			405,377			332							405,709
Net investment losses ⁽²⁾	—			—			(5,303		)	—							(5,303		)
Products revenues	—			—			—			951,012			—				951,012
Services and other revenues	—			—			—			382,268			79,995				462,263
Products expenses ⁽³⁾	—			—			—			(850,449		)	—				(850,449		)
Services and other expenses ⁽³⁾	—			—			—			(336,484		)	(122,137		)		(458,621		)
Amortization of intangible assets ⁽⁴⁾	—			—			—			(31,429		)	(49,329		)		(80,758		)
Segment profit (loss)	$	85,097		$	(300,018	)	$	400,074		$	115,250		$	(83,797	)		$	216,606
Interest expense																	(132,451		)
Net foreign exchange gains																	3,140
Income before income taxes																	$	87,295
U.S. GAAP combined ratio ⁽⁵⁾	97		%	132		%							NM			⁽⁶⁾	105		%


⁽¹⁾	Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets that is not allocated to a reportable segment.


⁽²⁾	Effective January 1, 2018, the Company adopted ASU No. 2016-01. As a result, the change in fair value of equity securities is no longer recognized in other comprehensive income; rather, all changes in the fair value of equity securities are now recognized in net investment losses within net income. Prior periods have not been restated to conform to the current presentation. See note 1.


⁽³⁾	Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $41.7 million for the year ended December 31, 2017.


⁽⁴⁾	Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to any other reportable segments.


⁽⁵⁾	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.


⁽⁶⁾	NM - Ratio is not meaningful



	Year Ended December 31, 2016
(dollars in thousands)	Insurance			Reinsurance			Investing		Markel Ventures			Other ⁽¹⁾				Consolidated
Gross premium volume	$	3,755,081		$	1,041,055		$	—	$	—		$	509			$	4,796,645
Net written premiums	3,101,657			898,728			—		—			635				4,001,020

Earned premiums	3,028,844			836,264			—		—			762				3,865,870
Losses and loss adjustment expenses:
Current accident year	(2,009,426		)	(546,476		)	—		—			—				(2,555,902		)
Prior accident years	369,594			125,514			—		—			10,050				505,158
Amortization of policy acquisition costs	(592,766		)	(189,455		)	—		—			—				(782,221		)
Other operating expenses	(597,201		)	(116,642		)	—		—			(1,061		)		(714,904		)
Underwriting profit	199,045			109,205			—		—			9,751				318,001
Net investment income	—			—			373,121		109							373,230
Net investment gains ⁽²⁾	—			—			65,147		—							65,147
Products revenues	—			—			—		885,473			—				885,473
Services and other revenues	—			—			—		328,976			93,330				422,306
Products expenses ⁽³⁾	—			—			—		(755,591		)	—				(755,591		)
Services and other expenses ⁽³⁾	—			—			—		(297,841		)	(118,300		)		(416,141		)
Amortization of intangible assets ⁽⁴⁾	—			—			—		(29,105		)	(39,428		)		(68,533		)
Impairment of goodwill and intangible assets	—			—			—		(18,723		)	—				(18,723		)
Segment profit (loss)	$	199,045		$	109,205		$	438,268	$	113,298		$	(54,647	)		$	805,169
Interest expense																(129,896		)
Loss on early extinguishment of debt																(44,100		)
Net foreign exchange losses																(1,253		)
Income before income taxes																$	629,920
U.S. GAAP combined ratio ⁽⁵⁾	93		%	87		%						NM			⁽⁶⁾	92		%


⁽¹⁾	Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment as well as any amortization of intangible assets and impairment of goodwill and intangible assets that are not allocated to a reportable segment.


⁽²⁾	Effective January 1, 2018, the Company adopted ASU No. 2016-01. As a result, the change in fair value of equity securities is no longer recognized in other comprehensive income; rather, all changes in the fair value of equity securities are now recognized in net investment gains within net income. Prior periods have not been restated to conform to the current presentation. See note 1.


⁽³⁾	Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $35.5 million for the year ended December 31, 2016.


