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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________
 FORM 10-Q
______________________________________________________________________________________

    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2023
or
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from _______ to _______
Commission File Number: 001-15811
_________________________________________
MARKEL CORPORATION
(Exact name of registrant as specified in its charter)
___________________________________________________________________________________
Virginia54-1959284
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4521 Highwoods Parkway, Glen Allen, Virginia 23060-6148
(Address of principal executive offices) (Zip Code)
(804) 747-0136
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common Stock, no par valueMKLNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filer  Non-accelerated filer  
Smaller reporting companyEmerging growth company 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes      No  x
Number of shares of the registrant's common stock outstanding at April 19, 2023: 13,346,714


Table of Contents
Markel Corporation
Form 10-Q
Index
 
  Page Number
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 2.
Item 6.
2

Table of Contents
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

March 31,
2023
December 31,
2022
(dollars in thousands)(unaudited)
ASSETS
Investments, at estimated fair value:
Fixed maturity securities, available-for-sale (amortized cost of $13,142,991 in 2023 and $12,805,887 in 2022)
$12,403,118 $11,856,835 
Equity securities (cost of $3,169,913 in 2023 and $3,100,040 in 2022)
8,113,476 7,671,912 
Short-term investments, available-for-sale (estimated fair value approximates cost)2,487,501 2,669,262 
Total Investments23,004,095 22,198,009 
Cash and cash equivalents4,031,952 4,137,432 
Restricted cash and cash equivalents972,901 1,084,081 
Receivables3,192,078 2,961,056 
Reinsurance recoverables8,585,580 8,446,745 
Deferred policy acquisition costs994,365 925,483 
Prepaid reinsurance premiums2,162,117 2,066,114 
Goodwill2,642,877 2,638,838 
Intangible assets1,706,206 1,747,464 
Other assets3,650,090 3,586,037 
Total Assets$50,942,261 $49,791,259 
LIABILITIES AND EQUITY
Unpaid losses and loss adjustment expenses$21,306,793 $20,947,898 
Life and annuity benefits668,848 650,721 
Unearned premiums6,570,373 6,220,748 
Payables to insurance and reinsurance companies800,371 669,742 
Senior long-term debt and other debt (estimated fair value of $3,450,000 in 2023 and $3,541,000 in 2022)
3,896,766 4,103,629 
Other liabilities3,417,906 3,461,482 
Total Liabilities36,661,057 36,054,220 
Redeemable noncontrolling interests491,883 523,154 
Commitments and contingencies
Shareholders' equity:
Preferred stock591,891 591,891 
Common stock3,506,972 3,493,893 
Retained earnings10,255,401 9,832,804 
Accumulated other comprehensive loss(609,781)(767,494)
Total Shareholders' Equity13,744,483 13,151,094 
Noncontrolling interests44,838 62,791 
Total Equity13,789,321 13,213,885 
Total Liabilities and Equity$50,942,261 $49,791,259 

See accompanying notes to consolidated financial statements.

