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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 September 30, 2020
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)
___________________________________________________________________________________
Virginia 54-1959284
(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 class Trading Symbol(s) Name of exchange on which registered
Common Stock, no par value MKL New 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 filer x Accelerated filer   ☐ Non-accelerated filer   ☐
Smaller reporting company ☐ Emerging 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 October 20, 2020: 13,778,084

Markel Corporation
Form 10-Q
Index
 
    Page Number
3
4
5
7
8
36
60
61
62
65
66
70
72
2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARKEL CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets
(dollars in thousands)
September 30,
2020 		December 31,
2019
(unaudited)
ASSETS
Investments, at estimated fair value:
Fixed maturity securities, available-for-sale (amortized cost of $9,290,362 in 2020 and $9,448,840 in 2019)
$ 10,244,242  $ 9,970,909 
Equity securities (cost of $2,811,397 in 2020 and $3,266,735 in 2019)
6,183,944  7,590,755 
Short-term investments, available-for-sale (estimated fair value approximates cost) 1,897,459  1,196,248 
Total Investments 18,325,645  18,757,912 
Cash and cash equivalents 4,593,025  3,072,807 
Restricted cash and cash equivalents 669,528  427,546 
Receivables 2,004,080  1,847,802 
Reinsurance recoverables 5,665,838  5,432,712 
Deferred policy acquisition costs 638,134  566,042 
Prepaid reinsurance premiums 1,457,580  1,415,857 
Goodwill 2,604,575  2,308,548 
Intangible assets 1,820,453  1,738,474 
Other assets 2,391,161  1,906,115 
Total Assets $ 40,170,019  $ 37,473,815 
LIABILITIES AND EQUITY
Unpaid losses and loss adjustment expenses $ 15,723,231  $ 14,728,676 
Life and annuity benefits 1,034,093  985,729 
Unearned premiums 4,509,811  4,057,727 
Payables to insurance and reinsurance companies 416,988  406,720 
Senior long-term debt and other debt (estimated fair value of $4,270,000 in 2020 and $3,907,000 in 2019)
3,498,311  3,534,183 
Other liabilities 2,838,807  2,504,802 
Total Liabilities 28,021,241  26,217,837 
Redeemable noncontrolling interests 241,020  177,562 
Commitments and contingencies
Shareholders' equity:
Preferred stock 591,891  — 
Common stock 3,425,247  3,404,919 
Retained earnings 7,377,095  7,457,176 
Accumulated other comprehensive income 499,714  208,772 
Total Shareholders' Equity 11,893,947  11,070,867 
Noncontrolling interests 13,811  7,549 
Total Equity 11,907,758  11,078,416 
Total Liabilities and Equity $ 40,170,019  $ 37,473,815 
See accompanying notes to consolidated financial statements.
3
MARKEL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Income (Loss) and Comprehensive Income
(Unaudited)
Quarter Ended September 30, Nine Months Ended September 30,
2020 2019 2020 2019
(dollars in thousands, except per share data)
OPERATING REVENUES
Earned premiums $ 1,394,428  $ 1,300,032  $ 4,085,311  $ 3,703,470 
Net investment income 90,384  113,382  274,242  339,395 
Net investment gains (losses):
Net realized investment gains 4,935  150  11,861  764 
Change in fair value of equity securities 534,367  31,994  (242,757) 1,069,224 
Net investment gains (losses) 539,302  32,144  (230,896) 1,069,988 
Products revenues 342,039  386,708  1,117,781  1,237,178 
Services and other revenues 545,582  200,792  1,132,978  594,631 
Total Operating Revenues 2,911,735  2,033,058  6,379,416  6,944,662 
OPERATING EXPENSES
Losses and loss adjustment expenses 863,247  752,134  2,652,811  2,118,000 
Underwriting, acquisition and insurance expenses 492,824  475,219  1,477,349  1,392,747 
Products expenses 296,371  354,404  974,925  1,098,968 
Services and other expenses 522,237  153,358  1,024,733  498,760 
Amortization of intangible assets 44,664  35,695  120,276  112,663 
Total Operating Expenses 2,219,343  1,770,810  6,250,094  5,221,138 
Operating Income 692,392  262,248  129,322  1,723,524 
Interest expense (42,744) (47,465) (133,201) (129,022)
Net foreign exchange gains (losses) (65,577) 53,850  (8,736) 57,001 
Loss on early extinguishment of debt —  (6,705) —  (6,705)
Income (Loss) Before Income Taxes 584,071  261,928  (12,615) 1,644,798 
Income tax expense (130,028) (57,975) (3,047) (356,849)
Net Income (Loss) 454,043  203,953  (15,662) 1,287,949 
Net (income) loss attributable to noncontrolling interests (1,317) 1,684  (15,607) (8,587)
Net Income (Loss) to Shareholders 452,726  205,637  (31,269) 1,279,362 
Preferred stock dividends —  —  —  — 
Net Income (Loss) to Common Shareholders $ 452,726  $ 205,637  $ (31,269) $ 1,279,362 
OTHER COMPREHENSIVE INCOME
Change in net unrealized gains on available-for-sale investments, net of taxes:
Net holding gains arising during the period $ 64,449  $ 48,315  $ 301,487  $ 329,113 
Reclassification adjustments for net gains (losses) included in net income (loss) (3,362) 203  (3,560) 760 
Change in net unrealized gains on available-for-sale investments, net of taxes 61,087  48,518  297,927  329,873 
Change in foreign currency translation adjustments, net of taxes 5,756  (4,606) (8,383) (5,978)
Change in net actuarial pension loss, net of taxes 538  462  1,422  2,338 
Total Other Comprehensive Income 67,381  44,374  290,966  326,233 
Comprehensive Income 521,424  248,327  275,304  1,614,182 
Comprehensive (income) loss attributable to noncontrolling interests (1,335) 1,742  (15,631) (8,538)
Comprehensive Income to Shareholders $ 520,089  $ 250,069  $ 259,673  $ 1,605,644 
NET INCOME (LOSS) PER COMMON SHARE
Basic $ 31.07  $ 13.97  $ (3.76) $ 92.92 
Diluted $ 31.03  $ 13.95  $ (3.76) $ 92.84 
See accompanying notes to consolidated financial statements.
4
MARKEL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity
(Unaudited)
Quarter Ended September 30, 2020 Preferred Shares Common Shares Preferred Stock Common
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income 		Total
Shareholders'
Equity 		Noncontrolling
Interests 		Total Equity Redeemable
Noncontrolling
Interests
(in thousands)
June 30, 2020 600  13,776  $ 591,891  $ 3,421,845  $ 6,948,466  $ 432,351  $ 11,394,553  $ 15,695  $ 11,410,248  $ 214,653 
Net income (loss) 452,726  —  452,726  (2,393) 450,333  3,710 
Other comprehensive income —  67,363  67,363  —  67,363  18 
Comprehensive Income (Loss) 520,089  (2,393) 517,696  3,728 
Issuance of common stock —  2  —  —  —  —  —  —  —  — 
Restricted stock units expensed —  —  —  3,402  —  —  3,402  —  3,402  — 
Adjustment of redeemable noncontrolling interests —  —  —  —  (23,621) —  (23,621) —  (23,621) 23,621 
Other —  —  —  —  (476) —  (476) 509  33  (982)
September 30, 2020 600  13,778  $ 591,891  $ 3,425,247  $ 7,377,095  $ 499,714  $ 11,893,947  $ 13,811  $ 11,907,758  $ 241,020 

Nine Months Ended September 30, 2020 Preferred Shares Common Shares Preferred Stock Common
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income 		Total
Shareholders'
Equity 		Noncontrolling
Interests 		Total Equity Redeemable
Noncontrolling
Interests
(in thousands)
December 31, 2019 —  13,794  $ —  $ 3,404,919  $ 7,457,176  $ 208,772  $ 11,070,867  $ 7,549  $ 11,078,416  $ 177,562 
Cumulative effect of adoption of ASU No. 2016-13, net of taxes (3,827) —  (3,827) —  (3,827) — 
January 1, 2020 —  13,794  —  3,404,919  7,453,349  208,772  11,067,040  7,549  11,074,589  177,562 
Net income (loss) (31,269) —  (31,269) 4,201  (27,068) 11,406 
Other comprehensive income —  290,942  290,942  —  290,942  24 
Comprehensive Income 259,673  4,201  263,874  11,430 
Issuance of preferred stock 600  —  591,891  —  —  —  591,891  —  591,891  — 
Issuance of common stock —  5  —  57  —  —  57  —  57  — 
Repurchase of common stock —  (21) —  —  (23,943) —  (23,943) —  (23,943) — 
Restricted stock units expensed —  —  —  26,386  —  —  26,386  —  26,386  — 
Acquisition of Lansing —  —  —  —  —  —  —  —  —  43,566 
Adjustment of redeemable noncontrolling interests —  —  —  —  (20,681) —  (20,681) —  (20,681) 20,681 
Purchase of noncontrolling interest —  —  —  (6,131) —  —  (6,131) —  (6,131) (7,029)
Other —  —  —  16  (361) —  (345) 2,061  1,716  (5,190)
September 30, 2020 600  13,778  $ 591,891  $ 3,425,247  $ 7,377,095  $ 499,714  $ 11,893,947  $ 13,811  $ 11,907,758  $ 241,020 
See accompanying notes to consolidated financial statements.
5
MARKEL CORPORATION AND SUBSIDIARIES

Consolidated Statements of Changes in Equity (continued)
(Unaudited)
Quarter Ended September 30, 2019 Common Shares Common
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income 		Total
Shareholders'
Equity 		Noncontrolling
Interests 		Total Equity Redeemable
Noncontrolling
Interests
(in thousands)
June 30, 2019 13,826  $ 3,400,964  $ 6,808,201  $ 187,200  $ 10,396,365  $ 16,716  $ 10,413,081  $ 151,297 
Net income (loss) 205,637  —  205,637  (5,590) 200,047  3,906 
Other comprehensive income (loss) —  44,432  44,432  —  44,432  (58)
Comprehensive Income (Loss) 250,069  (5,590) 244,479  3,848 
Issuance of common stock 1  43  —  —  43  —  43  — 
Repurchase of common stock (12) —  (12,732) —  (12,732) —  (12,732) — 
Restricted stock units expensed —  2,410  —  —  2,410  —  2,410  — 
Adjustment of redeemable noncontrolling interests —  —  (12,221) —  (12,221) —  (12,221) 12,221 
Purchase of noncontrolling interest —  (483) —  —  (483) —  (483) 483 
Other —  —  3  —  3  290  293  (2,247)
September 30, 2019 13,815  $ 3,402,934  $ 6,988,888  $ 231,632  $ 10,623,454  $ 11,416  $ 10,634,870  $ 165,602 

Nine Months Ended September 30, 2019 Common Shares Common
Stock 		Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss) 		Total
Shareholders'
Equity 		Noncontrolling
Interests 		Total Equity Redeemable
Noncontrolling
Interests
(in thousands)
December 31, 2018 13,888  $ 3,392,993  $ 5,782,310  $ (94,650) $ 9,080,653  $ 19,649  $ 9,100,302  $ 174,062 
Net income (loss) 1,279,362  —  1,279,362  (4,185) 1,275,177  12,772 
Other comprehensive income (loss) —  326,282  326,282  —  326,282  (49)
Comprehensive Income (Loss) 1,605,644  (4,185) 1,601,459  12,723 
Issuance of common stock 7  43  —  —  43  —  43  — 
Repurchase of common stock (80) —  (81,998) —  (81,998) —  (81,998) — 
Restricted stock units expensed —  14,282  —  —  14,282  —  14,282  — 
Adjustment to Nephila purchase price allocation —  —  —  —  —  (8,250) (8,250) 51 
Adjustment of redeemable noncontrolling interests —  —  9,464  —  9,464  —  9,464  (9,464)
Purchase of noncontrolling interest —  (4,219) —  —  (4,219) —  (4,219) (4,542)
Other —  (165) (250) —  (415) 4,202  3,787  (7,228)
September 30, 2019 13,815  $ 3,402,934  $ 6,988,888  $ 231,632  $ 10,623,454  $ 11,416  $ 10,634,870  $ 165,602 
See accompanying notes to consolidated financial statements.
6
MARKEL CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30,
2020 2019
(dollars in thousands)
OPERATING ACTIVITIES
Net income (loss) $ (15,662) $ 1,287,949 
Adjustments to reconcile net income (loss) to net cash provided by operating activities 1,277,250  (575,991)
Net Cash Provided By Operating Activities 1,261,588  711,958 
INVESTING ACTIVITIES
Proceeds from sales of fixed maturity securities and equity securities 1,544,501  326,304 
Proceeds from maturities, calls and prepayments of fixed maturity securities 507,480  446,625 
Cost of fixed maturity securities and equity securities purchased (764,823) (657,563)
Net change in short-term investments (697,580) (451,408)
Cost of equity method investments (5,066) (216,806)
Proceeds from sales of equity and cost method investments 15,167  4,634 
Additions to property and equipment (72,771) (95,457)
Proceeds from disposals of fixed assets 20,527  15,949 
Acquisitions, net of cash acquired (547,847) (25,627)
Other 22,903  (3,809)
Net Cash Provided (Used) By Investing Activities 22,491  (657,158)
FINANCING ACTIVITIES
Additions to senior long-term debt and other debt 189,846  1,578,823 
Repayment of senior long-term debt and other debt (227,692) (680,516)
Premiums and fees related to early extinguishment of debt —  (10,086)
Repurchases of common stock (23,943) (81,998)
Issuance of preferred stock, net 591,891  — 
Payment of contingent consideration (31,426) (14,113)
Purchase of noncontrolling interests (14,558) (9,754)
Distributions to noncontrolling interests (5,325) (7,147)
Other (3,172) (4,565)
Net Cash Provided By Financing Activities 475,621  770,644 
Effect of foreign currency rate changes on cash, cash equivalents, restricted cash and restricted cash equivalents 2,500  (22,107)
Increase in cash, cash equivalents, restricted cash and restricted cash equivalents 1,762,200  803,337 
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 3,500,353  2,396,432 
CASH, CASH EQUIVALENTS, RESTRICTED CASH AND RESTRICTED CASH EQUIVALENTS AT END OF PERIOD $ 5,262,553  $ 3,199,769 
See accompanying notes to consolidated financial statements.
7
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 interests in various businesses that operate outside of the specialty insurance marketplace.

a)Basis of Presentation. The consolidated balance sheet as of September 30, 2020 and the related consolidated statements of income (loss) and comprehensive income and changes in equity for the quarters and nine months ended September 30, 2020 and 2019, and the consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. 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, 2019 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 year amounts have been reclassified to conform to the current 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. For further details regarding certain estimates, see note 16.

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. Certain accounting policies were updated to reflect accounting pronouncements that became effective in 2020. See note 2. Readers are urged to review the Company's 2019 Annual Report on Form 10-K for a more complete description of the Company's business and accounting policies.

b)Investments. Available-for-sale investments and equity securities are recorded at estimated fair value. Unrealized gains and losses on available-for-sale investments, net of income taxes, are included in other comprehensive income. Unrealized gains and losses on equity securities, net of income taxes, are included in net income.

The Company completes a detailed analysis each quarter to assess declines in the fair value of available-for-sale investments. Effective January 1, 2020, the Company adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and related amendments, which created a new comprehensive credit losses standard, FASB Accounting Standards Codification (ASC) 326, Financial Instruments—Credit Losses. Upon adoption of ASC 326, any impairment losses on the Company's available-for-sale investments are recorded as an allowance, subject to reversal, rather than as a reduction in amortized cost, as was required under the previous other-than-temporary impairment (OTTI) model. In accordance with the provisions of ASU No. 2016-13, prior periods have not been restated.

Premiums and discounts are amortized or accreted over the lives of the related fixed maturity securities as an adjustment to the yield using the effective interest method. Dividend and interest income are recognized when earned. Accrued interest receivable is excluded from both the estimated fair value and the amortized cost basis of available-for-sale securities and included within other assets on the Company's consolidated balance sheets. Any uncollectible accrued interest receivable is written off in the period it is deemed uncollectible. Realized investment gains or losses on available-for-sale investments are included in net income. Realized gains or losses from sales of available-for-sale investments are derived using the first-in, first-out method on the trade date.


8
c)Receivables. Receivables include amounts receivable from agents, brokers and insureds, which represent premiums that are both currently due and amounts not yet due on insurance and reinsurance policies. Premiums for insurance policies are generally due at inception. Premiums for reinsurance policies generally become due over the period of coverage based on the policy terms. Changes in the estimate of reinsurance premiums written will result in an adjustment to premiums receivable in the period they are determined. Receivables also include amounts receivable from contracts with customers, which represent the Company's unconditional right to consideration for satisfying the performance obligations outlined in the contract.

The Company monitors credit risk associated with receivables, taking into consideration the fact that in certain instances in the Company's insurance operations, credit risk may be reduced by the Company's right to offset loss obligations or unearned premiums against premiums receivable. An allowance is established for amounts deemed uncollectible and receivables are recorded net of this allowance. Following the adoption of ASC 326, as described in note 2, beginning January 1, 2020 the allowance is established for expected credit losses to be recognized over the life of the receivable. The Company considers reasonable and supportable forecasts of future economic conditions in addition to information about past events and current conditions when estimating the allowance for credit losses. The Company uses information obtained from external sources to forecast short-term changes in macroeconomic conditions that are expected to impact the Company's exposure to credit losses. Any allowance for credit losses is charged to net income in the period the receivable is recorded and revised in subsequent periods to reflect changes in the Company's estimate of expected credit losses.

d)Reinsurance Recoverables. Amounts recoverable from reinsurers are estimated in a manner consistent with the claim liability associated with the reinsured business. The Company evaluates the financial condition of its reinsurers and monitors concentration of credit risk to minimize its exposure to significant losses from individual reinsurers. To further reduce credit exposure on reinsurance recoverables, the Company has received collateral, including letters of credit and trust accounts, from certain reinsurers. Collateral related to these reinsurance agreements is available, without restriction, when the Company pays losses covered by the reinsurance agreements. An allowance is established for amounts deemed uncollectible and reinsurance recoverables are recorded net of this allowance. Following the adoption of ASC 326, as described in note 2, beginning January 1, 2020 the allowance is established for expected credit losses to be recognized over the life of the reinsurance recoverable. The Company considers reasonable and supportable forecasts of future economic conditions in addition to information about past events and current conditions when estimating the allowance for credit losses. The Company uses information obtained from external sources to forecast short-term changes in macroeconomic conditions that are expected to impact the Company's exposure to credit losses. Any allowance for credit losses is charged to net income in the period the recoverable is recorded and revised in subsequent periods to reflect changes in the Company's estimate of expected credit losses.

9
2. Recent Accounting Pronouncements

Accounting Standards Adopted in 2020

Effective January 1, 2020, the Company adopted ASC 326, Financial Instruments—Credit Losses. This new standard replaced the incurred loss model used to measure impairment losses for financial assets measured at amortized cost with a current expected credit loss (CECL) model and also made changes to the impairment model for available-for-sale investments. Under the CECL model, allowances are established for expected credit losses to be recognized over the life of financial assets. Application of the CECL model does not impact the Company's investment portfolio, which is not measured at amortized cost, but it impacts certain of the Company's other financial assets, including its reinsurance recoverables and receivables. ASC 326 also replaced the OTTI model with an impairment allowance model, subject to reversal, for available-for-sale investments, which are measured at fair value. As a result of adopting ASC 326, the Company increased its allowances for credit losses related to its reinsurance recoverables and receivables by $3.8 million and $1.0 million, respectively, which was recorded through a cumulative-effect adjustment to retained earnings as of January 1, 2020 ($3.8 million, net of taxes). The Company continues to apply the previous guidance to 2019 and prior periods.