⁽⁴⁾	Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to any other reportable segments.


⁽⁵⁾	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.


⁽⁶⁾	NM - Ratio is not meaningful

b)The following table summarizes deferred policy acquisition costs, unearned premiums and unpaid losses and loss adjustment expenses.



(dollars in thousands)	Deferred Policy Acquisition Costs		Unearned Premiums		Unpaid Losses and Loss Adjustment Expenses
December 31, 2018
Insurance segment	$	315,363	$	2,031,140	$	7,947,772
Reinsurance segment	159,150		630,435		3,425,751
Other	—		—		386,329
Total Underwriting	474,513		2,661,575		11,759,852
Program services	—		949,453		2,516,627
Total	$	474,513	$	3,611,028	$	14,276,479
December 31, 2017
Insurance segment	$	286,780	$	1,855,331	$	7,711,510
Reinsurance segment	178,789		690,565		3,248,070
Other	—		—		429,270
Total Underwriting	465,569		2,545,896		11,388,850
Program services	—		762,883		2,195,431
Total	$	465,569	$	3,308,779	$	13,584,281

c)The following table summarizes earned premiums by major product grouping.



	Years Ended December 31,
(dollars in thousands)	2018			2017			2016
Insurance segment:
General liability	$	889,543		$	764,956		$	675,199
Professional liability	701,867			628,878			600,607
Property	369,116			365,513			357,320
Marine and energy	376,747			312,282			277,608
Personal lines	374,543			382,761			374,175
Programs	288,398			273,954			263,783
Workers compensation	329,690			319,679			301,126
Other products	454,035			266,010			179,026
Total Insurance	3,783,939			3,314,033			3,028,844
Reinsurance segment:
Property	233,195			321,178			288,771
Casualty	417,601			351,457			327,383
Auto	12,422			28,700			65,363
Other products	265,356			232,779			154,747
Total Reinsurance	928,574			934,114			836,264
Other	(453		)	(169		)	762
Total earned premiums	$	4,712,060		$	4,247,978		$	3,865,870

The Company does not manage products at this level of aggregation. The Company offers a diverse portfolio of products and manages these products in logical groupings within each operating segment.

d)The following table summarizes the Company's gross written premiums by country. Gross written premiums are attributed to individual countries based upon location of risk or cedent.



	Years Ended December 31,
(dollars in thousands)	2018		% of Total		2017		% of Total		2016		% of Total
United States	$	4,587,486	79	%	$	4,163,753	79	%	$	3,691,840	77	%
United Kingdom	471,818		8		374,941		7		358,348		7
Canada	127,546		2		132,018		3		125,444		3
Other countries	612,146		11		582,395		11		621,013		13
Total Underwriting	5,798,996		100	%	5,253,107		100	%	4,796,645		100	%
United States - Program services	2,065,473				253,853				—
Total	$	7,864,469			$	5,506,960			$	4,796,645

Most of the Company's gross written premiums are placed through insurance and reinsurance brokers. During the years ended December 31, 2018, 2017 and 2016, the top three independent brokers accounted for 25%, 27% and 28% of gross premiums written in the Company's underwriting segments. During the years ended December 31, 2018, 2017 and 2016, the top three independent brokers accounted for 13%, 14% and 15%, respectively, of gross premiums written in the Insurance segment and 76%, 78% and 75%, respectively, of gross premiums written in the Reinsurance segment.

e)During the years ended December 31, 2018, 2017 and 2016, Markel Ventures segment revenues attributable to U.S. operations were 88%, 85%, and 84%, respectively, of total Markel Ventures segment revenues.

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



	December 31,
(dollars in thousands)	2018		2017		2016
Segment assets:
Investing	$	19,100,790	$	20,317,160	$	19,029,584
Underwriting	6,451,984		6,828,048		5,397,696
Markel Ventures	2,124,506		1,900,728		1,206,223
Total segment assets	27,677,280		29,045,936		25,633,503
Other operations	5,628,983		3,759,080		241,796
Total assets	$	33,306,263	$	32,805,016	$	25,875,299