3

Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

Three Months Ended March 31,
20232022
(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums$1,967,704 $1,759,770 
Net investment income159,335 92,304 
Net investment gains (losses)372,563 (358,399)
Products revenues577,926 481,621 
Services and other revenues565,861 630,940 
Total Operating Revenues3,643,389 2,606,236 
OPERATING EXPENSES
Losses and loss adjustment expenses1,173,014 972,372 
Underwriting, acquisition and insurance expenses675,705 590,365 
Products expenses515,756 447,819 
Services and other expenses480,619 589,891 
Amortization of intangible assets44,399 46,049 
Total Operating Expenses2,889,493 2,646,496 
Operating Income (Loss)753,896 (40,260)
Interest expense(49,438)(49,692)
Net foreign exchange gains (losses)(32,928)23,004 
Income (Loss) Before Income Taxes671,530 (66,948)
Income tax (expense) benefit(133,731)18,136 
Net Income (Loss)537,799 (48,812)
Net income attributable to noncontrolling interests(49,147)(2,929)
Net Income (Loss) to Shareholders488,652 (51,741)
Preferred stock dividends  
Net Income (Loss) to Common Shareholders$488,652 $(51,741)
OTHER COMPREHENSIVE INCOME (LOSS)
Change in net unrealized gains (losses) on available-for-sale investments, net of taxes:
Net holding gains (losses) arising during the period$161,206 $(521,200)
Reclassification adjustments for net losses included in net income (loss)2,994 437 
Change in net unrealized gains (losses) on available-for-sale investments, net of taxes164,200 (520,763)
Change in discount rate for life and annuity benefits, net of taxes(9,052)60,693 
Change in foreign currency translation adjustments, net of taxes2,579 (1,248)
Change in net actuarial pension loss, net of taxes18 1,132 
Total Other Comprehensive Income (Loss)157,745 (460,186)
Comprehensive Income (Loss)695,544 (508,998)
Comprehensive income attributable to noncontrolling interests(49,179)(2,916)
Comprehensive Income (Loss) to Shareholders$646,365 $(511,914)
NET INCOME (LOSS) PER COMMON SHARE
Basic$37.33 $(6.50)
Diluted$37.26 $(6.50)

See accompanying notes to consolidated financial statements.

4

Table of Contents
MARKEL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Three Months Ended March 31, 2023Preferred
 Stock
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive Loss
Total
Shareholders'
Equity
Noncontrolling
Interests
Total EquityRedeemable
Noncontrolling
Interests
(dollars in thousands)
December 31, 2022$591,891 $3,493,893 $9,832,804 $(767,494)$13,151,094 $62,791 $13,213,885 $523,154 
Net income 488,652  488,652 44,693 533,345 4,454 
Other comprehensive income 157,713 157,713  157,713 32 
Comprehensive Income 646,365 44,693 691,058 4,486 
Repurchase of common stock  (81,964) (81,964) (81,964) 
Restricted stock awards expensed 21,698   21,698  21,698  
Adjustment of redeemable noncontrolling interests  13,473  13,473  13,473 (13,473)
Purchase of noncontrolling interest (8,619)  (8,619) (8,619)(13,046)
Redemption of Markel CATCo Re noncontrolling interests     (62,646)(62,646) 
Other  2,436  2,436  2,436 (9,238)
March 31, 2023$591,891 $3,506,972 $10,255,401 $(609,781)$13,744,483 $44,838 $13,789,321 $491,883 
Three Months Ended March 31, 2022Preferred
 Stock
Common
Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Shareholders'
Equity
Noncontrolling
Interests
Total EquityRedeemable
Noncontrolling
Interests
(dollars in thousands)
December 31, 2021$591,891 $3,441,079 $10,444,895 $222,007 $14,699,872 $22,860 $14,722,732 $461,378 
Net income (loss)(51,741) (51,741)(573)(52,314)3,502 
Other comprehensive loss (460,173)(460,173) (460,173)(13)
Comprehensive Income (Loss)(511,914)(573)(512,487)3,489 
Repurchase of common stock  (79,296) (79,296) (79,296) 
Restricted stock awards expensed 28,464   28,464  28,464  
Adjustment of redeemable noncontrolling interests  (36,940) (36,940) (36,940)36,940 
Adjustment to Metromont purchase price allocation       (18,681)
Disposition of Velocity     (22,059)(22,059) 
Other (94)721  627 5,326 5,953 (2,775)
March 31, 2022$591,891 $3,469,449 $10,277,639 $(238,166)$14,100,813 $5,554 $14,106,367 $480,351 

See accompanying notes to consolidated financial statements.