The following ASUs are relevant to the Company's operations and were adopted effective January 1, 2020. These ASUs did not have a material impact on the Company's financial position, results of operations or cash flows:
•ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement
•ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract
•ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities

Accounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU No. 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The ASU requires insurance entities with long duration contracts to: (1) review and, if there is a change, update the assumptions used to measure cash flows at least annually, as well as update the discount rate assumption at each reporting date; (2) measure all market risk benefits associated with deposit (or account balance) contracts at fair value; and (3) disclose liability rollforwards and information about significant inputs, judgments, assumptions and methods used in measurement, including changes thereto and the effect of those changes on measurement. In July 2020, the FASB proposed an update to ASU No. 2018-12 to defer its effective date. The proposed update would make the ASU effective for the Company during the first quarter of 2023. ASU No. 2018-12 will, among other things, impact the discount rate used in estimating reserves for the Company's life and annuity reinsurance portfolio, which is in runoff. Currently, the discount rate assumption is locked-in for the life of the contracts, unless there is a loss recognition event. The Company is currently evaluating ASU No. 2018-12 to determine the impact that adopting this standard will have on its consolidated financial statements.

The following ASUs are relevant to the Company's operations and are not yet effective. These ASUs are not expected to have a material impact on the Company's financial position, results of operations or cash flows:
•ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes
•ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting

10
3. Acquisitions

Lansing Building Products, LLC

In April 2020, the Company acquired a controlling interest in Lansing Building Products, LLC, a supplier of exterior building products and materials to professional contractors throughout the U.S., which simultaneously acquired the distribution business of Harvey Building Products to enhance geographic reach and scale (together, Lansing), bringing the Company's ownership in Lansing to 91%. Under the terms of the acquisition agreement, the Company has the option to acquire the remaining equity interests and the remaining equity holders have the option to sell their interests to the Company in the future. The redemption value of the remaining equity interests is generally based on Lansing's earnings in specified periods preceding the redemption dates. Total consideration for both transactions was $556.2 million, all of which was cash. The purchase price was preliminarily allocated to the acquired assets and liabilities of Lansing based on estimated fair value at the acquisition date. The Company preliminarily recognized goodwill of $290.8 million, which is primarily attributable to expected future earnings and cash flow potential of Lansing. The majority of the goodwill recognized is not expected to be deductible for income tax purposes. The Company also preliminarily recognized other intangible assets of $210.0 million, which includes $188.0 million of customer relationships and $22.0 million of trade names, which are expected to be amortized over a weighted average period of 16 years and 14 years, respectively. The Company also recognized redeemable noncontrolling interests of $43.6 million. Results attributable to Lansing are included in the Company's Markel Ventures segment.

The Company has not completed the process of determining the fair value of the assets acquired and liabilities assumed. These valuations are required to be completed within 12 months from the acquisition date. As a result, the fair value recorded for these items is a provisional estimate and may be subject to adjustment. Once completed, any adjustments resulting from the valuations may impact the individual amounts recorded for assets acquired and liabilities assumed, as well as the residual goodwill.

VSC Fire & Security, Inc.

In November 2019, the Company acquired VSC Fire & Security, Inc. (VSC), a provider of comprehensive fire protection, life safety, and low voltage solutions to retailers, commercial campuses, healthcare facilities, and government properties throughout the southeastern United States. Total consideration for the acquisition was $225.0 million, which included cash of $204.0 million. Total consideration also included the estimated fair value of contingent consideration the Company expects to pay in 2021 based on VSC's earnings, as defined in the purchase agreement.

As of December 31, 2019, the purchase price was preliminarily allocated to the acquired assets and liabilities of VSC based on estimated fair value at the acquisition date. During the first quarter of 2020, the Company completed the process of determining the fair value of the assets and liabilities acquired with VSC. The Company recognized goodwill of $124.9 million, which is primarily attributable to expected future earnings and cash flow potential of VSC. All of the goodwill recognized is deductible for income tax purposes. The Company also recognized other intangible assets of $64.5 million, which includes $48.0 million of customer relationships, $14.0 million of trade names and $2.5 million of other intangible assets, which are being amortized over a weighted average period of 12 years, 12 years and 8 years, respectively. Results attributable to VSC are included in the Company's Markel Ventures segment.

11
4. Investments

a)The following tables summarize the Company's available-for-sale investments. Commercial and residential mortgage-backed securities include securities issued by U.S. government-sponsored enterprises and U.S. government agencies. The net unrealized holding gains in the tables below are presented before taxes and any reserve deficiency adjustments for life and annuity benefit reserves. See note 11.
  September 30, 2020
(dollars in thousands) Amortized
Cost 		Gross
Unrealized
Holding
Gains 		Gross
Unrealized
Holding
Losses 		Estimated
Fair
Value
Fixed maturity securities:
U.S. Treasury securities $ 352,049  $ 10,726  $ (37) $ 362,738 
U.S. government-sponsored enterprises 471,629  53,212  (24) 524,817 
Obligations of states, municipalities and political subdivisions 3,898,016  388,563  (280) 4,286,299 
Foreign governments 1,333,875  210,688  (2,372) 1,542,191 
Commercial mortgage-backed securities 1,682,784  150,932  (22) 1,833,694 
Residential mortgage-backed securities 825,711  67,671  (28) 893,354 
Asset-backed securities 6,165  168  —  6,333 
Corporate bonds 720,133  75,354  (671) 794,816 
Total fixed maturity securities 9,290,362  957,314  (3,434) 10,244,242 
Short-term investments 1,898,317  682  (1,540) 1,897,459 
Investments, available-for-sale $ 11,188,679  $ 957,996  $ (4,974) $ 12,141,701 

  December 31, 2019
(dollars in thousands) Amortized
Cost 		Gross
Unrealized
Holding
Gains 		Gross
Unrealized
Holding
Losses 		Estimated
Fair
Value
Fixed maturity securities:
U.S. Treasury securities $ 282,305  $ 2,883  $ (402) $ 284,786 
U.S. government-sponsored enterprises 318,831  23,949  (200) 342,580 
Obligations of states, municipalities and political subdivisions 3,954,779  235,915  (812) 4,189,882 
Foreign governments 1,415,639  135,763  (9,398) 1,542,004 
Commercial mortgage-backed securities 1,761,777  57,450  (1,382) 1,817,845 
Residential mortgage-backed securities 855,641  32,949  (517) 888,073 
Asset-backed securities 11,042  28  (22) 11,048 
Corporate bonds 848,826  47,551  (1,686) 894,691 
Total fixed maturity securities 9,448,840  536,488  (14,419) 9,970,909 
Short-term investments 1,194,953  1,355  (60) 1,196,248 
Investments, available-for-sale $ 10,643,793  $ 537,843  $ (14,479) $ 11,167,157 

12
b)The following tables summarize gross unrealized investment losses on available-for-sale investments by the length of time that securities have continuously been in an unrealized loss position.
September 30, 2020
Less than 12 months 12 months or longer Total
(dollars in thousands) Estimated
Fair
Value 		Gross
Unrealized
Holding Losses 		Estimated
Fair
Value 		Gross
Unrealized
Holding Losses 		Estimated
Fair
Value 		Gross
Unrealized
Holding Losses
Fixed maturity securities:
U.S. Treasury securities $ 51,672  $ (37) $ —  $ —  $ 51,672  $ (37)
U.S. government-sponsored enterprises 14,986  (24) —  —  14,986  (24)
Obligations of states, municipalities and political subdivisions 57,282  (265) 2,994  (15) 60,276  (280)
Foreign governments 6,105  (85) 131,231  (2,287) 137,336  (2,372)
Commercial mortgage-backed securities 7,372  (9) 5,389  (13) 12,761  (22)
Residential mortgage-backed securities 3,303  (28) —  —  3,303  (28)
Corporate bonds 11,391  (370) 10,573  (301) 21,964  (671)
Total fixed maturity securities 152,111  (818) 150,187  (2,616) 302,298  (3,434)
Short-term investments 1,706,815  (1,540) —  —  1,706,815  (1,540)
Total $ 1,858,926  $ (2,358) $ 150,187  $ (2,616) $ 2,009,113  $ (4,974)

At September 30, 2020, the Company held 78 available-for-sale securities with a total estimated fair value of $2.0 billion and gross unrealized losses of $5.0 million. Of these 78 securities, 25 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $150.2 million and gross unrealized losses of $2.6 million. The Company does not intend to sell or believe it will be required to sell these available-for-sale securities before recovery of their amortized cost.

December 31, 2019
Less than 12 months 12 months or longer Total
(dollars in thousands) Estimated
Fair
Value 		Gross
Unrealized
Holding  Losses 		Estimated
Fair
Value 		Gross
Unrealized
Holding  Losses 		Estimated
Fair
Value 		Gross
Unrealized
Holding  Losses
Fixed maturity securities:
U.S. Treasury securities $ 36,862  $ (361) $ 46,518  $ (41) $ 83,380  $ (402)
U.S. government-sponsored enterprises 24,148  (197) 2,868  (3) 27,016  (200)
Obligations of states, municipalities and political subdivisions 127,836  (702) 6,830  (110) 134,666  (812)
Foreign governments 162,907  (3,393) 159,888  (6,005) 322,795  (9,398)
Commercial mortgage-backed securities 202,530  (1,126) 33,853  (256) 236,383  (1,382)
Residential mortgage-backed securities 11,706  (66) 58,162  (451) 69,868  (517)
Asset-backed securities —  —  3,632  (22) 3,632  (22)
Corporate bonds 41,847  (1,287) 40,274  (399) 82,121  (1,686)
Total fixed maturity securities 607,836  (7,132) 352,025  (7,287) 959,861  (14,419)
Short-term investments 3,316  (60) —  —  3,316  (60)
Total $ 611,152  $ (7,192) $ 352,025  $ (7,287) $ 963,177  $ (14,479)

At December 31, 2019, the Company held 201 securities with a total estimated fair value of $963.2 million and gross unrealized losses of $14.5 million. Of these 201 securities, 122 securities had been in a continuous unrealized loss position for one year or longer and had a total estimated fair value of $352.0 million and gross unrealized losses of $7.3 million.

13
Following the adoption of ASC 326, as described in note 1, beginning January 1, 2020 the Company completes a detailed analysis each quarter to assess whether the decline in the fair value of any investment below its cost basis is the result of a credit loss. All available-for-sale securities with unrealized losses are reviewed. The Company considers many factors in completing its quarterly review of securities with unrealized losses for credit-related impairment to determine whether a credit loss exists, including the extent to which fair value is below cost, the implied yield to maturity, rating downgrades of the security and whether or not the issuer has failed to make scheduled principal or interest payments. The Company also takes into consideration information about the financial condition of the issuer and industry factors that could negatively impact the capital markets.

If the decline in fair value of an available-for-sale security below its amortized cost is considered to be the result of a credit loss, the Company compares the estimated present value of the cash flows expected to be collected to the amortized cost of the security. The extent to which the estimated present value of the cash flows expected to be collected is less than the amortized cost of the security represents the credit loss, which is recorded as an allowance and recognized in net income. The allowance is limited to the difference between the fair value and the amortized cost of the security. Any remaining decline in fair value represents the non-credit portion of the impairment, which is recognized in other comprehensive income.

The Company also considers whether it intends to sell an available-for-sale security or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost. In these instances, a decline in fair value is recognized in net income based on the fair value of the security at the time of assessment, resulting in a new cost basis for the security.

c)The amortized cost and estimated fair value of fixed maturity securities at September 30, 2020 are shown below by contractual maturity.
(dollars in thousands) Amortized
Cost 		Estimated
Fair Value
Due in one year or less $ 346,355  $ 348,093 
Due after one year through five years 1,512,824  1,608,497 
Due after five years through ten years 2,169,620  2,385,810 
Due after ten years 2,746,903  3,168,461 
6,775,702  7,510,861 
Commercial mortgage-backed securities 1,682,784  1,833,694 
Residential mortgage-backed securities 825,711  893,354 
Asset-backed securities 6,165  6,333 
Total fixed maturity securities $ 9,290,362  $ 10,244,242 

d)The following table presents the components of net investment income.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Interest:
Municipal bonds (tax-exempt) $ 15,693  $ 17,456  $ 48,451  $ 54,167 
Municipal bonds (taxable) 16,456  18,442  50,185  55,634 
Other taxable bonds 38,788  40,560  118,376  122,583 
Short-term investments, including overnight deposits 894  14,294  13,516  38,259 
Dividends on equity securities 20,282  25,493  66,916  73,486 
Income (loss) from equity method investments 2,483  366  (11,849) 3,436 
Other (365) 797  438  3,971 
94,231  117,408  286,033  351,536 
Investment expenses (3,847) (4,026) (11,791) (12,141)
Net investment income $ 90,384  $ 113,382  $ 274,242  $ 339,395 

14
e)The following table presents the components of net investment gains (losses) and the change in net unrealized gains included in other comprehensive income.

  Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Fixed maturity securities:
Realized gains $ 5,292  $ 856  $ 12,025  $ 2,660 
Realized losses (1,209) (198) (7,480) (1,109)
Change in allowance for expected credit losses 202  —  —  — 
Short-term investments:
Realized gains 655  1,540  1,756  1,288 
Realized losses (43) (2,172) (399) (2,659)
Cost-method investments:
Realized gains —  —  11,167  — 
Other investment gains (losses): 38  124  (5,208) 584 
Net realized investment gains 4,935  150  11,861  764 
Equity securities:
Change in fair value of securities sold during the period 16,090  (345) (453,258) 35,786 
Change in fair value of securities held at the end of the period 518,277  32,339  210,501  1,033,438 
Total change in fair value 534,367  31,994  (242,757) 1,069,224 
Net investment gains (losses) $ 539,302  $ 32,144  $ (230,896) $ 1,069,988 
Change in net unrealized gains on available-for-sale investments included in other comprehensive income:
Fixed maturity securities $ 96,723  $ 95,170  $ 431,811  $ 509,712 
Short-term investments 1,425  (2,266) (2,153) 1,595 
Reserve deficiency adjustment for life and annuity benefit reserves (see note 11)
(20,625) (31,314) (56,237) (93,065)
Net increase $ 77,523  $ 61,590  $ 373,421  $ 418,242 

15
5. Fair Value Measurements

ASC 820, Fair Value Measurements and Disclosures, establishes a three-level hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the assets or liabilities fall within different levels of the hierarchy, the classification is based on the lowest level input that is significant to the fair value measurement of the asset or liability.

Classification of assets and liabilities within the hierarchy considers the markets in which the assets and liabilities are traded and the reliability and transparency of the assumptions used to determine fair value. The hierarchy requires the use of observable market data when available. The levels of the hierarchy are defined as follows:

Level 1 – Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities traded in active markets.

Level 2 – Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

Level 3 – Inputs to the valuation methodology are unobservable for the asset or liability and are significant to the fair value measurement.

In accordance with ASC 820, the Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods, including the market, income and cost approaches. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. The following section describes the valuation methodologies used by the Company to measure assets and liabilities at fair value, including an indication of the level within the fair value hierarchy in which each asset or liability is generally classified.

Available-for-sale investments and equity securities. Available-for-sale investments and equity securities are recorded at fair value on a recurring basis. Available-for-sale investments include fixed maturity securities and short-term investments. Short-term investments include certificates of deposit, commercial paper, discount notes and treasury bills with original maturities of one year or less. Fair value for available-for-sale investments and equity securities are determined by the Company after considering various sources of information, including information provided by a third party pricing service. The pricing service provides prices for substantially all of the Company's fixed maturity securities and equity securities. In determining fair value, the Company generally does not adjust the prices obtained from the pricing service. The Company obtains an understanding of the pricing service's valuation methodologies and related inputs, which include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers, duration, credit ratings, estimated cash flows and prepayment speeds. The Company validates prices provided by the pricing service by reviewing prices from other pricing sources and analyzing pricing data in certain instances.

The Company has evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs. Level 1 investments include those traded on an active exchange, such as the New York Stock Exchange. Level 2 investments include U.S. Treasury securities, U.S. government-sponsored enterprises, municipal bonds, foreign government bonds, commercial mortgage-backed securities, residential mortgage-backed securities, asset-backed securities and corporate debt securities. Level 3 investments include the Company's investments in certain insurance-linked securities funds managed by Markel CATCo Investment Management Ltd. (MCIM), a consolidated subsidiary, that are not traded on an active exchange, as further described and defined in note 12 (the Markel CATCo Funds), and are valued using unobservable inputs.
16
Fair value for available-for-sale investments and equity securities is measured based upon quoted prices in active markets, if available. Due to variations in trading volumes and the lack of quoted market prices, fixed maturity securities are classified as Level 2 investments. The fair value of fixed maturity securities is normally derived through recent reported trades for identical or similar securities, making adjustments through the reporting date based upon available market observable data described above. If there are no recent reported trades, the fair value of fixed maturity securities may be derived through the use of matrix pricing or model processes, where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Significant inputs used to determine the fair value of obligations of states, municipalities and political subdivisions, corporate bonds and obligations of foreign governments include reported trades, benchmark yields, issuer spreads, bids, offers, credit information and estimated cash flows. Significant inputs used to determine the fair value of commercial mortgage-backed securities, residential mortgage-backed securities and asset-backed securities include the type of underlying assets, benchmark yields, prepayment speeds, collateral information, tranche type and volatility, estimated cash flows, credit information, default rates, recovery rates, issuer spreads and the year of issue.

Due to the significance of unobservable inputs required in measuring the fair value of the Company's investments in the Markel CATCo Funds, these investments are classified as Level 3 within the fair value hierarchy. The fair value of the securities are derived using their reported net asset value (NAV) as the primary input, as well as other observable and unobservable inputs as deemed necessary by management. Management has obtained an understanding of the inputs, assumptions, process and controls used to determine NAV, which is calculated by an independent third party. Unobservable inputs to the NAV calculations include assumptions around premium earnings patterns and loss reserve estimates for the underlying securitized reinsurance contracts in which the Markel CATCo Funds invest. Significant unobservable inputs used in the valuation of these investments include an adjustment to include the fair value of the equity that was issued by one of the Markel CATCo Funds in exchange for notes receivable, rather than cash, which is excluded from NAV. The determination of fair value of the securities also considers external market data, including the trading price relative to its NAV of CATCo Reinsurance Opportunities Fund Ltd. (CROF), a comparable security traded on a market operated by the London Stock Exchange and on the Bermuda Stock Exchange. In July 2019, the Markel CATCo Funds were placed into run-off and capital is being returned to investors as it becomes available. However, due to the significant loss events on the underlying securitized reinsurance contracts in 2017 and 2018, portions of the Company's investments may be restricted up to three years.

The Company's valuation policies and procedures for Level 3 investments are determined by management. Fair value measurements are analyzed quarterly to ensure the change in fair value from prior periods is reasonable relative to management's understanding of the underlying investments, recent market trends and external market data.

Senior long-term debt and other debt. Senior long-term debt and other debt is carried at amortized cost with the estimated fair value disclosed on the consolidated balance sheets. Senior long-term debt and other debt is classified as Level 2 within the fair value hierarchy due to variations in trading volumes and the lack of quoted market prices. Fair value for senior long-term debt and other debt is generally derived through recent reported trades for identical securities, making adjustments through the reporting date, if necessary, based upon available market observable data including U.S. Treasury securities and implied credit spreads. Significant inputs used to determine the fair value of senior long-term debt and other debt include reported trades, benchmark yields, issuer spreads, bids and offers.

17
The following tables present the balances of assets measured at fair value on a recurring basis by level within the fair value hierarchy.
September 30, 2020
(dollars in thousands) Level 1 Level 2 Level 3 Total
Assets:
Investments:
Fixed maturity securities, available-for-sale:
U.S. Treasury securities $ —  $ 362,738  $ —  $ 362,738 
U.S. government-sponsored enterprises —  524,817  —  524,817 
Obligations of states, municipalities and political subdivisions —  4,286,299  —  4,286,299 
Foreign governments —  1,542,191  —  1,542,191 
Commercial mortgage-backed securities —  1,833,694  —  1,833,694 
Residential mortgage-backed securities —  893,354  —  893,354 
Asset-backed securities —  6,333  —  6,333 
Corporate bonds —  794,816  —  794,816 
Total fixed maturity securities, available-for-sale —  10,244,242  —  10,244,242 
Equity securities:
Insurance, banks and other financial institutions 2,161,293  —  102,050  2,263,343 
Industrial, consumer and all other 3,920,601  —  —  3,920,601 
Total equity securities 6,081,894  —  102,050  6,183,944 
Short-term investments, available-for-sale 1,787,423  110,036  —  1,897,459 
Total investments $ 7,869,317  $ 10,354,278  $ 102,050  $ 18,325,645 

December 31, 2019
(dollars in thousands) Level 1 Level 2 Level 3 Total
Assets:
Investments:
Fixed maturity securities, available-for-sale:
U.S. Treasury securities $ —  $ 284,786  $ —  $ 284,786 
U.S. government-sponsored enterprises —  342,580  —  342,580 
Obligations of states, municipalities and political subdivisions —  4,189,882  —  4,189,882 
Foreign governments —  1,542,004  —  1,542,004 
Commercial mortgage-backed securities —  1,817,845  —  1,817,845 
Residential mortgage-backed securities —  888,073  —  888,073 
Asset-backed securities —  11,048  —  11,048 
Corporate bonds —  894,691  —  894,691 
Total fixed maturity securities, available-for-sale —  9,970,909  —  9,970,909 
Equity securities:
Insurance, banks and other financial institutions 2,463,190  —  45,992  2,509,182 
Industrial, consumer and all other 5,081,573  —  —  5,081,573 
Total equity securities 7,544,763  —  45,992  7,590,755 
Short-term investments, available-for-sale 1,093,799  102,449  —  1,196,248 
Total investments $ 8,638,562  $ 10,073,358  $ 45,992  $ 18,757,912 

18
The following table summarizes changes in Level 3 investments measured at fair value on a recurring basis.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Equity securities, beginning of period $ 115,648  $ 37,988  $ 45,992  $ 53,728 
Purchases —  —  90,000  500 
Sales (13,472) (857) (31,365) (7,726)
Net investment gains (losses) on Level 3 investments (126) 7,358  (2,577) (2,013)
Transfers into Level 3 —  —  —  — 
Transfers out of Level 3 —  —  —  — 
Equity securities, end of period $ 102,050  $ 44,489  $ 102,050  $ 44,489 

In connection with the run-off of one of the Markel CATCo Funds and to facilitate the return of capital to third party investors, the Company invested $90.0 million in that fund effective January 1, 2020. This investment replaces collateral previously provided by other investors for risk exposures within the underlying reinsurance contracts in which the fund is invested related to loss events that occur after December 31, 2019 and through the expiration of the reinsurance contracts, all of which either had expired or were commuted as of September 30, 2020. Underwriting results for the 2020 loss exposures on these contracts are attributed to the Company through its investment in the fund.

Except as disclosed in note 3, the Company did not have any assets or liabilities measured at fair value on a non-recurring basis during the nine months ended September 30, 2020 and 2019.

6. Receivables

The following table presents the components of receivables and the related allowance for credit losses.
(dollars in thousands) September 30, 2020 December 31, 2019
Amounts receivable from agents, brokers and insureds $ 1,527,801  $ 1,424,881 
Trade accounts receivable 330,721  259,062 
Other 171,889  182,582 
2,030,411  1,866,525 
Allowance for credit losses (26,331) (18,723)
Receivables $ 2,004,080  $ 1,847,802 

The increase in the allowance for credit losses on receivables from December 31, 2019 to September 30, 2020 reflects the impact of adopting ASC 326 effective January 1, 2020 as well as a decline in short-term economic conditions as forecasted during the nine months ended September 30, 2020 as a result of expected impacts from the COVID-19 pandemic. See note 1 for further details regarding the impact of adopting ASC 326.
19
7. 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 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 within the Company's underwriting operations. The Reinsurance segment includes all treaty reinsurance written within the Company's underwriting operations. All investing activities related to the Company's insurance operations are included in the Investing segment.

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.

The Company's other operations include the results of the Company's insurance-linked securities operations and program services business, as well as the results of its legal and professional consulting services. 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 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 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. Underwriting and investing assets are not allocated to the Company's underwriting 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.

20
a)The following tables summarize the Company's segment disclosures.
Quarter Ended September 30, 2020
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 1,514,002  $ 222,066  $ —  $ —  $ 536,666  $ 2,272,734 
Net written premiums 1,220,054  178,994  —  —  (1,772) 1,397,276 
Earned premiums 1,173,758  222,369  —  —  (1,699) 1,394,428 
Losses and loss adjustment expenses:
Current accident year (817,174) (213,325) —  —  —  (1,030,499)
Prior accident years 137,312  30,681  —  —  (741) 167,252 
Amortization of policy acquisition costs (239,096) (56,997) —  —  —  (296,093)
Other operating expenses (179,840) (17,609) —  —  718  (196,731)
Underwriting profit (loss) 74,960  (34,881) —  —  (1,722) 38,357 
Net investment income —  —  90,380  4  —  90,384 
Net investment gains —  —  539,302  —  —  539,302 
Products revenues —  —  —  342,039  —  342,039 
Services and other revenues —  —  —  482,089  63,493  545,582 
Products expenses —  —  —  (296,371) —  (296,371)
Services and other expenses —  —  —  (432,294) (89,943) (522,237)
Amortization of intangible assets (3)
—  —  —  (15,862) (28,802) (44,664)
Segment profit (loss) $ 74,960  $ (34,881) $ 629,682  $ 79,605  $ (56,974) $ 692,392 
Interest expense (42,744)
Net foreign exchange losses (65,577)
Income before income taxes $ 584,071 
U.S. GAAP combined ratio (4)
94  % 116  % NM (5) 97  %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $15.3 million for the quarter ended September 30, 2020.
(2)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. Amortization of intangible assets attributable to the Company's underwriting segments was $10.4 million for the quarter ended September 30, 2020, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)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.
(5)NM - Ratio is not meaningful
21
Quarter Ended September 30, 2019
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 1,418,363  $ 226,387  $ —  $ —  $ 619,742  $ 2,264,492 
Net written premiums 1,181,919  187,180  —  —  1,285  1,370,384 
Earned premiums 1,058,869  240,144  —  —  1,019  1,300,032 
Losses and loss adjustment expenses:
Current accident year (722,172) (178,058) —  —  —  (900,230)
Prior accident years 135,029  13,800  —  —  (733) 148,096 
Amortization of policy acquisition costs (218,710) (61,925) —  —  —  (280,635)
Other operating expenses (171,731) (20,436) —  —  (2,417) (194,584)
Underwriting profit (loss) 81,285  (6,475) —  —  (2,131) 72,679 
Net investment income —  —  113,220  162  —  113,382 
Net investment gains —  —  32,144  —  —  32,144 
Products revenues —  —  —  386,708  —  386,708 
Services and other revenues —  —  —  109,373  91,419  200,792 
Products expenses —  —  —  (354,404) —  (354,404)
Services and other expenses —  —  —  (96,015) (57,343) (153,358)
Amortization of intangible assets (3)
—  —  —  (10,357) (25,338) (35,695)
Segment profit (loss) $ 81,285  $ (6,475) $ 145,364  $ 35,467  $ 6,607  $ 262,248 
Interest expense (47,465)
Net foreign exchange gains 53,850 
Loss on early extinguishment of debt (6,705)
Income before income taxes $ 261,928 
U.S. GAAP combined ratio (4)
92  % 103  % NM (5) 94  %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $12.9 million for the quarter ended September 30, 2019.
(2)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. Amortization of intangible assets attributable to the Company's underwriting segments was $9.8 million for the quarter ended September 30, 2019, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)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.
(5)NM - Ratio is not meaningful
22

Nine Months Ended September 30, 2020
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 4,482,149  $ 958,529  $ —  $ —  $ 1,528,072  $ 6,968,750 
Net written premiums 3,683,767  820,573  —  —  (4,191) 4,500,149 
Earned premiums 3,400,760  688,884  —  —  (4,333) 4,085,311 
Losses and loss adjustment expenses:
Current accident year (2,554,010) (534,218) —  —  —  (3,088,228)
Prior accident years 404,649  29,049  —  —  1,719  435,417 
Amortization of policy acquisition costs (717,300) (176,799) —  —  —  (894,099)
Other operating expenses (530,440) (51,001) —  —  (1,809) (583,250)
Underwriting profit (loss) 3,659  (44,085) —  —  (4,423) (44,849)
Net investment income —  —  274,000  242  —  274,242 
Net investment losses —  —  (230,896) —  —  (230,896)
Products revenues —  —  —  1,117,781  —  1,117,781 
Services and other revenues —  —  —  895,469  237,509  1,132,978 
Products expenses —  —  —  (974,925) —  (974,925)
Services and other expenses —  —  —  (798,502) (226,231) (1,024,733)
Amortization of intangible assets (3)
—  —  —  (39,299) (80,977) (120,276)
Segment profit (loss) $ 3,659  $ (44,085) $ 43,104  $ 200,766  $ (74,122) $ 129,322 
Interest expense (133,201)
Net foreign exchange losses (8,736)
Loss before income taxes $ (12,615)
U.S. GAAP combined ratio (4)
100  % 106  % NM (5) 101  %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $43.5 million for the nine months ended September 30, 2020.
(2)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. Amortization of intangible assets attributable to the Company's underwriting segments was $31.5 million for the nine months ended September 30, 2020, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)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.
(5)NM - Ratio is not meaningful

23
Nine Months Ended September 30, 2019
(dollars in thousands) Insurance Reinsurance Investing
Markel Ventures (1)
Other (2)
Consolidated
Gross premium volume $ 3,979,559  $ 963,145  $ —  $ —  $ 1,823,977  $ 6,766,681 
Net written premiums 3,306,447  844,949  —  —  1,719  4,153,115 
Earned premiums 3,023,865  678,382  —  —  1,223  3,703,470 
Losses and loss adjustment expenses:
Current accident year (1,998,042) (456,870) —  —  —  (2,454,912)
Prior accident years 309,324  20,695  —  —  6,893  336,912 
Amortization of policy acquisition costs (627,318) (178,209) —  —  —  (805,527)
Other operating expenses (526,884) (58,301) —  —  (2,035) (587,220)
Underwriting profit 180,945  5,697  —  —  6,081  192,723 
Net investment income —  —  338,783  612  —  339,395 
Net investment gains —  —  1,069,988  —  —  1,069,988 
Products revenues —  —  —  1,237,178  —  1,237,178 
Services and other revenues —  —  —  330,653  263,978  594,631 
Products expenses —  —  —  (1,098,968) —  (1,098,968)
Services and other expenses —  —  —  (290,745) (208,015) (498,760)
Amortization of intangible assets (3)
—  —  —  (31,674) (80,989) (112,663)
Segment profit (loss) $ 180,945  $ 5,697  $ 1,408,771  $ 147,056  $ (18,945) $ 1,723,524 
Interest expense (129,022)
Net foreign exchange gains 57,001 
Loss on early extinguishment of debt (6,705)
Income before income taxes $ 1,644,798 
U.S. GAAP combined ratio (4)
94  % 99  % NM (5) 95  %
(1)Products expenses and services and other expenses for the Markel Ventures segment include depreciation expense of $40.4 million for the nine months ended September 30, 2019.
(2)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. Amortization of intangible assets attributable to the Company's underwriting segments was $29.5 million for the nine months ended September 30, 2019, however, the Company does not allocate amortization of intangible assets between the Insurance and Reinsurance segments.
(3)Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to the Company's Insurance and Reinsurance segments.
(4)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.
(5)NM - Ratio is not meaningful

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

(dollars in thousands) September 30, 2020 December 31, 2019
Segment assets:
Investing $ 23,412,502  $ 22,129,633 
Underwriting 7,304,769  6,621,639 
Markel Ventures 3,657,470  2,550,835 
Total segment assets 34,374,741  31,302,107 
Other operations 5,795,278  6,171,708 
Total assets $ 40,170,019  $ 37,473,815 

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8. Products, Services and Other Revenues

The amount of revenues from contracts with customers was $839.2 million and $535.7 million for the quarters ended September 30, 2020 and 2019, respectively, and $2.1 billion and $1.7 billion for the nine months ended September 30, 2020 and 2019, respectively.

The following tables present revenues from contracts with customers by segment and type, all of which are included in products revenues and services and other revenues in the consolidated statements of income (loss) and comprehensive income.
Quarter Ended September 30,
2020 2019
(dollars in thousands) Markel Ventures Other Total Markel Ventures Other Total
Products $ 332,584  $ —  $ 332,584  $ 378,421  $ —  $ 378,421 
Services 467,377  18,136  485,513  97,062  17,516  114,578 
Investment management —  21,066  21,066  —  42,750  42,750 
Total revenues from contracts with customers 799,961  39,202  839,163  475,483  60,266  535,749 
Program services and other fronting —  23,395  23,395  —  30,775  30,775 
Other 24,167  896  25,063  20,598  378  20,976 
Total $ 824,128  $ 63,493  $ 887,621  $ 496,081  $ 91,419  $ 587,500 

Nine Months Ended September 30,
2020 2019
(dollars in thousands) Markel Ventures Other Total Markel Ventures Other Total
Products $ 1,085,338  $ —  $ 1,085,338  $ 1,198,124  $ —  $ 1,198,124 
Services 850,861  86,143  937,004  291,617  64,142  355,759 
Investment management —  75,898  75,898  —  113,738  113,738 
Total revenues from contracts with customers 1,936,199  162,041  2,098,240  1,489,741  177,880  1,667,621 
Program services and other fronting —  73,889  73,889  —  84,953  84,953 
Other 77,051  1,579  78,630  78,090  1,145  79,235 
Total $ 2,013,250  $ 237,509  $ 2,250,759  $ 1,567,831  $ 263,978  $ 1,831,809 

Receivables from contracts with customers were $378.3 million and $263.9 million as of September 30, 2020 and December 31, 2019, respectively.

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9. Unpaid Losses and Loss Adjustment Expenses

The following table presents a reconciliation of consolidated beginning and ending reserves for losses and loss adjustment expenses.
Nine Months Ended September 30,
(dollars in thousands) 2020 2019
Net reserves for losses and loss adjustment expenses, beginning of year $ 9,475,261  $ 9,214,443 
Effect of foreign currency rate changes on beginning of year balance (25,659) (51,544)
Effect of adoption of ASC 326 (see note 2) 3,849  — 
Adjusted net reserves for losses and loss adjustment expenses, beginning of year 9,453,451  9,162,899 
Incurred losses and loss adjustment expenses:
Current accident year 3,088,228  2,454,912 
Prior accident years (435,467) (336,942)
Total incurred losses and loss adjustment expenses 2,652,761  2,117,970 
Payments:
Current accident year 469,447  410,493 
Prior accident years 1,407,641  1,597,117 
Total payments 1,877,088  2,007,610 
Effect of foreign currency rate changes on current year activity (220) (669)
Net reserves for losses and loss adjustment expenses, end of period 10,228,904  9,272,590 
Reinsurance recoverables on unpaid losses 5,494,327  5,165,226 
Gross reserves for losses and loss adjustment expenses, end of period $ 15,723,231  $ 14,437,816 

Underwriting results for the nine months ended September 30, 2020 included $371.8 million of net losses and loss adjustment expenses attributed to the COVID-19 pandemic, including $356.8 million for which COVID-19 was identified as the proximate, or direct, cause of loss. These losses and loss adjustment expenses were net of ceded losses of $92.6 million.

Both the gross and net loss estimates for direct losses attributed to COVID-19 represent the Company's best estimates as of September 30, 2020 based upon information currently available. The Company's estimates for these direct losses and loss adjustment expenses are based on reported claims, as well as detailed policy level reviews and reviews of in-force assumed reinsurance contracts for potential exposures. These estimates also consider analysis provided by brokers and claims counsel. There are no recent historical events with similar characteristics to COVID-19, and therefore the Company has no past loss experience on which to base its estimates. Additionally, the economic and social impacts of the pandemic continue to evolve.

Significant assumptions on which the Company's estimates of reserves for direct COVID-19 losses and loss adjustment expenses are based include:
•the scope of coverage provided under the Company's policies, particularly those that provide for business interruption coverage;
•coverage provided under the Company's ceded reinsurance contracts;
•the expected duration of the disruption caused by the COVID-19 pandemic; and
•the ability of insureds to mitigate some or all of their losses.

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The Company's estimates continue to be based on broad assumptions about coverage, liability and reinsurance. Additionally, it is highly likely that there will be significant litigation involved in the handling of claims associated with COVID-19, and in certain instances, assessing the validity of policy exclusions for pandemics and interpreting policy terms to determine coverage for pandemics. Such matters have been, and are expected to continue to be, subject to judicial review and also may be subject to government action. A test case of a sample of business interruption coverages for policies written in the United Kingdom, which do not have the same exclusions as policies commonly written in the U.S., concluded in the third quarter of 2020 with the court's judgment finding mostly in favor of policyholders. This ruling was most impactful to certain estimates in the Company's Reinsurance segment, resulting in an increase in the Company's estimate of losses and loss adjustment expenses on certain treaties during the third quarter following an increase in estimated losses by the respective cedents on the treaties. The Company's estimates at September 30, 2020 also reflect additional data gathered through increased claims reporting and a change in expectation of the duration of the pandemic. While the Company believes the net reserves for losses and loss adjustment expenses for COVID-19 as of September 30, 2020 are adequate based on information available at this time, the Company will continue to closely monitor reported claims, government actions, judicial decisions and changes in the levels of worldwide social disruption and economic activity arising from the pandemic and will adjust the estimates of gross and net losses as new information becomes available. Such adjustments to the Company's reserves for COVID-19 losses and loss adjustment expenses may be material to the Company's results of operations, financial condition and cash flows. See note 16 for details regarding other potential loss exposures arising from the pandemic.

In 2020, underwriting results also included $101.0 million of underwriting loss from Hurricanes Laura, Sally and Isaias as well as the derecho in Iowa and wildfires in the western U.S. (2020 Catastrophes). The net loss estimates on the 2020 Catastrophes represent the Company's best estimates based upon information currently available. The estimates for these losses are based on preliminary industry loss estimates, output from both industry and proprietary models, claims received to date and detailed policy and reinsurance contract level reviews. Due to limited claims activity thus far on the 2020 Catastrophes, these loss estimates are still dependent on broad assumptions about coverage, liability and reinsurance and are therefore subject to a wide range of variability. While the Company believes its reserves for the 2020 Catastrophes as of September 30, 2020 are adequate, it continues to closely monitor industry loss estimates and reported claims and will adjust estimates of gross and net losses as new information becomes available.

In 2019, underwriting results included $42.6 million of underwriting loss from Hurricane Dorian and Typhoon Faxai (2019 Catastrophes). The underwriting loss on the 2019 Catastrophes was comprised of $45.1 million of net losses and loss adjustment expenses partially offset by $2.5 million of net assumed reinstatement premiums.

For the nine months ended September 30, 2020, incurred losses and loss adjustment expenses included $435.5 million of favorable development on prior years' loss reserves, which included $294.9 million of favorable development on the Company's general liability, professional liability and workers' compensation product lines within the Insurance segment and property product lines within the Reinsurance segment.

For the nine months ended September 30, 2019, incurred losses and loss adjustment expenses included $336.9 million of favorable development on prior years' loss reserves, which included $257.7 million of favorable development on the Company's general liability, workers' compensation and professional liability product lines within the Insurance segment and aviation, auto and whole account product lines within the Reinsurance segment.