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MARKEL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Three Months Ended March 31,
20232022
(dollars in thousands)
OPERATING ACTIVITIES
Net income (loss)$537,799 $(48,812)
Adjustments to reconcile net income (loss) to net cash provided by operating activities(253,618)463,685 
Net Cash Provided By Operating Activities284,181 414,873 
INVESTING ACTIVITIES
Proceeds from sales, maturities, calls and prepayments of fixed maturity securities592,004 119,545 
Cost of fixed maturity securities purchased(806,704)(517,400)
Proceeds from sales of equity securities64,030 76,788 
Cost of equity securities purchased(129,163)(112,783)
Net change in short-term investments210,177 (287,027)
Additions to property and equipment(37,179)(51,696)
Consolidation of Markel CATCo Re, net 629,955 
Proceeds from sale of business, net 106,846 
Other(1,696)(14,204)
Net Cash Used By Investing Activities(108,531)(49,976)
FINANCING ACTIVITIES
Additions to senior long-term debt and other debt161,151 254,285 
Repayment of senior long-term debt and other debt(369,227)(189,031)
Repurchases of common stock(81,964)(79,296)
Redemption of Markel CATCo Re noncontrolling interests(88,997) 
Purchase of noncontrolling interests(21,665) 
Other(11,452)(4,808)
Net Cash Used By Financing Activities(412,154)(18,850)
Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents19,844 (19,411)
Increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents(216,660)326,636 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period5,221,513 4,880,947 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD$5,004,853 $5,207,583 

See accompanying notes to consolidated financial statements.

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MARKEL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Markel Corporation is a diverse financial holding company serving a variety of niche markets. Markel Corporation's principal business markets and underwrites specialty insurance products. Through its wholly owned subsidiary, Markel Ventures, Inc. (Markel Ventures), Markel Corporation also owns controlling interests in various businesses that operate outside of the specialty insurance marketplace. See note 2 for details regarding reportable segments.

a) Basis of Presentation. The consolidated balance sheet as of March 31, 2023 and the related consolidated statements of income (loss) and comprehensive income (loss) and changes in equity for three months ended March 31, 2023 and 2022, and the condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. Except for the adjustments described in note 1 c), such adjustments consist only of normal, recurring items. Interim results are not necessarily indicative of results of operations for the entire year. The consolidated balance sheet as of December 31, 2022 was derived from Markel Corporation's audited annual consolidated financial statements.

The accompanying consolidated financial statements have been prepared in accordance with United States (U.S.) generally accepted accounting principles (GAAP) and include the accounts of Markel Corporation and its consolidated subsidiaries, as well as any variable interest entities (VIEs) that meet the requirements for consolidation (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The Company consolidates the results of its Markel Ventures subsidiaries on a one-month lag, with the exception of significant transactions or events that occur during the intervening period. Certain prior period amounts have been reclassified to conform to the current period presentation.

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements.

The consolidated financial statements and notes are presented as permitted by Form 10-Q and do not contain certain information included in the Company's annual consolidated financial statements and notes. The following accounting policy was updated to reflect an accounting standard that became effective January 1, 2023. See note 1 c). For a more complete description of the Company's business and accounting policies, readers are urged to review the Company's 2022 Annual Report on Form 10-K.

b) Life and Annuity Benefits. The Company has a run-off block of life and annuity reinsurance contracts that subject the Company to mortality, longevity and morbidity risks. Effective January 1, 2023, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts and restated all prior periods presented to reflect the new accounting standard. The primary component of the Company's liabilities for life and annuity benefits is the present value of the liability for future policyholder benefits. The cash flow assumptions used to determine the policyholder benefit reserves are reviewed and updated, as necessary, at least annually. Interest accretion for the reserves is calculated using the discount rate locked-in at contract inception. Policy benefit reserves are remeasured each period using current discount rates, based on yields for upper-medium grade fixed maturity securities, with the impact of changes in the discount rate included in other comprehensive income, net of taxes. All other results attributable to the run-off of life and annuity reinsurance contracts are included in services and other revenues and services and other expenses in the consolidated statements of income and comprehensive income. Investment income earned on the investments that support the policy benefit reserves are included in net investment income. Because of the uncertainty in the assumptions used to estimate reserves for life and annuity benefit obligations and the long-term nature of these reinsurance contracts, the ultimate liability may be greater or less than the estimates. See note 9 for further details regarding life and annuity benefits.

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c) Recent Accounting Pronouncements

Accounting Standards Adopted

Effective January 1, 2023, the Company adopted ASU No. 2018-12 and several ASUs issued as amendments to ASU No. 2018-12. This standard requires insurance companies with long duration contracts to: (1) review and, if there is a change, update the assumptions used to measure expected cash flows at least annually; (2) update the discount rate assumption at each reporting date; and (3) enhance certain qualitative and quantitative disclosures. ASU No. 2018-12 was applied using a modified retrospective approach that required restatement of prior periods presented, including a cumulative adjustment recorded to accumulated other comprehensive income as of January 1, 2021 (the transition date) as a result of updating the discount rate assumption. At the transition date, the adoption of ASU 2018-12 had no impact on retained earnings but resulted in a decrease to accumulated other comprehensive income, net of taxes, of $15.3 million as of January 1, 2021, which was comprised of the following corresponding adjustments to life and annuity benefits and deferred tax liabilities.

(dollars in thousands)January 1, 2021
Reverse reserve deficiency adjustment related to unrealized gains on underlying investment portfolio of available-for-sale securities
$119,548 
Apply updated discount rate to the liability for future policyholder benefits(138,865)
Increase in life and annuity benefits(19,317)
Decrease in deferred tax liability4,057 
Decrease in accumulated other comprehensive income, net of taxes$(15,260)

The impact of changes in the discount rate on the liability for future policyholder benefits following the transition date are included in other comprehensive income (loss) in the respective periods and, combined with the transition adjustment, resulted in the following cumulative changes to the Company's previously presented consolidated balance sheets.

December 31,
(dollars in thousands)20222021
Decrease (increase) in life and annuity benefits$113,396 $(19,759)
Decrease (increase) in deferred tax liability(23,813)4,149 
Increase (decrease) in accumulated other comprehensive income (loss), net of taxes$89,583 $(15,610)

Changes in the discount rate on the liability for future policyholder benefits also resulted in an increase, or benefit, of $16.0 million to the previously presented other comprehensive loss for the three months ended March 31, 2022, which was comprised of the following adjustments.

(dollars in thousands)Three Months Ended March 31, 2022
Reverse benefit included in change in net unrealized gains (losses) on available-for-sale-investments, net of taxes, related to reversal of previously recognized reserve deficiency adjustment
$(44,682)
Change in discount rate for life and annuity benefits, net of taxes60,693 
Increase in other comprehensive loss, net of taxes$16,011 

The adoption of other provisions of this ASU did not have a material impact on the Company's financial position, results of operations or cash flows for any of the periods presented.

Effective January 1, 2023, the Company adopted ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU No. 2021-08 requires contract assets and liabilities accounted for under FASB Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, to be recorded at the acquisition date as if the acquirer entered into those contracts itself on the contract inception dates, rather than at fair value. At adoption, ASU No. 2021-08 did not impact the Company's financial position, results of operations or cash flows, but prospectively, this ASU will impact amounts recorded by the Company for assets acquired and liabilities assumed in conjunction with certain acquisitions.

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2. Segment Reporting Disclosures

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 the Company's 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 on a risk-bearing basis within the Company's underwriting operations. The Reinsurance segment includes all treaty reinsurance written on a risk-bearing basis within the Company's underwriting operations. All investing activities related to the Company's insurance operations are included in the Investing segment.

The Company's 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.

The Company's other operations primarily consist of the results of the Company's insurance-linked securities operations and program services business. 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. 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 Company's underwriting segments may also include other revenues and expenses that are attributable to the Company's underwriting operations that are not captured in underwriting profit. Segment profit for the Investing segment is measured by income from the Company's investment portfolio, which is comprised of net investment income and net investment gains. Segment profit for the Investing segment also includes income from equity method investments, which is included within services and other revenues. Segment profit for the Markel Ventures segment is measured by operating income.