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10. Reinsurance

The following table summarizes the effect of reinsurance and retrocessional reinsurance on premiums written and earned.
Quarter Ended September 30,
2020 2019
(dollars in thousands) Direct Assumed Ceded Net Premiums Direct Assumed Ceded Net Premiums
Underwriting:
Written $ 1,420,067  $ 315,774  $ (337,181) $ 1,398,660  $ 1,358,243  $ 282,506  $ (271,094) $ 1,369,655 
Earned 1,323,451  362,539  (290,058) 1,395,932  1,219,103  327,431  (246,965) 1,299,569 
Program services and other:
Written 518,921  17,972  (538,277) (1,384) 584,196  39,547  (623,014) 729 
Earned 491,524  14,489  (507,517) (1,504) 576,576  20,399  (596,512) 463 
Consolidated:
Written 1,938,988  333,746  (875,458) 1,397,276  1,942,439  322,053  (894,108) 1,370,384 
Earned $ 1,814,975  $ 377,028  $ (797,575) $ 1,394,428  $ 1,795,679  $ 347,830  $ (843,477) $ 1,300,032 

Nine Months Ended September 30,
2020 2019
(dollars in thousands) Direct Assumed Ceded Net Premiums Direct Assumed Ceded Net Premiums
Underwriting:
Written $ 4,229,398  $ 1,211,335  $ (936,342) $ 4,504,391  $ 3,808,759  $ 1,129,440  $ (786,704) $ 4,151,495 
Earned 3,886,390  1,035,501  (832,196) 4,089,695  3,510,203  946,648  (754,505) 3,702,346 
Program services and other:
Written 1,475,709  52,308  (1,532,259) (4,242) 1,754,613  73,869  (1,826,862) 1,620 
Earned 1,535,248  54,800  (1,594,432) (4,384) 1,629,659  49,672  (1,678,207) 1,124 
Consolidated:
Written 5,705,107  1,263,643  (2,468,601) 4,500,149  5,563,372  1,203,309  (2,613,566) 4,153,115 
Earned $ 5,421,638  $ 1,090,301  $ (2,426,628) $ 4,085,311  $ 5,139,862  $ 996,320  $ (2,432,712) $ 3,703,470 

Substantially all of the premiums written and earned in the Company's program services and other fronting operations for the quarter and nine months ended September 30, 2020 and 2019 were ceded. The percentage of consolidated ceded earned premiums to gross earned premiums was 36% and 37% for the quarter and nine months ended September 30, 2020, respectively, and 39% and 40% for the quarter and nine months ended September 30, 2019, respectively. The percentage of consolidated assumed earned premiums to net earned premiums was 27% for both the quarter and nine months ended September 30, 2020 as well as the quarter and nine months ended September 30, 2019.

Substantially all of the incurred losses and loss adjustment expenses in the Company's program services and other fronting operations, which totaled $412.7 million for both the quarter ended September 30, 2020 and 2019 and $1.1 billion for both the nine months ended September 30, 2020 and 2019, were ceded.

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The following table summarizes the effect of reinsurance and retrocessional reinsurance on losses and loss adjustment expenses in the Company's underwriting operations.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Gross $ 1,023,479  $ 846,549  $ 3,135,105  $ 2,561,579 
Ceded (160,387) (94,362) (481,874) (443,774)
Net losses and loss adjustment expenses $ 863,092  $ 752,187  $ 2,653,231  $ 2,117,805 

The following table presents the Company's reinsurance recoverables and the related allowance for credit losses.
(dollars in thousands) September 30, 2020 December 31, 2019
Reinsurance recoverables, gross $ 5,696,938  $ 5,459,561 
Allowance for credit losses (31,100) (26,849)
Reinsurance recoverables $ 5,665,838  $ 5,432,712 

The increase in the allowance for credit losses on reinsurance recoverables from December 31, 2019 to September 30, 2020 reflects the impact of adopting ASC 326 effective January 1, 2020 as well as a decline in short-term economic conditions as forecasted during the first nine months of 2020 as a result of expected impacts from the COVID-19 pandemic. See note 1 for further details regarding the impact of adopting ASC 326.

11. Life and Annuity Benefits

Life and annuity benefits are compiled on a reinsurance contract-by-contract basis and are discounted using standard actuarial techniques and cash flow models. Since the development of the life and annuity reinsurance reserves is based upon cash flow projection models, the Company must make estimates and assumptions based on cedent experience, industry mortality tables, and expense and investment experience, including a provision for adverse deviation. The assumptions used to determine policy benefit reserves are generally locked-in for the life of the contract unless an unlocking event occurs. Loss recognition testing is performed to determine if existing policy benefit reserves, together with the present value of future gross premiums and expected investment income earned thereon, are adequate to cover the present value of future benefits, settlement and maintenance costs. If the existing policy benefit reserves are not sufficient, the locked-in assumptions are revised to current best estimate assumptions and a charge to earnings for life and annuity benefits is recognized at that time.

Life and annuity benefits are also adjusted to the extent unrealized gains on the investments supporting the policy benefit reserves would result in a reserve deficiency if those gains were realized. During the quarter and nine months ended September 30, 2020, the Company recognized a reserve deficiency resulting from a decrease in the market yield on the investment portfolio supporting the policy benefit reserves by increasing life and annuity benefits by $20.6 million and $56.2 million, respectively, and decreasing the change in net unrealized holding gains included in other comprehensive income by a corresponding amount. As of September 30, 2020 and December 31, 2019, the cumulative adjustment to life and annuity benefits attributable to unrealized gains on the underlying investment portfolio totaled $107.6 million and $51.4 million, respectively. The adjustment required for the quarter and nine months ended September 30, 2019 was $31.3 million and $93.1 million, respectively.

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12. Variable Interest Entities

MCIM, a wholly-owned consolidated subsidiary of the Company, is an insurance-linked securities investment fund manager and reinsurance manager headquartered in Bermuda. Results attributable to MCIM are not included in a reportable segment.

MCIM serves as the insurance manager for Markel CATCo Re, a Bermuda Class 3 reinsurance company, and as the investment manager for Markel CATCo Reinsurance Fund Ltd., a Bermuda exempted mutual fund company comprised of multiple segregated accounts (Markel CATCo Funds). The Markel CATCo Funds issue multiple classes of nonvoting, redeemable preference shares to investors and the Markel CATCo Funds are primarily invested in nonvoting preference shares of Markel CATCo Re. The underwriting results of Markel CATCo Re are attributed to the Markel CATCo Funds through those nonvoting preference shares. Voting shares in Markel CATCo Reinsurance Fund Ltd. and Markel CATCo Re are held by MCIM.

The Markel CATCo Funds and Markel CATCo Re are considered VIEs, as their preference shareholders have no voting rights. MCIM has the power to direct the activities that most significantly impact the economic performance of these entities, but does not have a variable interest in any of the entities. Generally, the Company is not the primary beneficiary of the Markel CATCo Funds or Markel CATCo Re, and therefore does not consolidate these entities, as the Company's involvement is generally limited to that of an investment or insurance manager, receiving fees that are at market and commensurate with the level of effort required.

The Company is the sole investor in one of the Markel CATCo Funds, the Markel Diversified Fund, and consolidates that fund as its primary beneficiary. Total assets of the Markel Diversified Fund, which are included on the Company's consolidated balance sheets, were $11.1 million and $19.6 million as of September 30, 2020 and December 31, 2019, respectively, and are primarily comprised of an investment in one of the Markel CATCo Funds. The Company also has investments in another one of the Markel CATCo Funds ($92.4 million and $26.8 million as of September 30, 2020 and December 31, 2019, respectively), which is not consolidated and includes a $90.0 million investment that was made in the first quarter of 2020. See note 5. With the exception of the Company's investment in the Markel Diversified Fund, the Company generally does not have the obligation to absorb losses or the right to receive benefits from its investments in the Markel CATCo Funds that could potentially be significant to the respective fund, and therefore does not consolidate those funds.

The Company's exposure to risk from the unconsolidated Markel CATCo Funds and Markel CATCo Re is generally limited to its investment and any earned but uncollected fees. The Company has not issued any investment performance guarantees to these VIEs or their investors. As of September 30, 2020 and December 31, 2019, net assets under management of MCIM for unconsolidated VIEs were $1.1 billion and $2.7 billion, respectively. See note 15.

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13. Related Party Transactions

The Company engages in certain related party transactions in the normal course of business at arm's length.

Insurance-Linked Securities

Within the Company's insurance-linked securities operations, the Company provides investment and insurance management services through MCIM and Nephila. See note 12 for details regarding operations conducted through MCIM. Nephila serves as the investment manager to several Bermuda, Ireland and U.S. based private funds (the Nephila Funds). To provide access for the Nephila Funds to the insurance, reinsurance and weather markets, Nephila also provides managing general agent services and acts as an insurance manager to certain Bermuda Class 3 and 3A reinsurance companies and Lloyd's Syndicate 2357 (Syndicate 2357) (collectively, the Nephila Reinsurers). The Company receives management fees for investment and insurance management services provided through its insurance-linked securities operations based on the net asset value of the accounts managed, and, for certain funds, incentive fees based on the annual performance of the funds managed. Nephila also receives commissions from the Nephila Reinsurers, which are based on the direct written premiums of the insurance contracts placed. For the quarter and nine months ended September 30, 2020, total revenues from the Company's insurance-linked securities operations were $38.5 million and $146.3 million, respectively, of which $32.8 million and $122.7 million, respectively, were attributed to unconsolidated entities managed by Nephila and MCIM. For the quarter and nine months ended September 30, 2019, total revenues from the Company's insurance-linked securities operations were $54.9 million and $158.6 million, respectively, of which $52.6 million and $152.8 million, respectively, were attributed to unconsolidated entities managed by Nephila and MCIM. Other related party transactions with the Company's insurance-linked securities operations are described below.

Within the Company's program services business, the Company has a program with Nephila through which the Company writes insurance policies that are ceded to Syndicate 2357 and certain other Nephila Reinsurers. Through this arrangement, Nephila utilizes certain of the Company's licensed insurance companies to write U.S. catastrophe exposed property risk that is then ceded to Nephila Reinsurers. Gross premiums written through the Company's program with Nephila were $119.2 million and $332.6 million for the quarter and nine months ended September 30, 2020, respectively, and $126.4 million and $360.6 million for the quarter and nine months ended September 30, 2019, respectively, all of which were ceded to Nephila Reinsurers. As of September 30, 2020 and December 31, 2019, reinsurance recoverables on the consolidated balance sheets included $291.8 million and $238.8 million, respectively, due from Nephila Reinsurers.

Under this program, the Company bears underwriting risk for annual aggregate agreement year losses in excess of a limit the Company believes is unlikely to be exceeded. To the extent losses under this program exceed the prescribed limit, the Company is obligated to pay such losses to the cedents without recourse to the Nephila Reinsurers. While the Company believes losses under this program are unlikely, those losses, if incurred, could be material to the Company's consolidated results of operations and financial condition.

The Company has also entered into other assumed and ceded reinsurance transactions with the Nephila Reinsurers in the normal course of business, which are not material to the Company's consolidated financial statements.

The Hagerty Group, LLC

In June 2019, the Company acquired a minority ownership interest in The Hagerty Group, LLC (Hagerty Group), a company that primarily operates as a managing general agent under the names Hagerty Insurance Agency and Hagerty Classic Marine Insurance Agency (collectively, Hagerty), which is accounted for under the equity method. Hagerty Group also includes Hagerty Re, a Bermuda Class 3 reinsurance company. Essentia Insurance Company (Essentia), one of the Company's insurance subsidiaries, is the exclusive insurance underwriter for Hagerty in the U.S., and a portion of this insurance is ceded to Hagerty Re. For the quarter and nine months ended September 30, 2020, gross written premiums attributable to Hagerty written on Essentia were $144.8 million and $399.7 million, respectively, of which $68.4 million and $189.0 million, respectively, were ceded to Hagerty Re. For the quarter and nine months ended September 30, 2019, gross written premiums attributable to Hagerty written on Essentia were $120.8 million and $333.7 million, respectively, of which $57.7 million and $159.8 million, respectively, were ceded to Hagerty Re.

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14. Shareholders' Equity

a)In May 2020, the Company issued 600,000 6.00% Fixed-Rate Reset Non-Cumulative Series A preferred shares, with no par value and a liquidation preference of $1,000 per share, for an aggregate initial purchase price of $600 million. Net proceeds of the Series A preferred shares offering, after deducting the underwriting discount and offering expenses, was $591.9 million. Preferred stock and related additional paid-in capital are included in preferred stock on the Company's consolidated balance sheets.

The Company has the option to redeem the Series A preferred shares:

•in whole but not in part, at any time, within 90 days after the occurrence of a "rating agency event," at $1,020 per Series A preferred share, plus accrued and unpaid dividends,
•in whole but not in part, at any time, within 90 days after the occurrence of a "regulatory capital event" at $1,000 per Series A preferred share, plus accrued and unpaid dividends, or
•in whole or in part, on June 1, 2025, or every fifth anniversary of that date, at $1,000 per Series A preferred share, plus accrued and unpaid dividends.

A "rating agency event" means that any nationally recognized statistical rating organization that publishes a rating for the Company amends, clarifies or changes the criteria it uses to assign equity credit to securities like the Series A preferred shares, which results in shortening the length of time that the Series A preferred shares are assigned a particular level of equity credit or in the lowering of the equity credit assigned to the preferred shares.

A "regulatory capital event" means that the Company becomes subject to capital adequacy supervision by a capital regulator and determines that, under such capital adequacy guidelines, the liquidation preference amount of the Series A preferred shares would not qualify as capital.

The Series A preferred shares rank senior to the Company's common stock with respect to the payment of dividends and liquidation rights. Holders of the Series A preferred shares will be entitled to receive non-cumulative cash dividends, when, as and if declared by the Board of Directors, from the original issue date, semi-annually in arrears on the first day of June and December of each year, beginning December 1, 2020. The Company accrues dividends when they are declared by the Board of Directors. To the extent declared, these dividends will accrue, on the liquidation preference of $1,000 per share, at a fixed annual rate of 6.00% from the original issue date to June 1, 2025. After June 1, 2025, the dividend rate will reset every five years and accrue at an annual rate equal to the five-year U.S. Treasury Rate as of two business days prior to the reset date, plus 5.662%. Dividends will not be cumulative and will not be mandatory. Accordingly, if dividends are not declared for any dividend period, then dividends for that dividend period will not accrue and will not be payable.

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b)Net income (loss) per common share was determined by dividing adjusted net income (loss) to common shareholders by the applicable weighted average common shares outstanding. Basic common shares outstanding include restricted stock units that are no longer subject to any contingencies for issuance, but for which corresponding shares have not been issued. Diluted net income (loss) per common share is computed by dividing adjusted net income (loss) to common shareholders by the weighted average number of common shares and dilutive potential common shares outstanding during the period.

Quarter Ended September 30, Nine Months Ended September 30,
(in thousands, except per share amounts) 2020 2019 2020 2019
Net income (loss) to common shareholders $ 452,726  $ 205,637  $ (31,269) $ 1,279,362 
Adjustment of redeemable noncontrolling interests (23,621) (12,221) (20,681) 9,464 
Adjusted net income (loss) to common shareholders $ 429,105  $ 193,416  $ (51,950) $ 1,288,826 
Basic common shares outstanding 13,809  13,849  13,811  13,870 
Dilutive potential common shares from restricted stock units and restricted stock (1)
18  15  —  12 
Diluted common shares outstanding 13,827  13,864  13,811  13,882 
Basic net income (loss) per common share $ 31.07  $ 13.97  $ (3.76) $ 92.92 
Diluted net income (loss) per common share (1)
$ 31.03  $ 13.95  $ (3.76) $ 92.84 
(1)The impact of restricted stock units and restricted stock of 13 thousand shares was excluded from the computation of diluted earnings per common share for the nine months ended September 30, 2020 because the effect would have been anti-dilutive.

15. Commitments and Contingencies

a)Late in the fourth quarter of 2018, the Company was contacted by and received inquiries from the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority (collectively, Governmental Authorities) into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Re (the Markel CATCo Inquiries), an unconsolidated subsidiary managed by MCIM. As a result, the Company engaged outside counsel to conduct an internal review.

The internal review was completed in April 2019 and found no evidence that MCIM personnel acted in bad faith in exercising business judgment in the setting of reserves and making related disclosures during late 2017 and early 2018. The Company's outside counsel has met with the Governmental Authorities and reported the findings from the internal review. The Company cannot currently predict the duration, scope or result of the Markel CATCo Inquiries.

During the internal review, the Company discovered violations of Markel policies by two senior executives of MCIM. As a result, these two executives are no longer with the Company. On February 21, 2019, Anthony Belisle, one of the two senior executives that is no longer with MCIM, filed suit against MCIM and Markel Corporation, which suit was amended on March 29, 2019. As amended, Mr. Belisle's complaint alleged claims for, among other things, breach of contract, defamation, invasion of privacy, indemnification, intentional interference with contractual relations and deceptive and unfair acts and sought relief of, among other things, $66.0 million in incentive compensation, enhanced compensatory damages, consequential damages, damages for emotional distress and injury to reputation, exemplary damages and attorneys' fees. In June 2019, MCIM, Markel Corporation, and Mr. Belisle agreed to commence binding arbitration to finally, fully and confidentially resolve the claims and counterclaims alleged in the action, and the Belisle suit was dismissed with prejudice in July 2019. In late July 2020, the parties commenced settlement discussions and reached a final agreement on July 28, 2020. The settlement amount was not material to the Company's consolidated results of operations or financial condition.

In July 2019, MCIM announced it would cease accepting new investments in the Markel CATCo Funds and would not write any new business in Markel CATCo Re. Both the Markel CATCo Funds and Markel CATCo Re have been placed into run-off, returning capital to investors as it becomes available. The process is expected to take approximately three years.
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The Markel CATCo Inquiries, as well as other matters related to or arising from the Markel CATCo Inquiries, including matters of which the Company is currently unaware, could result in additional claims, litigation, investigations, enforcement actions or proceedings. For example, additional litigation may be filed by investors in the Markel CATCo Funds. The Company also could become subject to increased regulatory scrutiny, investigations or proceedings in any of the jurisdictions where it operates. If any regulatory authority takes action against the Company or the Company enters into an agreement to settle a matter, the Company may incur sanctions or be required to pay substantial fines or implement remedial measures that could prove costly or disruptive to its businesses and operations. Costs associated with the Company's internal review, including legal and investigation costs, as well as legal costs incurred in connection with any existing or future litigation, are being expensed as incurred.

An unfavorable outcome in one or more of these matters, and others the Company cannot anticipate, could have a material adverse effect on the Company's results of operations and financial condition. In addition, the Company may take further steps to mitigate potential risks or liabilities that may arise from the Markel CATCo Inquiries and related developments and some of those steps may have a material impact on the Company's results of operations or financial condition. Even if an unfavorable outcome does not materialize, these matters, and actions the Company may take in response, could have an adverse impact on the Company's reputation and result in substantial expense and disruption.

b)Since becoming aware of a matter in the first quarter of 2018 related to the manufacturing of products at one of the Company's Markel Ventures businesses, the Company has conducted an investigation, reviewed the business's operations and developed remediation plans. Upon completion of its review during 2018, the Company recorded an expense of $33.5 million in its results of operations and began implementing remediation plans. The amount accrued represented management's best estimate of amounts considered probable including: remediation costs associated with the manufacture of products, costs associated with the investigation of this matter, a write down of inventory on hand and settlement costs related to pre-existing litigation. As of September 30, 2020, $14.6 million remained accrued for this matter.

Final resolution of this matter could ultimately result in additional remediation and other costs, the amount of which cannot be estimated at this time, but which could have a material impact on the Company's income before income taxes. However, management does not expect this matter ultimately will have a material adverse effect on the Company's results of operations or financial condition. If a determination is made that additional costs associated with this matter are considered probable, these additional costs will be recognized as an expense in the Company's results of operations.

c)In 2019, the Company established Lodgepine Capital Management Limited (Lodgepine), a new retrocessional insurance-linked securities fund manager in Bermuda. Lodgepine's initial product offering will be Lodgepine Fund Limited, a property catastrophe retrocessional investment fund, and subject to certain conditions, the Company has committed to invest up to $100 million in Lodgepine Fund Limited.

d)On March 11, 2020, COVID-19, a novel coronavirus outbreak, was declared a pandemic by the World Health Organization. See note 16 for further details regarding potential impacts of COVID-19 on the Company's business.

e)Contingencies arise in the normal course of the Company's operations and are not expected to have a material impact on the Company's financial condition or results of operations.

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16. Developments Related to COVID-19

The COVID-19 pandemic has caused unprecedented social and economic disruption, increased volatility of capital markets and intervention by various governments and central banks around the world, the effects of which have impacted almost all of the Company's operations during the first nine months of 2020. The Company cannot reasonably estimate the extent or duration of the impacts of the pandemic; however, further potential impacts of the pandemic on the Company's results of operations, financial condition and cash flows, including those described below, could be material.

The significant volatility in the equity markets arising from economic uncertainty resulted in a net decline in the fair value of the Company's equity portfolio of $242.8 million for the nine months ended September 30, 2020 and further declines are possible.

As described in note 9, the Company's underwriting results for the nine months ended September 30, 2020 included $356.8 million of net losses and loss adjustment expenses directly attributed to COVID-19 and assumptions used to develop this estimate are inherently uncertain and subject to a wide range of variability. The Company also has underwriting exposure to loss impacts that are indirectly related to the COVID-19 pandemic and associated with a broader range of coverages, including coverages within the Company's trade credit, professional liability and workers' compensation product lines, among others, as well as the Company's reinsurance product lines. Underwriting results for the nine months ended September 30, 2020 included $15.0 million of net losses and loss adjustment expenses indirectly attributed to the COVID-19 pandemic on the Company's trade credit product line within the Insurance segment, though no other significant indirect losses have been reported at this time. Business closures, reduced recreational activity and lower gross receipts, revenues and payrolls of insureds, among other things, also may impact the Company's premium volume and the economic impacts of the pandemic on the Company's insureds also may subject it to increased credit risk. A significant decline in economic activity also could impact premium volume within the Company's program services operations, which may result in a reduction in fee income.

Within the Company's Markel Ventures operations, many of the Company's businesses have experienced decreased demand for their products and services as a result of the pandemic. As the social and economic disruption caused by the pandemic is ongoing, the Company expects that revenues from its Markel Ventures operations will continue to be impacted, and these impacts may continue to be material. In certain cases, revenue declines also could result in ongoing cash and working capital constraints and could impact the companies' liquidity and their ability to comply with debt covenants.

Within the Company's insurance-linked securities operations, investment losses to date within the investment funds managed by the Company have not been significant; however, uncertainty around potential COVID-19 loss exposures has reduced, and may further reduce, the net asset value on which the Company's management fees are based. Volatility in the capital markets and investor uncertainty regarding insurance industry exposure to COVID-19 also has impacted, and may continue to impact, the Company's ability to raise additional third party capital for the funds it manages. The Company also has experienced, and may continue to experience, higher than anticipated investor redemptions from the funds.

Loss of revenues in the Company's underwriting, Markel Ventures, insurance-linked securities or other operations, the extent of which the Company is currently unable to reasonably estimate, also could impact the carrying value of the Company's goodwill and intangible assets and, with respect to its Markel Ventures operations, inventory and other long-lived assets, which may become impaired. The Company's consolidated balance sheet as of September 30, 2020 included goodwill and intangible assets of $4.4 billion. Through September 30, 2020, the Company considered whether a quantitative assessment of goodwill and intangible assets for impairment was required as a result of the significant economic disruption caused by the COVID-19 pandemic. After considering qualitative factors regarding the actual and expected impacts of the pandemic on the Company's operations, as well as the amount by which the fair value of the Company's reporting units exceeded their respective carrying values at the date of the last quantitative assessment, the Company determined these conditions did not indicate that it is more likely than not that the carrying value of the Company's reporting units exceeded their fair value as of September 30, 2020 based on information available at this time. Similar factors were considered to determine if these circumstances were an indicator requiring an assessment of the recoverability of the Company's intangible assets, and the Company concluded they were not based on information available at this time. However, delayed recovery or further deterioration in market conditions related to the general economy and the specific industries in which the Company operates, a sustained trend of weaker than anticipated financial performance within a reporting unit, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in future goodwill or intangible asset impairment charges that, if incurred, could have a material adverse effect on the Company's financial condition and results of operations.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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 Markel Corporation and its consolidated subsidiaries, as well as any variable interest entities that meet the requirements for consolidation (the Company).

Our Business

We are a diverse financial holding company serving a variety of niche markets. Our principal business markets and underwrites specialty insurance products. We believe that our specialty product focus and niche market strategy enable us to develop expertise and specialized market knowledge. We seek to differentiate ourselves from competitors by our expertise, service, continuity and other value-based considerations. We also own interests in various businesses that operate outside of the specialty insurance marketplace. Our financial goals are to earn consistent underwriting and operating profits and superior investment returns to build shareholder value.

Our business is comprised of the following types of operations:
•Underwriting - our underwriting operations are comprised of our risk-bearing insurance and reinsurance operations
•Investing - our investing activities are primarily related to our underwriting operations
•Markel Ventures - our Markel Ventures operations include our controlling interests in a diverse portfolio of businesses that operate outside of the specialty insurance marketplace
•Insurance-linked securities - our insurance-linked securities (ILS) operations include investment fund managers that offer a variety of investment products, including insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives
•Program services - our program services business serves as a fronting platform that provides other insurance entities access to the U.S. property and casualty insurance market

Underwriting and Investing

Our chief operating decision maker allocates resources to and assesses the performance of our ongoing underwriting operations on a global basis in the following two segments: Insurance and Reinsurance. In determining how to monitor our underwriting results, we consider 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. Results for lines of business discontinued prior to, or in conjunction with, acquisitions, including development on asbestos and environmental loss reserves and the results attributable to the run-off of life and annuity reinsurance business, are monitored separately and are not included in a reportable segment. All investing activities related to our underwriting operations are included in the Investing segment.

Our Insurance segment includes both hard-to-place risks written outside of the standard market on an excess and surplus basis and unique and hard-to-place risks that must be written on an admitted basis due to marketing and regulatory reasons. Risks written in our Insurance segment are written on either a direct basis or a subscription basis, the latter of which means that the loss exposures brought into the market are typically insured by more than one insurance company or Lloyd's of London (Lloyd's) syndicate. When we write business in the subscription market, we prefer to participate as lead underwriter in order to control underwriting terms, policy conditions and claims handling. The following products are included in this segment: general liability, professional liability, primary and excess of loss property, including catastrophe-exposed property, personal property, workers' compensation, marine and energy liability coverages, specialty program insurance for well-defined niche markets, and liability and other coverages tailored for unique exposures. Business in this segment is written through our Markel Specialty, Markel International and State National divisions. The Markel Specialty division was formed effective April 1, 2020 through the combination of our Markel Assurance and Markel Specialty divisions. The newly combined Markel Specialty division creates a unified platform that makes it easier for our customers to access our diverse portfolio of products and capabilities, offered on both an excess and surplus and admitted basis, and provides an improved customer experience. The Markel International division writes business worldwide from our London and Munich-based platforms, which include branch offices around the world. The State National division's collateral protection underwriting business also is included in the Insurance segment.
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Our Reinsurance segment includes property, casualty and specialty treaty reinsurance products offered to other insurance and reinsurance companies globally through the broker market. Our treaty reinsurance offerings include both quota share and excess of loss reinsurance and are typically written on a participation basis, which means each reinsurer shares proportionally in the business ceded under the reinsurance treaty written. Principal lines of business include: property, including catastrophe-exposed property, professional liability, general liability, credit, surety, auto and workers' compensation. In October 2020, we made the decision to discontinue writing catastrophe-exposed property business at our Global Reinsurance division, within our Reinsurance segment, as our Nephila ILS operations will become our single point of entry for serving the property catastrophe reinsurance market. Our reinsurance product offerings are underwritten primarily by our Global Reinsurance division.

Markel Ventures

Through our wholly-owned subsidiary Markel Ventures, Inc. (Markel Ventures), we own interests in various businesses that we monitor and report in the Markel Ventures segment. These businesses are viewed by management as separate and distinct from our insurance operations and are comprised of a diverse portfolio of businesses from different industries that offer various types of products and services to businesses and consumers, predominately in the United States. Our products group is comprised of businesses that manufacture or produce equipment, transportation-related products and consumer and building products. For example, types of products offered by businesses in this group include equipment used in baking systems and food processing, over-the-road car haulers, laminated oak and composite wood flooring used in the trucking industry as well as ornamental plants and residential homes. The services group is comprised of businesses that provide healthcare, consulting and other types of services to businesses and consumers. For example, types of services offered by businesses in this group include management and technology consulting, behavioral healthcare and retail intelligence.

In November 2019, we acquired VSC Fire & Security, Inc. (VSC), a Virginia-based privately held provider of comprehensive fire protection, life safety and low voltage solutions. Results attributable to VSC are included in our Markel Ventures segment.

In April 2020, we acquired a controlling interest in Lansing Building Products, LLC, a supplier of exterior building products and materials to professional contractors throughout the U.S., which simultaneously acquired the distribution business of Harvey Building Products to enhance its geographic reach and scale (together, Lansing), bringing our ownership in Lansing to 91%. Results attributable to Lansing are included in our Markel Ventures segment.

Insurance-Linked Securities

Our insurance-linked securities operations are primarily comprised of our Nephila and run-off Markel CATCo operations.
In November 2018, we completed the acquisition of all of the outstanding shares of Nephila Holdings Ltd. (together with its subsidiaries, Nephila). Nephila primarily serves as an insurance and investment fund manager headquartered in Bermuda that offers a broad range of investment products, including insurance-linked securities, catastrophe bonds, insurance swaps and weather derivatives.
Nephila serves as the investment manager to several Bermuda, Ireland and U.S. based private funds (the Nephila Funds). To provide access for the Nephila Funds to the insurance, reinsurance and weather markets, Nephila also provides managing general agent services and acts as an insurance manager to certain Bermuda Class 3 and 3A reinsurance companies and Lloyd's Syndicate 2357 (Syndicate 2357) (collectively, the Nephila Reinsurers). The results of the Nephila Reinsurers are attributed to the Nephila Funds primarily through derivative transactions between these entities. Neither the Nephila Funds nor the Nephila Reinsurers are subsidiaries of Markel Corporation, and as such, these entities are not included in our consolidated financial statements.
Our Markel CATCo operations are conducted through Markel CATCo Investment Management Ltd. (MCIM). MCIM is an insurance-linked securities investment fund manager headquartered in Bermuda and through 2019, was focused on building and managing highly diversified, collateralized retrocession and reinsurance portfolios covering global property catastrophe risks. MCIM serves as the insurance manager for Markel CATCo Re Ltd. (Markel CATCo Re), a Bermuda Class 3 reinsurance company, and as the investment manager for Markel CATCo Reinsurance Fund Ltd., a Bermuda exempted mutual fund company comprised of multiple segregated accounts (Markel CATCo Funds). MCIM also serves as the investment manager to CATCo Reinsurance Opportunities Fund Ltd. (CROF), a limited liability closed-end Bermuda exempted mutual fund company listed on a market operated by the London Stock Exchange and on the Bermuda Stock Exchange. CROF invests substantially all of its assets in Markel CATCo Reinsurance Fund Ltd. Both Markel CATCo Re and the Markel CATCo Funds are unconsolidated subsidiaries of Markel Corporation.
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In July 2019, MCIM announced it would cease accepting new investments in the Markel CATCo Funds and would not write any new business in Markel CATCo Re. Both the Markel CATCo Funds and Markel CATCo Re have been placed into run-off, returning capital to investors as it becomes available. See note 15 of the notes to consolidated financial statements for further details regarding other developments within our Markel CATCo operations.

In 2019, we established Lodgepine Capital Management Limited (Lodgepine), a new retrocessional insurance-linked securities fund manager in Bermuda. Lodgepine's initial product offering will be Lodgepine Fund Limited, a property catastrophe retrocessional investment fund, and subject to certain conditions, we have committed to invest up to $100 million in Lodgepine Fund Limited. Lodgepine Fund Limited initially plans to subscribe to a portfolio of retrocessional reinsurance, which includes contracts written in our Reinsurance segment.

Program Services

Our program services business is conducted through our State National division and is separately managed from our underwriting operations. Our program services business generates fee income, in the form of ceding (program service) fees, by offering issuing carrier capacity to both specialty general agents and other producers who sell, control, and administer books of insurance business that are supported by third parties that assume reinsurance risk, including Syndicate 2357. Through our program services business, we write a wide variety of insurance products, principally including general liability insurance, commercial liability insurance, commercial multi-peril insurance, property insurance and workers' compensation insurance, substantially all of which is ceded to third parties.

Although we reinsure substantially all of the risks inherent in our program services business, we have certain programs that contain limits on our reinsurers' obligations to us that expose us to underwriting risk. Under certain programs, including one program with Syndicate 2357, an unconsolidated affiliate, we bear underwriting risk for annual aggregate agreement year losses in excess of a limit that we believe is highly unlikely to be exceeded. See note 13 of the notes to consolidated financial statements for further details regarding our program with Syndicate 2357.

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, including litigation contingencies. These estimates, by necessity, are based on assumptions about numerous factors.

Our critical accounting estimates consist of estimates and assumptions used in determining the reserves for unpaid losses and loss adjustment expenses and life and annuity reinsurance benefit reserves as well as estimates and assumptions used in the valuation of goodwill and intangible assets. We review the adequacy of reserves for unpaid losses and loss adjustment expenses and life and annuity reinsurance benefit reserves quarterly. Estimates and assumptions for goodwill and intangible assets are reviewed in conjunction with acquisitions and goodwill and indefinite-lived intangible assets are reassessed for impairment at least annually or when events or circumstances indicate that their carrying value may not be recoverable. Actual results may differ materially from the estimates and assumptions used in preparing the consolidated financial statements.

Readers are urged to review our 2019 Annual Report on Form 10-K for a more complete description of our critical accounting estimates. Additionally, see "Developments Related to COVID-19" for further discussion on our interim considerations around the evaluation of goodwill and intangible assets for impairment.

Recent Accounting Pronouncements

See note 2 of the notes to consolidated financial statements for discussion of recently issued accounting pronouncements that we have not yet adopted and the expected effects on our consolidated financial position, results of operations and cash flows.

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Results of Operations

The following table presents the components of net income (loss) to shareholders and comprehensive income to shareholders.
  Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Insurance segment underwriting profit $ 74,960  $ 81,285  $ 3,659  $ 180,945 
Reinsurance segment underwriting profit (loss) (34,881) (6,475) (44,085) 5,697 
Investing segment profit (1)
629,682  145,364  43,104  1,408,771 
Markel Ventures segment profit (2)
79,605  35,467  200,766  147,056 
Other operations (3)
(56,974) 6,607  (74,122) (18,945)
Interest expense (42,744) (47,465) (133,201) (129,022)
Net foreign exchange gains (losses) (65,577) 53,850  (8,736) 57,001 
Loss on early extinguishment of debt —  (6,705) —  (6,705)
Income tax expense (130,028) (57,975) (3,047) (356,849)
Net loss (income) attributable to noncontrolling interests (1,317) 1,684  (15,607) (8,587)
Net income (loss) to shareholders 452,726  205,637  (31,269) 1,279,362 
Net income (loss) to common shareholders 452,726  205,637  (31,269) 1,279,362 
Other comprehensive income to shareholders 67,363  44,432  290,942  326,282 
Comprehensive income to shareholders $ 520,089  $ 250,069  $ 259,673  $ 1,605,644 

(1)Net investment income and net investment gains (losses), if any, attributable to Markel Ventures are included in segment profit for Markel Ventures. All other net investment income and net investment gains (losses) are included in Investing segment profit.
(2)Segment profit for the Markel Ventures segment includes amortization of intangible assets attributable to Markel Ventures. Amortization of intangible assets is not allocated to our Insurance and Reinsurance segments.
(3)Other operations include the results attributable to our 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. Amortization of intangible assets attributable to our underwriting segments was $10.4 million and $31.5 million for the quarter and nine months ended September 30, 2020, respectively, and $9.8 million and $29.5 million for the quarter and nine months ended September 30, 2019; however, we do not allocate amortization of intangible assets between the Insurance and Reinsurance segments.

Comprehensive income to shareholders for the nine months ended September 30, 2020 reflects significant investing and underwriting losses attributed to COVID-19, a novel coronavirus outbreak that was declared a pandemic by the World Health Organization on March 11, 2020, which has caused unprecedented social and economic disruption, increased volatility of capital markets and intervention by various governments and central banks around the world.

The components of net income (loss) to shareholders and comprehensive income to shareholders for the quarter and nine months ended September 30, 2020 and 2019 are discussed in detail under "Underwriting Results," "Investing Results," "Markel Ventures," "Other Operations," "Interest Expense, Loss on Early Extinguishment of Debt and Income Taxes" and "Comprehensive Income to Shareholders."

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Underwriting Results

Underwriting profits are a key component of our strategy to build shareholder value. We believe that the ability to achieve consistent underwriting profits demonstrates knowledge and expertise, commitment to superior customer service and the ability to manage insurance risk. 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 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.

The following table presents selected data from our underwriting operations.
  Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Gross premium volume (1)
$ 1,734,457  $ 1,645,995  $ 5,436,491  $ 4,944,336 
Net written premiums $ 1,397,276  $ 1,370,384  $ 4,500,149  $ 4,153,115 
Net retention (1)
81  % 83  % 83  % 84  %
Earned premiums $ 1,394,428  $ 1,300,032  $ 4,085,311  $ 3,703,470 
Losses and loss adjustment expenses $ 863,247  $ 752,134  $ 2,652,811  $ 2,118,000 
Underwriting, acquisition and insurance expenses $ 492,824  $ 475,219  $ 1,477,349  $ 1,392,747 
Underwriting profit (loss) $ 38,357  $ 72,679  $ (44,849) $ 192,723 
U.S. GAAP Combined Ratios
Insurance 94  % 92  % 100  % 94  %
Reinsurance 116  % 103  % 106  % 99  %
Consolidated 97  % 94  % 101  % 95  %
(1)Gross premium volume and net retention exclude $538.3 million and $1.5 billion for the quarter and nine months ended September 30, 2020, respectively, and $618.5 million and $1.8 billion for the quarter and nine months ended September 30, 2019, respectively, of written premiums attributable to our program services business and other fronting arrangements that were ceded.

Combined Ratio

Our consolidated combined ratio was 97% for the quarter ended September 30, 2020 compared to 94% for the same period of 2019. The increase in the combined ratio was driven by higher catastrophe losses in 2020 compared to 2019 and an increase in our estimate of net losses and loss adjustment expenses attributed to COVID-19 during the third quarter of 2020, partially offset by a lower attritional loss ratio and a lower expense ratio within our Insurance segment in 2020 compared to 2019 .

Our consolidated combined ratio was 101% for the nine months ended September 30, 2020 compared to 95% for the same period of 2019. The increase in the consolidated combined ratio was driven by losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by more favorable development on prior accident years' loss reserves and a lower attritional loss ratio and a lower expense ratio within our Insurance segment in 2020 compared to 2019.

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Catastrophe Losses

Underwriting results for the quarter and nine months ended September 30, 2020 included $101.0 million of underwriting loss from Hurricanes Laura, Sally and Isaias, as well as the derecho in Iowa and wildfires in the western U.S. (2020 Catastrophes). The net loss estimates on the 2020 Catastrophes represent our best estimates based upon information currently available. Our estimates for these losses are based on preliminary industry loss estimates, output from both industry and proprietary models, claims received to date and detailed policy and reinsurance contract level reviews. Due to limited claims activity thus far on the 2020 Catastrophes, these loss estimates are still dependent on broad assumptions about coverage, liability and reinsurance and are therefore subject to a wide range of variability. While we believe our reserves for the 2020 Catastrophes as of September 30, 2020 are adequate, we continue to closely monitor industry loss estimates and reported claims and will adjust our estimates of gross and net losses as new information becomes available.

Underwriting results for the quarter and nine months ended September 30, 2019 included $42.6 million of underwriting loss from Hurricane Dorian and Typhoon Faxai (2019 Catastrophes).

The following table summarizes, by segment, the components of the underwriting losses related to the 2020 Catastrophes and 2019 Catastrophes for the quarter and nine months ended September 30, 2020 and 2019, respectively.

Quarter and Nine Months Ended September 30,
2020 2019
2020 Catastrophes 2019 Catastrophes
(dollars in thousands) Insurance Reinsurance Consolidated Insurance Reinsurance Consolidated
Losses and loss adjustment expenses $ 66,581  $ 35,211  $ 101,792  $ 13,868  $ 31,253  $ 45,121 
Assumed reinstatement premiums —  (750) (750) —  (2,475) (2,475)
Underwriting loss $ 66,581  $ 34,461  $ 101,042  $ 13,868  $ 28,778  $ 42,646 
Impact on quarter to date combined ratio 6  % 15  % 7  % 1  % 12  % 3  %
Impact on year to date combined ratio 2  % 5  % 2  % —  % 4  % 1  %

COVID-19 Losses

Underwriting results for the quarter and nine months ended September 30, 2020 included $48.9 million and $373.9 million, respectively, of underwriting losses arising from the COVID-19 pandemic.