For management reporting purposes, the Company allocates assets to its underwriting operations and to its Investing and Markel Ventures segments and certain of its other operations, including its insurance-linked securities and program services operations. Underwriting assets include assets attributed to the Company's Insurance and Reinsurance segments, discontinued underwriting lines of business, as well as assets that are not specifically allocated to the Company's other operations. Generally, the Company manages its underwriting assets in the aggregate and therefore does not allocate assets to individual underwriting segments.

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a) The following tables summarize the Company's segment disclosures.
Three Months Ended March 31, 2023
(dollars in thousands)InsuranceReinsuranceInvestingMarkel Ventures
Other (1)
Consolidated
Gross premium volume$2,097,938 $552,061 $ $ $786,013 $3,436,012 
Net written premiums1,702,141 516,091   (454)2,217,778 
Earned premiums1,710,924 257,234   (454)1,967,704 
Losses and loss adjustment expenses:
Current accident year(1,077,546)(166,785)   (1,244,331)
Prior accident years62,628 8,704   (15)71,317 
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs(360,354)(61,778)   (422,132)
Other underwriting expenses(239,148)(13,141)  (1,284)(253,573)
Underwriting profit (loss)96,504 24,234   (1,753)118,985 
Net investment income  158,594 741  159,335 
Net investment gains  372,563   372,563 
Products revenues   577,926  577,926 
Services and other revenues  (2,380)526,013 42,228 565,861 
Products expenses   (515,756) (515,756)
Services and other expenses (2)
   (496,746)16,127 (480,619)
Amortization of intangible assets (3)
   (19,551)(24,848)(44,399)
Segment profit$96,504 $24,234 $528,777 $72,627 $31,754 $753,896 
Interest expense(49,438)
Net foreign exchange losses(32,928)
Income before income taxes$671,530 
(1)    Other represents the total profit (loss) attributable to the Company's operations that are not included in a reportable segment, as well as amortization of intangible assets attributable to underwriting segments, which is not allocated between the Insurance and Reinsurance segments.
(2)    Services and other expenses for Other for the three months ended March 31, 2023 included $44.8 million of favorable loss reserve development on the run-off of reinsurance contracts written by Markel CATCo Re Ltd., all of which was attributable to noncontrolling interests. See Note 11.
(3)    Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets attributable to the Company's underwriting segments, included in Other, was $9.6 million for the three months ended March 31, 2023.

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Three Months Ended March 31, 2022
(dollars in thousands)InsuranceReinsuranceInvestingMarkel Ventures
Other (1)
Consolidated
Gross premium volume$1,943,306 $576,316 $ $ $878,665 $3,398,287 
Net written premiums1,611,020 555,220   (1,506)2,164,734 
Earned premiums1,477,148 283,967   (1,345)1,759,770 
Losses and loss adjustment expenses:
Current accident year(886,237)(182,458)   (1,068,695)
Prior accident years98,640 (2,083)  (234)96,323 
Underwriting, acquisition and insurance expenses:
Amortization of policy acquisition costs(310,406)(71,754)   (382,160)
Other underwriting expenses(191,651)(14,389)  (2,165)(208,205)
Underwriting profit (loss)187,494 13,283   (3,744)197,033 
Net investment income  92,297 7  92,304 
Net investment losses  (358,399)  (358,399)
Products revenues   481,621  481,621 
Services and other revenues  (19,570)468,764 181,746 630,940 
Products expenses   (447,819) (447,819)
Services and other expenses   (431,903)(157,988)(589,891)
Amortization of intangible assets (2)
   (20,933)(25,116)(46,049)
Segment profit (loss)$187,494 $13,283 $(285,672)$49,737 $(5,102)$(40,260)
Interest expense(49,692)
Net foreign exchange gains