The following table summarizes, by segment, the components of the underwriting losses attributed to the COVID-19 pandemic for the quarter and nine months ended September 30, 2020. As of September 30, 2020, losses and loss adjustment expenses were net of ceded losses of $92.6 million.

COVID-19 Pandemic
Quarter Ended September 30, 2020 Nine Months Ended September 30, 2020
(dollars in thousands) Insurance Reinsurance Consolidated Insurance Reinsurance Consolidated
Losses and loss adjustment expenses $ 12,395  $ 34,450  $ 46,845  $ 305,395  $ 66,450  $ 371,845 
Ceded (assumed) reinstatement premiums 2,145  (93) 2,052  2,145  (93) 2,052 
Underwriting loss $ 14,540  $ 34,357  $ 48,897  $ 307,540  $ 66,357  $ 373,897 
Impact on combined ratio 1  % 15  % 3  % 9  % 10  % 9  %

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Beginning in late February, as the COVID-19 outbreak was becoming more widespread, it was identified as a potential exposure within our underwriting operations. We began to regularly review all of our product lines to identify lines of business we believed could be directly impacted by COVID-19 and to evaluate the extent to which the virus may impact our coverages. In those instances where we identified COVID-19 as the proximate, or direct, cause of loss, we established net reserves for losses and loss adjustment expenses totaling $325.0 million during the first quarter of 2020. Our direct losses from COVID-19 are primarily attributed to business written within our international insurance operations and are primarily associated with coverages for event cancellation and business interruption losses in policies where no specific pandemic exclusions exist. During the quarter ended September 30, 2020, we increased our estimate of direct net losses and loss adjustment expenses attributable to COVID-19 by $31.8 million following changes in certain assumptions on which our estimates are based, as further discussed below, and resulting in total direct net losses and loss adjustment expenses of $356.8 million for the nine months ended September 30, 2020.

In addition to loss exposures that are directly attributable to COVID-19, we are also exposed to losses indirectly related to the COVID-19 pandemic and associated with a broader range of coverages, including coverages within our trade credit, professional liability and workers' compensation product lines, among others, as well as our reinsurance product lines. During the quarter and nine months ended September 30, 2020, we recognized $15.0 million of net losses and loss adjustment expenses in our trade credit product line within our Insurance segment related to losses that were indirectly attributable to the pandemic. No other significant indirect losses attributable to COVID-19 have been reported at this time. See "Developments Related to COVID-19" for further discussion of other potential indirect exposures arising from the pandemic.

The following table summarizes, by coverage and underwriting platform, the components of our direct net losses and loss adjustment expenses from COVID-19 for the quarter and nine months ended September 30, 2020.

  Quarter Ended September 30, 2020
(dollars in millions) Insurance Reinsurance Consolidated
Event cancellation
International $ 13.2  $ —  $ 13.2 
United States (1.0) —  (1.0)
Business interruption
International (12.4) 20.0  7.6 
United States (7.5) —  (7.5)
All other coverages 5.1  14.4  19.5 
Total $ (2.6) $ 34.4  $ 31.8 

  Nine Months Ended September 30, 2020
(dollars in millions) Insurance Reinsurance Consolidated
Event cancellation
International $ 185.7  $ —  $ 185.7 
United States 7.5  —  7.5 
Business interruption
International 79.6  22.0  101.6 
United States 8.5  15.0  23.5 
All other coverages 9.1  29.4  38.5 
Total $ 290.4  $ 66.4  $ 356.8 

Both the gross and net loss estimates for direct losses attributed to COVID-19 represent our best estimates as of September 30, 2020 based upon information currently available. Our estimates for these direct losses and loss adjustment expenses are based on reported claims, as well as detailed policy level reviews and reviews of in-force assumed reinsurance contracts for potential exposures. We also considered analysis provided by our brokers and claims counsel. There are no recent historical events with similar characteristics to COVID-19, and therefore we have no past loss experience on which to base our estimates. Additionally, the economic and social impacts of the pandemic continue to evolve.

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Significant assumptions on which our estimates of reserves for direct COVID-19 losses and loss adjustment expenses are based include:
•the scope of coverage provided under our policies, particularly those that provide for business interruption coverage, which generally falls under the following three categories:
◦coverage has not been triggered because the policy's insuring agreement has not been satisfied and/or a covered cause of loss has not been established;
◦the policy would not respond because the policy includes a communicable disease, virus or pandemic exclusion; or
◦the policy may provide coverage for communicable diseases and pandemics, but also includes conditions and limitations to coverage;
•coverage provided under our ceded reinsurance contracts;
•the expected duration of the disruption caused by the COVID-19 pandemic, which we have assumed will extend, in varying degrees, beyond the government directives currently in place and may impact certain covered events through the end of the year and beyond; and
•the ability of insureds to mitigate some or all of their losses. For example, in the case of our event cancellation coverages, by deferring the event or moving to a virtual format, and for our business interruption exposures, the ability to continue providing certain services or to provide services remotely.

Due to the inherent uncertainty associated with the assumptions surrounding the COVID-19 pandemic, these estimates are subject to a wide range of variability. Our initial estimates at March 31, 2020 reflected limited claims reporting and were based on broad assumptions about coverage, liability and reinsurance. A test case of a sample of business interruption coverages for policies written in the United Kingdom, which do not have the same exclusions as policies commonly written in the U.S., concluded in the third quarter of 2020 with the court's judgment finding mostly in favor of policyholders. This ruling was most impactful to certain estimates in our Reinsurance segment, where we increased our estimate of losses and loss adjustment expenses on certain treaties following an increase in estimated losses by the respective cedents on the treaties. The ruling did not meaningfully impact the reserves previously established for business interruption coverage within our Insurance segment given the assumptions made in our initial estimates and our policy terms and conditions. Our estimates at September 30, 2020 also reflect additional data gathered through increased claims reporting and a change in our expectation of the duration of the pandemic, which was most impactful to our event cancellation coverages.

As of September 30, assumptions about coverage, liability and reinsurance continue to be subject to judicial review and may be subject to other government action. Additionally, it is highly likely that there will be significant litigation involved in the handling of claims associated with COVID-19, and in certain instances, assessing the validity of policy exclusions for pandemics and interpreting policy terms to determine coverage for pandemics, which are in the process of being tested in various judicial systems. While we believe our net reserves for losses and loss adjustment expenses for COVID-19 as of September 30, 2020 are adequate based on information available at this time, we continue to closely monitor reported claims, government actions, judicial decisions and changes in the levels of worldwide social disruption and economic activity arising from the pandemic and will adjust our estimates of gross and net losses as new information becomes available. Such adjustments to our reserves for COVID-19 losses and loss adjustment expenses may be material to our results of operations, financial condition and cash flows.

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Insurance Segment

The combined ratio for the Insurance segment was 94% (including six points for underwriting losses on the 2020 Catastrophes and one point for underwriting losses attributed to COVID-19) for the quarter ended September 30, 2020 compared to 92% (including one point for underwriting losses on the 2019 Catastrophes) for the same period of 2019.

For the quarter ended September 30, 2020, the increase in the combined ratio was driven by higher catastrophe losses in 2020 compared to 2019 and the impact of losses attributed to COVID-19 in 2020, partially offset by a lower attritional loss ratio and a lower expense ratio in 2020 compared to 2019. Higher earned premiums in 2020 compared to 2019 had a favorable impact on our expense ratio and an unfavorable impact on the prior accident years' loss ratio.
•Excluding the impact of the 2020 and 2019 Catastrophes and losses attributed to COVID-19 in 2020, the current accident year loss ratio for the quarter ended September 30, 2020 decreased compared to the same period of 2019 primarily driven by lower attritional loss ratios on our property and general liability product lines, which benefited from higher premium rates.
•The Insurance segment's combined ratio for the quarter ended September 30, 2020 included $137.3 million of favorable development on prior years' loss reserves compared to $135.0 million for the same period of 2019. For the quarter ended September 30, 2020, favorable development was most significant on our general liability and professional liability products lines, across several accident years, and workers' compensation product lines, primarily on the 2016 to 2019 accident years. The favorable development on prior years' loss reserves in the third quarter of 2019 was also most significant on our general liability, workers' compensation and professional liability product lines.
•The expense ratio for the quarter ended September 30, 2020 decreased compared to the same period of 2019, primarily due to the favorable impact of higher earned premiums.

The combined ratio for the Insurance segment was 100% (including nine points for underwriting losses attributed to COVID-19 and two points for underwriting losses on the 2020 Catastrophes) for the nine months ended September 30, 2020 compared to 94% for the same period of 2019.

For the nine months ended September 30, 2020, the increase in the combined ratio was driven by the impact of losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by more favorable development on prior accident years' loss reserves and a lower attritional loss ratio and a lower expense ratio in 2020 compared to 2019. Higher earned premiums in 2020 compared to 2019 had a favorable impact on our expense ratio and an unfavorable impact on the prior years' loss ratio.
•Excluding the impact of losses attributed to COVID-19 in 2020 and the 2020 and 2019 Catastrophes, the current accident year loss ratio for the nine months ended September 30, 2020 decreased compared to the same period of 2019, primarily due to lower net attritional losses on our marine and energy and professional liability product lines, partially offset by higher net attritional losses on our programs product line. We also had lower attritional loss ratios on our property and general liability product lines, which benefited from higher premium rates in 2020.
•The Insurance segment's combined ratio for the nine months ended September 30, 2020 included $404.6 million of favorable development on prior years' loss reserves compared to $309.3 million for the same period of 2019. The impact on the combined ratio of more favorable development on prior years' loss reserves was partially offset by the unfavorable impact of higher earned premiums in 2020 compared to 2019. The increase in favorable development was primarily due to more favorable development on our professional liability product lines in 2020 compared to 2019 and favorable development on our property product lines in 2020 compared to adverse development in 2019. For the nine months ended September 30, 2020, favorable development was most significant on our general liability, professional liability and workers' compensation product lines across several accident years. The favorable development on prior years' loss reserves in 2019 was also most significant on our general liability, workers' compensation and professional liability product lines.
•The expense ratio for the nine months ended September 30, 2020 decreased compared to the same period of 2019, primarily due to the favorable impact of higher earned premiums.
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Reinsurance Segment

The combined ratio for the Reinsurance segment was 116% (including 15 points for underwriting losses attributed to COVID-19 and 15 points for underwriting losses on the 2020 Catastrophes) for the quarter ended September 30, 2020 compared to 103% (including 12 points for underwriting losses on the 2019 Catastrophes) for the same period of 2019.

For the quarter ended September 30, 2020, the increase in the combined ratio was driven by the impact of underwriting losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by more favorable development on prior accident years' loss reserves in 2020 compared to 2019.
•Excluding the impact of losses attributed to COVID-19 in 2020 and the 2020 and 2019 Catastrophes, the current accident year loss ratio for the quarter ended September 30, 2020 increased compared to the same period of 2019, primarily due to less favorable premium adjustments in 2020 compared to 2019, most notably within our property and workers' compensation product lines, partially offset by lower net attritional losses, primarily on our general liability and property product lines.
•The Reinsurance segment's combined ratio for the quarter ended September 30, 2020 included $30.7 million of favorable development on prior years' loss reserves compared to $13.8 million for the same period of 2019. The increase in favorable development was primarily due to favorable development on our professional liability and workers' compensation product lines in 2020 compared to adverse development on these product lines in 2019. For the quarter ended September 30, 2020, favorable development was most significant on our property and professional liability product lines across several accident years. The favorable development on prior years' loss reserves in the third quarter of 2019 was most significant on our property product lines.

The combined ratio for the Reinsurance segment was 106% (including 10 points for underwriting losses attributed to COVID-19 and five points for underwriting losses on the 2020 Catastrophes) for the nine months ended September 30, 2020 compared to 99% (including four points for underwriting losses on the 2019 Catastrophes) for the same period of 2019.

For the nine months ended September 30, 2020, the increase in the combined ratio was primarily driven by the impact of underwriting losses attributed to COVID-19 in 2020 and higher catastrophe losses in 2020 compared to 2019, partially offset by a lower expense ratio and more favorable development on prior accident years' loss reserves in 2020 compared to 2019.
•The Reinsurance segment's combined ratio for the nine months ended September 30, 2020 included $29.0 million of favorable development on prior years' loss reserves compared to $20.7 million for the same period of 2019. The increase in favorable development was primarily due to more favorable development on our property product lines in 2020 compared to 2019, partially offset by more adverse development on our public entity product lines in 2020 compared to 2019. Additionally, in 2020, we recognized additional exposure related to net favorable premium adjustments along with adverse development on certain of our professional liability product lines. For the nine months ended September 30, 2020, favorable development was most significant on our property product lines, primarily on the 2017 to 2019 accident years. The favorable development on prior years' loss reserves in 2019 was most significant on our aviation, auto and whole account product lines.
•The expense ratio for the nine months ended September 30, 2020 decreased compared to the same period of 2019, primarily due to lower general expenses.

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Premiums

The following tables summarize gross premium volume, net written premiums and earned premiums.

Gross Premium Volume
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Insurance $ 1,514,002  $ 1,418,363  $ 4,482,149  $ 3,979,559 
Reinsurance 222,066  226,387  958,529  963,145 
Other underwriting (227) 516  55  12 
Total Underwriting 1,735,841  1,645,266  5,440,733  4,942,716 
Program services and other 536,893  619,226  1,528,017  1,823,965 
Total $ 2,272,734  $ 2,264,492  $ 6,968,750  $ 6,766,681 

Gross premium volume in our underwriting operations for the quarter and nine months ended September 30, 2020 increased 6% and 10%, respectively, compared to the same periods of 2019 due to an increase in gross premium volume in our Insurance segment. Also impacting consolidated gross premium volume were gross premiums written through our program services business and other fronting arrangements, which decreased 13% and 16% for the quarter and nine months ended September 30, 2020, respectively. The decrease in gross premium volume in our program services business for both periods was driven by the run-off of one large program and the cancellation of an in-force book of policies related to another large program. Substantially all gross premiums from our program services business and other fronting arrangements were ceded to third parties for the quarter and nine months ended September 30, 2020 and 2019. See "Other Operations" for further discussion on gross premiums from our program services operations.

Gross premium volume in our Insurance segment increased 7% and 13% for the quarter and nine months ended September 30, 2020, respectively, compared to the same periods of 2019. The increase for both periods was primarily driven by growth and more favorable rates within our professional liability and general liability product lines, as well as growth in our personal lines product lines. For the quarter ended September 30, 2020, these increases were partially offset by lower gross premiums written within our programs product line, due in part to reduced social and economic activity related to COVID-19, as well as active portfolio management where we have discontinued writing certain underperforming programs.

Gross premium volume in our Reinsurance segment decreased slightly for both the quarter and nine months ended September 30, 2020 compared to the same period of 2019. For the quarter ended September 30, 2020, significant offsetting variances compared to 2019 include:
•lower gross premiums within our workers' compensation product lines, primarily due to lower gross premiums on renewals and less favorable premium adjustments,
•lower gross premiums within our property product lines, primarily due to an unfavorable impact from the timing of multi-year contracts, and
•higher gross premiums within our general liability product lines, primarily due to new business.
Significant variability in gross premium volume can be expected in our Reinsurance segment due to individually significant contracts and multi-year contracts, as well as the timing of renewals.

During the first nine months of 2020, we continued to see improved pricing across most of our product lines, most notably within our general liability, professional liability and property product lines. The primary exception was workers' compensation, where we continued to see low single digit rate decreases given generally favorable underlying trends in recent years. When we believe the prevailing market price will not support our underwriting profit targets, the business is not written. As a result of our underwriting discipline, gross premium volume may vary when we alter our product offerings to maintain or improve underwriting profitability.

See "Developments Related to COVID-19" for further discussion on potential impacts to our premiums.

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Net Written Premiums
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Insurance $ 1,220,054  $ 1,181,919  $ 3,683,767  $ 3,306,447 
Reinsurance 178,994  187,180  820,573  844,949 
Other underwriting (388) 556  51  99 
Total Underwriting 1,398,660  1,369,655  4,504,391  4,151,495 
Program services and other (1,384) 729  (4,242) 1,620 
Total $ 1,397,276  $ 1,370,384  $ 4,500,149  $ 4,153,115 

Net retention of gross premium volume for our underwriting operations for the quarter and nine months ended September 30, 2020 was 81% and 83%, respectively, compared to 83% and 84% for the same periods of 2019. The decrease in net retention for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 was driven by a decrease in net retention within our Insurance segment, due in part to a new quota share agreement to fully cede premiums on a program that was put into run-off. 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.

Earned Premiums
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Insurance $ 1,173,758  $ 1,058,869  $ 3,400,760  $ 3,023,865 
Reinsurance 222,369  240,144  688,884  678,382 
Other underwriting (195) 556  51  99 
Total Underwriting 1,395,932  1,299,569  4,089,695  3,702,346 
Program services and other (1,504) 463  (4,384) 1,124 
Total $ 1,394,428  $ 1,300,032  $ 4,085,311  $ 3,703,470 

Earned premiums increased 7% and 10% for the quarter and nine months ended September 30, 2020, respectively, compared to the same periods of 2019. The increase in earned premiums for both the quarter and nine months ended September 30, 2020 was primarily attributable to an increase in gross premium volume within our Insurance segment on our professional and general liability product lines, as described above.


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Investing Results

Our business strategy recognizes the importance of both consistent underwriting and operating profits and superior investment returns to build shareholder value. We rely on sound underwriting practices to produce investable funds while minimizing underwriting risk. We measure investing results by our net investment income and net investment gains as well as our taxable equivalent total investment return.

The following table summarizes our investment performance.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Net investment income $ 90,384  $ 113,382  $ 274,242  $ 339,395 
Net investment gains (losses) $ 539,302  $ 32,144  $ (230,896) $ 1,069,988 
Change in net unrealized investment gains on available-for-sale securities (1)
$ 98,148  $ 92,904  $ 429,658  $ 511,307 
Investment yield (2)
0.6  % 0.7  % 1.8  % 2.3  %
Taxable equivalent total investment return, before foreign currency effect 3.8  % 11.3  %
Taxable equivalent total investment return
3.8  % 10.9  %
(1)The change in net unrealized gains on available-for-sale securities excludes the reserve deficiency adjustment for life and annuity benefit reserves of $20.6 million and $31.3 million, respectively, for the quarters ended September 30, 2020 and 2019, and $56.2 million and $93.1 million, respectively, for the nine months ended September 30, 2020 and 2019.
(2)Investment yield reflects net investment income as a percentage of monthly average invested assets at cost.

The decrease in net investment income for the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 was driven primarily by lower short-term investment income due to lower short-term interest rates, and lower interest income on our fixed maturity investment portfolio, primarily due to decreased holdings of fixed maturity securities in 2020. The decrease in net investment income for the nine months ended September 30, 2020 was also driven by losses on our equity method investments. See note 4(d) of the notes to consolidated financial statements for details regarding the components of net investment income.
Net investment gains for the quarter ended September 30, 2020 were primarily attributable to an increase in the fair value of our equity portfolio driven by favorable market value movements. This follows significant declines in the fair value of our equity portfolio in the first quarter of 2020 driven by unfavorable market value movements resulting from the onset of the COVID-19 pandemic, the impacts of which are further discussed in "Developments Related to COVID-19." The decline in fair value of the equity portfolio in the first quarter of 2020 resulted in net investment losses for the nine months ended September 30, 2020. See note 4(e) of the notes to consolidated financial statements for further details on the components of net investment gains (losses).

We also evaluate our investment performance by analyzing taxable equivalent total investment return, which is a non-GAAP financial measure. Taxable equivalent total investment return includes items that impact net income, such as coupon interest on fixed maturity securities, changes in fair value of equity securities, dividends on equity securities and realized investment gains or losses on available-for-sale securities, as well as changes in unrealized gains or losses on available-for-sale securities, which do not impact net income. Certain items that are included in net investment income have been excluded from the calculation of taxable equivalent total investment return, such as amortization and accretion of premiums and discounts on our fixed maturity portfolio, to provide a comparable basis for measuring our investment return against industry investment returns. The calculation of taxable equivalent total investment return also includes the current tax benefit associated with income on certain investments that is either taxed at a lower rate than the statutory income tax rate or is not fully included in U.S. taxable income. We believe the taxable equivalent total investment return is a better reflection of the economics of our decision to invest in certain asset classes. We focus on our long-term investment return, understanding that the level of investment gains or losses may vary from one period to the next.

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The following table reconciles investment yield to taxable equivalent total investment return.
Nine Months Ended September 30,
2020 2019
Investment yield (1)
1.8  % 2.3  %
Adjustment of investment yield from amortized cost to fair value (0.4) % (0.5) %
Net amortization of net premium on fixed maturity securities 0.3  % 0.3  %
Net investment gains (losses) and change in net unrealized investment gains on available-for-sale securities
1.0  % 8.4  %
Taxable equivalent effect for interest and dividends (2)
0.1  % 0.1  %
Other (3)
1.0  % 0.3  %
Taxable equivalent total investment return 3.8  % 10.9  %
(1)Investment yield reflects net investment income as a percentage of monthly average invested assets at amortized cost.
(2)Adjustment to tax-exempt interest and dividend income to reflect a taxable equivalent basis.
(3)Adjustment to reflect the impact of time-weighting the inputs to the calculation of taxable equivalent total investment return.

Markel Ventures

We report the results of our Markel Ventures operations in our Markel Ventures segment. This segment includes a diverse portfolio of businesses from different industries that offer various types of products and services to businesses and consumers, predominantly in the United States. We measure Markel Ventures' results by its operating income and net 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 any significant transactions or events that occur in the intervening period.

The following table summarizes the operating revenues, operating income, EBITDA and net income to shareholders from our Markel Ventures segment. See note 7 of the notes to consolidated financial statements for further details regarding the components of our Markel Ventures segment operating revenues and expenses.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Operating revenues $ 824,132  $ 496,243  $ 2,013,492  $ 1,568,443 
Operating income $ 79,605  $ 35,467  $ 200,766  $ 147,056 
EBITDA $ 110,804  $ 58,716  $ 283,536  $ 219,131 
Net income to shareholders $ 48,731  $ 19,877  $ 108,712  $ 84,878 

Operating revenues from our Markel Ventures segment increased for the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 due to the contribution of revenues from Lansing, which was acquired in April 2020, and VSC, which was acquired in November 2019. The quarter and nine months ended September 30, 2020 included $373.4 million and $563.6 million, respectively, of operating revenues attributable to Lansing and VSC. Excluding the contributions of Lansing and VSC in 2020, operating revenues from our other Markel Ventures businesses decreased for the quarter and nine months ended September 30, 2020 compared to the same periods of 2019, primarily due to decreased demand across many of our products businesses attributable to the economic and social disruption caused by the COVID-19 pandemic. For both periods, the decrease in demand, which led to lower sales volumes, had the most significant impact at our transportation-related businesses. These decreases were partially offset by the impact of higher sales volumes at one of our consumer and building products businesses.

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Operating income and EBITDA from our Markel Ventures segment increased for the quarter and nine months ended September 30, 2020 compared to the same periods of 2019. The increase in operating income and EBITDA for both periods was due in part to the acquisitions of Lansing and VSC. The increase in operating income and EBITDA for both periods was also attributable to a gain on the sale of assets at one of our leasing businesses and higher revenues at one of our consumer and building products businesses, as described above. For the nine months ended September 30, 2020, the increase in operating income and EBITDA was also attributable to growth and improved operating results at one of our consulting services businesses. Operating income and EBITDA for both periods were unfavorably impacted by lower operating revenues at our transportation-related businesses, as a result of decreased demand attributed to the COVID-19 pandemic, as described above.

Markel Ventures EBITDA is a non-GAAP financial measure. We use Markel Ventures EBITDA as an operating performance measure in conjunction with U.S. GAAP measures, including operating revenues, operating income and net income to shareholders, to monitor and evaluate the performance of our Markel Ventures segment. Because EBITDA excludes interest, income taxes, depreciation and amortization, it provides an indicator of economic performance that is useful to both management and investors in evaluating our Markel Ventures businesses as it is not affected by levels of debt, interest rates, effective tax rates or levels of depreciation or amortization resulting from purchase accounting. The following table reconciles Markel Ventures operating income to Markel Ventures EBITDA.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Markel Ventures operating income $ 79,605  $ 35,467  $ 200,766  $ 147,056 
Depreciation expense 15,337  12,892  43,471  40,401 
Amortization of intangible assets 15,862  10,357  39,299  31,674 
Markel Ventures EBITDA $ 110,804  $ 58,716  $ 283,536  $ 219,131 

Net income to shareholders from our Markel Ventures segment increased for the quarter and nine months ended September 30, 2020 compared to the same periods of 2019, primarily due to higher operating income, partially offset by higher income tax expense and interest expense.

See "Developments Related to COVID-19" for further discussion of impacts of the pandemic on our Markel Ventures operations.

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Other Operations

The following table presents the components of operating revenues and operating expenses that are not included in a reportable segment.
Quarter Ended September 30,
2020 2019
(dollars in thousands) Services and other revenues Services and other expenses Amortization of intangible assets Services and other revenues Services and other expenses Amortization of intangible assets
Other operations:
Insurance-linked securities $ 38,547  $ 83,495  $ 9,612  $ 54,947  $ 46,123  $ 9,611 
Program services 23,519  4,746  5,235  28,844  3,422  5,236 
Life and annuity 541  1,063  —  378  1,789  — 
Other 886  639  3,579  7,250  6,009  650 
63,493  89,943  18,426  91,419  57,343  15,497 
Underwriting operations 10,376  9,841 
Total $ 63,493  $ 89,943  $ 28,802  $ 91,419  $ 57,343  $ 25,338 

Nine Months Ended September 30,
2020 2019
(dollars in thousands) Services and other revenues Services and other expenses Amortization of intangible assets Services and other revenues Services and other expenses Amortization of intangible assets
Other operations:
Insurance-linked securities $ 146,265  $ 183,814  $ 28,836  $ 158,570  $ 159,006  $ 33,748 
Program services 74,561  16,073  15,703  79,395  14,300  15,704 
Life and annuity 1,071  12,613  —  1,145  14,284  — 
Other 15,612  13,731  4,918  24,868  20,425  2,019 
237,509  226,231  49,457  263,978  208,015  51,471 
Underwriting operations 31,520  29,518 
Total $ 237,509  $ 226,231  $ 80,977  $ 263,978  $ 208,015  $ 80,989 

Insurance-Linked Securities

For the quarter ended September 30, 2020, the decrease in operating revenues in our insurance-linked securities operations was driven by lower revenues from our Nephila operations, primarily due to lower investment management fees as a result of increases in development class assets, or capital held in a side-pocket for which management fees are not earned, and redemptions in 2020. The decrease in operating revenues for the quarter ended September 30, 2020 was also attributable to lower revenues from our Markel CATCo operations, primarily due to lower assets under management during 2020 compared to 2019 and, effective January 1, 2020, a further reduction in the management fee rate.

For the nine months ended September 30, 2020, the decrease in operating revenues in our insurance-linked securities operations was driven by lower revenues from our Markel CATCo operations, as described above, partially offset by higher revenues from our Nephila operations. Higher revenues from our Nephila operations for the nine months ended September 30, 2020 were primarily due to growth in our managing general agent operations, partially offset by lower investment management fees, as described above.

Nephila's net assets under management were $9.4 billion and $10.4 billion as of September 30, 2020 and December 31, 2019, respectively. MCIM's net assets under management were $1.2 billion and $2.8 billion as of September 30, 2020 and December 31, 2019, respectively, a portion of which is attributable to our investments in the Markel CATCo Funds.
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The increase in services and other expenses in our insurance-linked securities operations for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 was primarily due to a legal settlement at our Markel CATCo operations. See note 15 of the notes to consolidated financial statements for further details around developments in our Markel CATCo operations. Services and other expenses at our Nephila operations increased for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 due to growth in our managing general agent operations in 2020. For the nine months ended September 30, 2020, higher managing general agent expenses were partially offset by a favorable impact from transaction-related costs in 2019 that did not recur in 2020. Services and other expenses in 2020 also reflect start-up costs associated with our new retrocessional insurance-linked securities fund manager, Lodgepine.

Program Services

The decrease in operating revenues in our program services operations for both the quarter and nine months ended September 30, 2020 compared to the same periods of 2019 was primarily due to lower gross premium volume. Gross written premiums in our program services operations were $536.6 million and $1.5 billion for the quarter and nine months ended September 30, 2020, respectively, and $619.2 million and $1.8 billion for the quarter and nine months ended September 30, 2019, respectively. The decrease in gross premium volume for both periods was driven by the run-off of one large program and the cancellation of an in-force book of policies related to another large program resulting in a one-time unfavorable premium adjustment of $55.0 million associated with the return of unearned premium, which was recognized in the first quarter of 2020. For the nine months ended September 30, 2020, these decreases were partially offset by gross written premiums from new program business in 2020.

Interest Expense, Loss on Early Extinguishment of Debt and Income Taxes

Interest Expense and Loss on Early Extinguishment of Debt

Interest expense was $42.7 million and $133.2 million for the quarter and nine months ended September 30, 2020, respectively, compared to $47.5 million and $129.0 million for the same periods of 2019. The change in interest expense for the quarter and nine months ended September 30, 2020 was primarily a result of the following transactions:
•the purchase and redemption of our 6.25% and 5.35% unsecured senior notes in the third and fourth quarters of 2019
•the repayment of our 7.125% unsecured senior notes in the third quarter of 2019
•the issuance of our 3.35% and 4.15% unsecured senior notes in the third quarter of 2019
The change in interest expense for the nine months ended September 30, 2020 was also impacted by the issuance of our 5.0% unsecured senior notes issued in the second quarter of 2019.

In September 2019, we purchased $125.2 million of principal on our 6.25% unsecured senior notes due September 30, 2020 and $97.8 million of principal on our 5.35% unsecured senior notes due June 1, 2021 through a tender offer at a total purchase price of $130.1 million and $103.0 million, respectively. In connection with the tender offer and purchase, we recognized a loss on early extinguishment of debt of $6.7 million during the quarter and nine months ended September 30, 2019. See "Financial Condition" for further discussion of our other 2019 senior long-term debt transactions.

Income Taxes

The effective tax rate for the nine months ended September 30, 2020 was not meaningful due to the small pre-tax loss in the period. The effective tax rate was 22% for the nine months ended September 30, 2019. We use the estimated annual effective tax rate method for calculating our tax provision in interim periods. This method applies our best estimate of the effective tax rate expected for the full year to year-to-date earnings before income taxes. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated (discrete items), are excluded from the estimated annual effective tax rate, and the related tax expense or benefit is reported in the same period as the related item. The estimated annual effective tax rate was 21% for both the nine months ended September 30, 2020 and 2019. The difference between the estimated annual effective tax rate and the effective tax rate for both periods was attributed to discrete items during the respective periods, however, the impact of the discrete items for the nine months ended September 30, 2020 was magnified due to the small pre-tax loss during the period.

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Comprehensive Income to Shareholders

The following table summarizes the components of comprehensive income to shareholders.
Quarter Ended September 30, Nine Months Ended September 30,
(dollars in thousands) 2020 2019 2020 2019
Net income (loss) to shareholders $ 452,726  $ 205,637  $ (31,269) $ 1,279,362 
Other comprehensive income
Change in net unrealized gains on available-for-sale investments, net of taxes 61,087  48,518  297,927  329,873 
Other, net of taxes 6,294  (4,144) (6,961) (3,640)
Other comprehensive (income) loss attributable to noncontrolling interest (18) 58  (24) 49 
Other comprehensive income to shareholders 67,363  44,432  290,942  326,282 
Comprehensive income to shareholders $ 520,089  $ 250,069  $ 259,673  $ 1,605,644 

Book Value per Common Share and Total Shareholder Return

Book value per common share was $819.71 as of September 30, 2020, which reflects an increase of 2% from $802.59 at December 31, 2019. Our stock price per share, or total shareholder return, decreased 15% for the nine months ended September 30, 2020.

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Financial Condition

Investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) were $23.6 billion at September 30, 2020 compared to $22.3 billion at December 31, 2019. Equity securities were $6.2 billion, or 26% of invested assets, at September 30, 2020, compared to $7.6 billion, or 34% of invested assets, at December 31, 2019. The decrease in equity securities from December 31, 2019 to September 30, 2020 was attributable to sales of equity securities as well as a decrease in fair value, which was driven by net unfavorable market value movements during the nine months ended September 30, 2020. Fixed maturity securities were 43% of invested assets at September 30, 2020 compared to 45% at December 31, 2019.

Net cash provided by operating activities was $1.3 billion for the nine months ended September 30, 2020 compared to $712.0 million for the same period of 2019. Net cash flows from operating activities for the nine months ended September 30, 2020 reflected higher net premium collections in our Insurance segment.

Net cash provided by investing activities was $22.5 million for the nine months ended September 30, 2020 compared to net cash used by investing activities of $657.2 million for the same period of 2019. During the nine months ended September 30, 2020, net cash provided by investing activities included $1.2 billion from sales of equity securities, net of cash used for purchases of equity securities. This was partially offset by cash used to increase our holdings of short-term investments in the period. See "Developments Related to COVID-19" for further discussion of actions we have taken in our investment portfolio in response to the pandemic. Net cash provided by investing activities in 2020 also was net of $547.9 million of net cash used for the acquisition of Lansing. During the nine months ended September 30, 2019, net cash used by investing activities included $212.5 million of cash to acquire a minority ownership interest in The Hagerty Group, LLC. Cash flow from investing activities is also 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.

Net cash provided by financing activities was $475.6 million for the nine months ended September 30, 2020 compared to $770.6 million for the same period of 2019. In May 2020, we issued preferred shares with net proceeds of $591.9 million, as further discussed below. During the nine months ended September 30, 2019, we issued unsecured senior notes with net proceeds of $1.4 billion, before expenses. We used a portion of these proceeds to repay the remaining outstanding balance of our 7.125% unsecured senior notes due September 30, 2019 ($234.8 million aggregate principal outstanding at December 31, 2018). We used an additional portion of these proceeds to purchase $223.0 million of principal on two additional series of our other unsecured senior notes through a tender offer at a total purchase price of $233.1 million. Cash of $23.9 million and $82.0 million was used to repurchase shares of our common stock during the first nine months of 2020 and 2019, respectively. We suspended repurchases of our shares in March 2020.

We seek to maintain prudent levels of liquidity and financial leverage for the protection of our policyholders, creditors and shareholders. Our debt to capital ratio was 23% at September 30, 2020 and 24% at December 31, 2019.

We have access to various capital sources, including dividends from certain of our insurance and Markel Ventures subsidiaries, holding company invested assets, undrawn capacity under our revolving credit facility and access to the debt and equity capital markets. We believe that we have sufficient liquidity to meet our capital needs. However, the availability of these sources of capital and the availability and terms of future financings will depend on a variety of factors, and could be adversely affected by, among other things, risks and uncertainties related to COVID-19. See "Developments Related to COVID-19" for further discussion of the potential impacts of COVID-19 on our liquidity and capital resources.

In May 2020, we issued 600,000 6.00% Fixed-Rate Reset Non-Cumulative Series A preferred shares, with no par value and a liquidation preference of $1,000 per share, for aggregate net proceeds after expenses of $591.9 million. Dividends, if declared by our Board of Directors, are payable semi-annually in arrears beginning in December 2020. If we do not declare and pay the full dividends for the latest completed dividend period on all outstanding Series A preferred shares, we may not (i) declare or pay a dividend on our common shares or (ii) purchase, redeem or otherwise acquire for consideration any common shares, subject to certain exceptions. See note 14 of the notes to consolidated financial statements.

Our holding company had $3.8 billion and $4.0 billion of invested assets at September 30, 2020 and December 31, 2019, respectively. The decrease in invested assets was primarily due to a capital contribution to Markel Ventures for the acquisition of Lansing as well as interest payments associated with our unsecured senior notes and a decrease in the fair value of equity securities, partially offset by the proceeds from our preferred shares offering, as described above.
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Developments Related to COVID-19

On March 11, 2020, COVID-19, a novel coronavirus outbreak, was declared a pandemic by the World Health Organization. This pandemic has caused unprecedented social and economic disruption, increased volatility of capital markets and intervention by various governments and central banks around the world. In addition to the losses incurred in both our investing and underwriting operations during the first nine months of 2020, and the decreased demand for certain products and services within our Markel Ventures operations, we are experiencing significant impacts across our business operations. Most of the workforce in our insurance operations is working remotely from their homes, however, some of our offices have re-opened to the workforce at a reduced capacity. We have taken significant measures and developed new policies and procedures to protect the health and safety of our employees who are returning the office. While remote working continues to be the predominate approach, and is currently operating effectively, an extended period of remote work arrangements could strain our business continuity plans, introduce or increase operational and control risks, including but not limited to increased cybersecurity risks, and impact our ability to effectively manage our businesses. Within our Markel Ventures operations, most of our businesses are operating on their premises, however, their ability to continue to do so may be impacted as the pandemic evolves. For those employees in our insurance and Markel Ventures operations who are returning to work, or have continued work, on our premises, there is a risk that they will contract COVID-19, which could expose us to increased risk of employment related claims and litigation. Illnesses suffered by key employees, or a significant percentage of our workforce, also could prevent or delay the performance of critical business functions.

We are committed to serving the needs of our employees, customers, business partners and shareholders and continue to focus our efforts on safeguarding our people, supporting our front office and business operations and keeping our employees, customers, business partners and shareholders informed.

Other impacts we have experienced in our operations during the quarter and nine months ended September 30, 2020, including our consideration of these impacts on the valuation of our goodwill and intangible assets, as well as steps we are taking to respond to the economic disruption and dislocation caused by the pandemic, are discussed below, along with potential future impacts to our results of operations and financial condition.

Liquidity and Capital Resources

We seek to maintain prudent levels of liquidity and financial leverage for the protection of our policyholders, creditors and shareholders. We began the year in a strong liquidity position, holding $4.0 billion of invested assets at our holding company, the highest level in our history, and at September 30, 2020, our holding company held $3.8 billion of invested assets. Invested assets at the holding company as of September 30, 2020 include net proceeds from our May 2020 issuance of preferred stock totaling $591.9 million, and following two debt issuances in 2019 and the purchase and redemption of our unsecured senior notes due to mature in 2020 and 2021, we have no unsecured senior notes maturing until July 2022. We also have access to our $300 million revolving credit facility. We continue to maintain a fixed maturity portfolio comprised of high credit quality, investment grade securities with an average rating of "AA." Despite a $242.8 million decrease in the fair value of our equity portfolio in the first nine months of 2020, unrealized gains on our equity portfolio were $3.4 billion as of September 30, 2020.

Given the dislocation in the financial markets and related uncertainty around the global credit markets, we have taken several steps within our investment portfolio to increase our allocation to cash. Initially, we were retaining cash proceeds from maturities of short-term investments and fixed maturity securities. However, we subsequently have been reallocating cash to purchase short-term investments and fixed maturity securities. We also paused our purchases of equity securities and sold certain equity securities based on our views of the underlying fundamentals of these positions and where pricing was deemed appropriate. We also suspended repurchases of our shares in March 2020 and are focusing on expense reductions across our company.

Declines in the fair value of our equity securities and underwriting losses arising from COVID-19, as well as the 2020 Catastrophes, have reduced the capital held by our insurance subsidiaries. Our insurance operations may require additional capital to support premium writings, and we remain committed to maintaining adequate capital and surplus at each of our insurance subsidiaries. As of September 30, 2020, the statutory capital of all of our insurance subsidiaries exceeded required capital, and we believe we are well positioned to continue to pay claims, including those arising from the pandemic, promptly in accordance with the terms of our policies.

We continue to believe we have adequate liquidity to meet our capital and operating needs, including that which may be required to support the operating needs of our subsidiaries.

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Underwriting Operations

As previously discussed, our underwriting results for the nine months ended September 30, 2020 included $356.8 million of net losses and loss adjustment expenses directly attributed to COVID-19 (where COVID-19 was deemed the proximate cause of loss), including $31.8 million recognized during the third quarter. Due to the inherent uncertainty associated with the assumptions surrounding this pandemic, these estimates are subject to a wide range of variability. While we believe our net reserves for direct losses and loss adjustment expenses for COVID-19 as of September 30, 2020 are adequate based on information available at this time, we continue to closely monitor reported claims, government actions, judicial decisions and changes in local and worldwide social disruption arising from the pandemic and will adjust our estimates of gross and net losses as new information becomes available. See "Results of Operations - Underwriting Results" for further discussion on our estimate of direct losses and loss adjustment expenses attributed to COVID-19.

We also have underwriting exposure to loss impacts that are indirectly related to the COVID-19 pandemic and associated with a broader range of coverages, including coverages within our trade credit, professional liability and workers' compensation product lines, among others, as well as our reinsurance product lines. During the quarter and nine months ended September 30, 2020, we recognized $15.0 million of net losses and loss adjustment expenses in our trade credit product line within our Insurance segment related to losses that were indirectly attributable to the pandemic. As the impacts of the pandemic continue to evolve, we expect that further losses indirectly related to the COVID-19 pandemic are likely to emerge. As an example, we provide liability coverage for health and medical institutions and professions, as well as other professions, which have been strained or otherwise impacted by the pandemic. No other significant indirect losses have been reported at this time.

The widespread economic and social disruption caused by COVID-19 has created significant financial hardships for individuals and businesses worldwide. However, at this time, we do not believe there has been any material change in our exposure to credit losses. Our allowances for credit losses in both our insurance receivables and reinsurance recoverables were adjusted during the first quarter of 2020 to reflect the increased credit risk associated with the negative economic outlook, the impact of which was not material to our underwriting results.

The significant decline in economic activity occurring during the pandemic may have an unfavorable impact on our premium volume, due to business closures, reduced recreational activity and lower gross receipts, revenues and payrolls of our insureds, among other things. While premium volume for the quarter and nine months ended September 30, 2020 was impacted by these effects of the pandemic, the impact was not material to our underwriting results. For those policies where the underlying loss exposures have been reduced as a result of decreased economic activity or stay-at-home orders resulting from COVID-19, we also may be required to refund premiums to policyholders, however, there have been no material adjustments to date. These adverse impacts on our premium volume could be material.

Within our underwriting operations, we also are reviewing and analyzing the underwriting guidelines and procedures we use to underwrite and reinsure policies that provide coverages related to communicable diseases, viruses, pathogens and other similar risks. Where appropriate, we are taking steps to mitigate our exposure to additional or further losses related to these types of risks, including increasing pricing and adding policy terms and conditions, including exclusions. These actions may reduce premium volume in certain classes of business.

Markel Ventures Operations

Beginning in the second quarter of 2020, the economic and social disruption created by the pandemic impacted the results of operations, financial position and cash flows of our Markel Ventures operations. Revenues across many of our businesses decreased due to changes in consumer behavior and the overall impact of current economic conditions on commercial and consumer spending, all of which impacted demand for certain products and services within our businesses. We have also seen orders and contracts canceled or postponed, and as a result of reduced demand, we have temporarily reduced capacity at certain of our operations for which the duration is currently uncertain. As the social and economic disruption caused by the pandemic is ongoing, we expect that revenues from our Markel Ventures operations will continue to be impacted, and these impacts may continue to be material.

In order to partially mitigate the impact of decreased revenues, certain of our businesses have taken actions to reduce expenses, including, but not limited to, elimination of non-essential expenses, cancellation or deferral of open positions, salary reductions and workforce furloughs and reductions. Our businesses may increase borrowings, if needed, to maintain the cash flow required to operate.

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Continued loss of revenues in certain of our products and services businesses, the extent of which we are currently unable to reasonably estimate, could also impact the carrying value of inventory, goodwill and intangible assets and other long-lived assets, which may become impaired. See further discussion below for considerations regarding the valuation of our goodwill and intangible assets as of September 30, 2020. In certain cases, revenue declines also could result in ongoing cash and working capital constraints and could impact the companies' liquidity and their ability to comply with debt covenants, and, in response, we may take steps necessary to support these operations.

As a result of the economic hardship experienced by our customers, we may modify our payment terms or offer discounts to our customers, and we also are exposed to increased credit risk. Our allowances for credit losses on our receivables were adjusted during the first quarter of 2020 to reflect the increased credit risk associated with the negative economic outlook, the impact of which was not material to our results of operations.

Insurance-Linked Securities and Program Services

Through our insurance-linked securities operations, we receive management fees for investment and insurance management services based on the net asset value of the accounts we manage, and, for certain funds, incentive fees based on the annual performance of the funds managed.

For the nine months ended September 30, 2020, investment losses attributed to COVID-19 within the investment funds we manage have not been significant; however, uncertainty around potential COVID-19 loss exposures, has reduced, and may further reduce, the net asset value on which our management fees are based. Deferred or reduced investment management fees and the associated decline in cash flows, the extent of which we are currently unable to reasonably estimate, also could impact the carrying value of our goodwill and intangible assets, which may become impaired. See further discussion below for considerations regarding the valuation of our goodwill and intangible assets as of September 30, 2020.

Volatility in the capital markets and investor uncertainty regarding insurance industry exposure to COVID-19 also has impacted, and may continue to impact, our ability to raise additional third party capital for the funds we manage. We also have experienced, and may continue to experience, higher than anticipated investor redemptions from our funds. These impacts could have a material impact on our results of operations and financial condition.

Our program services business generates fee income, in the form of ceding (program service) fees. This fee income is calculated based on the gross premium volume of the insurance programs we support. Similar to our underwriting operations, the significant decline in economic activity may have an unfavorable impact on premium volume, which may result in a reduction in fee income.

Goodwill and Intangible Assets

Our consolidated balance sheet as of September 30, 2020 included goodwill and intangible assets of $4.4 billion, as follows:
  September 30, 2020
(dollars in millions) Underwriting Markel Ventures
Other (1)
Total
Goodwill $ 892.9  $ 904.7  $ 807.0  $ 2,604.6 
Intangible assets 460.0  637.0  723.5  1,820.5 
Total $ 1,352.9  $ 1,541.7  $ 1,530.5  $ 4,425.1 
(1)Amounts included in Other reflect our operations that are not included in a reportable segment, including our insurance-linked securities operations and our program services operations.

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Through September 30, 2020, we considered whether a quantitative assessment of goodwill and intangible assets for impairment was required as a result of the significant economic disruption caused by the COVID-19 pandemic. After considering qualitative factors regarding the actual and expected impacts of the pandemic on our operations, as well as the amount by which the fair value of our reporting units exceeded their respective carrying values at the date of the last quantitative assessment, we determined these conditions did not indicate that it is more likely than not that the carrying value of any of our reporting units exceeded their fair value as of September 30, 2020 based on information available to us at this time. Similar factors were considered to determine if these circumstances were an indicator requiring an assessment of the recoverability of our intangible assets, and we concluded they were not based on information available to us at this time. However, delayed recovery or further deterioration in market conditions related to the general economy and the specific industries in which we operate, a sustained trend of weaker than anticipated financial performance within a reporting unit, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in future goodwill or intangible asset impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.

For additional risks to our businesses related to COVID-19, see the risk factor titled "The COVID-19 pandemic has had, and may continue to have, material adverse effects on us."
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Brexit Developments

On June 23, 2016, the United Kingdom (U.K.) voted to exit the European Union (E.U.) (Brexit). A Withdrawal Agreement was agreed between the U.K. government and the E.U. in October 2019 and was approved by the U.K. Parliament on January 23, 2020. Under the Withdrawal Agreement, the U.K. left the E.U. on January 31, 2020. The effect of the Withdrawal Agreement is that E.U. laws continue to have effect in the U.K. during a transition period until December 31, 2020. The final terms of the future relationship between the U.K. and the E.U. remain to be negotiated. The effects of Brexit will depend in part on agreements, if any, the U.K. makes to retain access to E.U. markets. Ultimately, all Brexit terms also must be ratified by the legislative bodies of the 27 E.U. member states.

Without a Brexit agreement on future terms of trade, U.K. based insurers may be prohibited from administering policies for, or paying claims to, European Economic Area (EEA) policyholders post Brexit. In order to provide certainty for its EEA policyholders, our U.K. insurance company, Markel International Insurance Company Limited, transferred its legacy EEA exposures, claims and policies to our German insurance company, Markel Insurance SE. Lloyd's also has commenced its transfer of legacy EEA exposures. That transfer is expected to be completed prior to December 31, 2020, however it may take longer, and there is no assurance that approval of that transfer will be granted or on what terms and conditions. Lloyd's has indicated that it intends to honor contractual commitments, including the payment of valid claims, and expects that its approach will be respected by EEA regulators pending the completion of its transfer of legacy EEA exposures. The European Insurance and Occupational Pensions Authority has issued its recommendation to E.U. member states that they adopt legislation to permit the orderly run-off of legacy EEA exposures, claims and policies by U.K. insurers. While some E.U. member states have adopted such legislation, no E.U. member state is obligated to do so, and the terms of any such legislation may vary significantly among the E.U. member states. Without an orderly run-off regime for legacy business in every E.U. member state, Lloyd's, and in turn, our Lloyd's syndicate, may be impaired in running-off business, including paying claims, in the E.U. member states.

For additional risks related to Brexit, see "The exit of the United Kingdom from the European Union could have a material adverse effect on us." under Risk Factors in our 2019 Annual Report on Form 10-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk Disclosures 

Market risk is the risk of economic losses due to adverse changes in the estimated fair value of a financial instrument as the result of changes in equity prices, interest rates, foreign currency exchange rates and commodity prices. Our consolidated balance sheets include assets and liabilities with estimated fair values that are subject to market risk. Our primary market risks have been equity price risk associated with investments in equity securities, interest rate risk associated with investments in fixed maturity securities and foreign currency exchange rate risk associated with our international operations. Some businesses within our Markel Ventures operations are exposed to commodity price risk resulting from changes in the price of raw materials, parts and other components necessary to manufacture products, however, this risk is not material to the Company. The operating results of these businesses could be adversely impacted should they be unable to obtain price increases from customers in response to significant increases in raw materials, parts and other component prices.

During the nine months ended September 30, 2020, there were no material changes to the market risk components described in our Annual Report on Form 10-K for the year ended December 31, 2019.

The estimated fair value of our investment portfolio at September 30, 2020 was $23.6 billion, 43% of which was invested in fixed maturity securities and 26% of which was invested in equity securities. At December 31, 2019, the estimated fair value of our investment portfolio was $22.3 billion, 45% of which was invested in fixed maturity securities and 34% of which was invested in equity securities.

Our fixed maturity portfolio includes corporate bonds, mortgage-backed securities and securities issued by municipalities, foreign governments and non-sovereign foreign institutions. Credit risk exists within our fixed maturity portfolio from the potential for loss resulting from adverse changes in an issuer's ability to repay its debt obligations. During the nine months ended September 30, 2020, there were no material changes in our corporate bond, mortgage-backed security, municipal bond or foreign government fixed maturity holdings.

We believe that our fixed maturity portfolio is highly diversified and is comprised of high quality securities. We have consistently invested in high credit quality, investment grade securities. Our fixed maturity portfolio has an average rating of "AA," with 98% rated "A" or better by at least one nationally recognized rating organization. Our policy is to invest in investment grade securities and to minimize investments in fixed maturity securities that are unrated or rated below investment grade. At September 30, 2020, less than 1% of our fixed maturity portfolio was unrated or rated below investment grade. Our fixed maturity portfolio includes securities issued with financial guaranty insurance. We purchase fixed maturity securities based on our assessment of the credit quality of the underlying assets without regard to insurance.

We also have credit risk to the extent any of our reinsurers are unwilling or unable to meet their obligations under our ceded reinsurance agreements. As of December 31, 2019, all of our ten largest reinsurers within our underwriting operations were rated "A" or better by A.M. Best and within our program services business, six of our ten largest reinsurers were rated "A" or better by A.M. Best. For reinsurers within our program services business with a credit rating of lower than "A" we employ a stringent collateral monitoring program, under which the majority of the reinsurance recoverable balances are fully collateralized. During the nine months ended September 30, 2020, there were no material changes to the credit ratings of our top ten reinsurers within our underwriting and program services operations as reported in our Annual Report on Form 10-K for the year ended December 31, 2019.

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Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15 (Disclosure Controls). This evaluation was conducted under the supervision and with the participation of our management, including the Co-Principal Executive Officers (Co-PEOs) and the Principal Financial Officer (PFO).

Our management, including the Co-PEOs and PFO, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon our controls evaluation, the Co-PEOs and PFO concluded that effective Disclosure Controls were in place to ensure that the information required to be disclosed in reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

There were no changes in our internal control over financial reporting during the third quarter of 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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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 "Business Overview," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Annual Report on Form 10-K and under "Developments Related to COVID-19" and "Risk Factors" in this report, or are included in the items listed below:
•current global economic, market and industry conditions, as well as significant volatility, uncertainty and disruption caused by the COVID-19 pandemic, including governmental, legislative, judicial or regulatory actions or developments affecting our businesses;
•our expectations about future results of our underwriting, investing, Markel Ventures and other operations are based on current knowledge and assume no significant man-made or natural catastrophes, no significant changes in products or personnel and no adverse changes in market conditions;
•the effect of cyclical trends on our underwriting, investing, Markel Ventures and other operations, including demand and pricing in the insurance, reinsurance and other markets in which we operate;
•actions by competitors, including the use of technology and innovation to simplify the customer experience, increase efficiencies, redesign products, alter models and effect other potentially disruptive changes in the insurance industry, and the effect of competition on market trends and pricing;
•our efforts to develop new products, expand in targeted markets or improve business processes and workflows may not be successful and may increase or create new risks (e.g., insufficient demand, change to risk exposures, distribution channel conflicts, execution risk, increased expenditures);
•the frequency and severity of man-made and natural catastrophes (including earthquakes, wildfires and weather-related catastrophes) may exceed expectations, are unpredictable and, in the case of wildfires and weather-related catastrophes, may be exacerbated if, as many forecast, changing conditions in the oceans and atmosphere result in increased hurricane, flood, drought or other adverse weather-related activity;
•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 legal and social trends, and inherent uncertainties in the loss estimation process can adversely impact the adequacy of our loss reserves and our allowance for reinsurance recoverables;
•reinsurance reserves are subject to greater uncertainty than insurance reserves, primarily because of reliance upon the original underwriting decisions made by ceding companies and the longer lapse of time from the occurrence of loss events to their reporting to the reinsurer for ultimate resolution;
•inaccuracies (whether due to data error, human error or otherwise) in the various modeling techniques and data analytics (e.g., scenarios, predictive and stochastic modeling, and forecasting) we use to analyze and estimate exposures, loss trends and other risks associated with our insurance and insurance-linked securities businesses could cause us to misprice our products or fail to appropriately estimate the risks to which we are exposed;
•changes in the assumptions and estimates used in establishing reserves for our life and annuity reinsurance book (which is in runoff), for example, changes in assumptions and estimates of mortality, longevity, morbidity and interest rates, could result in material increases in our estimated loss reserves for such 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 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 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 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 and 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 that health epidemics and pandemics, including the COVID-19 pandemic, as well as actions of local, state and federal authorities in response thereto, may have on our business operations and claims activity;
•the impact on our businesses in the event of a repeal, in part or in whole, or modification of U.S. health care reform legislation and regulations;
•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 of our enterprise information technology systems and those maintained by third parties upon which we may rely, or a failure to comply with data protection or privacy regulations;
•outsourced providers may fail to perform as we anticipate or may breach their obligations to us;
•our acquisitions may increase our operational and 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 executive officer or other key personnel could adversely impact one or more of our operations;
•the manner in which we manage our global operations through a network of business entities could result in inconsistent management, governance and oversight practices and make it difficult for us to implement strategic decisions and coordinate procedures;
•our substantial international operations and investments expose us to increased political, operational and economic risks, including foreign currency exchange rate and credit risk;
•the political, legal, regulatory, financial, tax and general economic impacts, and other impacts we cannot anticipate, related to the United Kingdom's withdrawal from the European Union (Brexit), which could have adverse consequences for our businesses, particularly our London-based international insurance operations;
•our ability to obtain additional capital for our operations on terms favorable to us;
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•our compliance, or failure to comply, with covenants and other requirements under our revolving credit facility, senior debt and other indebtedness;
•our ability to maintain or raise third party capital for existing or new investment vehicles and risks related to our management of third party capital;
•the effectiveness of our procedures for compliance with existing and future guidelines, policies and legal and regulatory standards, rules, laws and regulations;
•the impact of economic and trade sanctions and embargo programs on our businesses, including instances in which the requirements and limitations applicable to the global operations of U.S. companies and their affiliates are more restrictive than, or conflict with, those applicable to non-U.S. companies and their affiliates;
•regulatory changes, or challenges by regulators, regarding the use of certain issuing carrier or fronting arrangements;
•our dependence on a limited number of brokers for a large portion of our revenues and third-party capital;
•adverse changes in our assigned financial strength or debt ratings or outlook could adversely impact us, including our ability to attract and retain business, the amount of capital our insurance subsidiaries must hold and the availability and cost of capital;
•changes in the amount of statutory capital our insurance subsidiaries are required to hold, which can vary significantly and is based on many factors, some of which are outside our control;
•losses from litigation and regulatory investigations and actions; and
•a number of additional factors may adversely affect our Markel Ventures operations, and the markets they serve, and negatively impact their revenues and profitability, including, among others: adverse weather conditions, plant disease and other contaminants; changes in government support for education, healthcare and infrastructure projects; changes in capital spending levels; changes in the housing and commercial construction markets; liability for environmental matters; volatility in the market prices for their products; and volatility in commodity prices and interest and foreign currency exchange rates.

Our premium volume, underwriting and investment results and results from our other operations have been and will continue to be potentially materially affected by these factors. In addition, with respect to previously reported developments at MCIM and the decision to place both the Markel CATCo Funds and Markel CATCo Re into run-off:
•the inquiries by the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority into loss reserves recorded in late 2017 and early 2018 at Markel CATCo Re (the Markel CATCo Inquiries) may result in adverse findings, reputational damage, the imposition of sanctions, increased costs, litigation and other negative consequences; and
•management time and resources may be diverted to address the Markel CATCo Inquiries, as well as related litigation.

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 speak only as at their dates.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Markel CATCo Inquiries

We previously reported that the U.S. Department of Justice, U.S. Securities and Exchange Commission and Bermuda Monetary Authority (together, the Governmental Authorities) are conducting inquiries into loss reserves recorded in late 2017 and early 2018 at our Markel CATCo operations. Those reserves are held at Markel CATCo Re, an unconsolidated subsidiary of MCIM. The Markel CATCo Inquiries are limited to MCIM and its subsidiaries (together, Markel CATCo) and do not involve other Markel subsidiaries.

We retained outside counsel to conduct an internal review of Markel CATCo's loss reserving in late 2017 and early 2018. The internal review was completed in April 2019 and found no evidence that Markel CATCo personnel acted in bad faith in exercising business judgment in the setting of reserves and making related disclosures during late 2017 and early 2018. Our outside counsel has met with the Governmental Authorities and reported the findings from the internal review. At this time, we are unable to predict the duration, scope or result of the Markel CATCo Inquiries.

Belisle Arbitration

On February 21, 2019, Anthony Belisle filed a lawsuit, Anthony Belisle v. Markel CATCo Investment Management Ltd and Markel Corp. (U.S. District Court for the District of New Hampshire), which suit was amended on March 29, 2019. As amended, the complaint alleged claims for, among other things, breach of contract, defamation, invasion of privacy, indemnification, intentional interference with contractual relations and deceptive and unfair acts and sought relief of, among other things, $66 million in incentive compensation, enhanced compensatory damages, consequential damages, damages for emotional distress and injury to reputation, exemplary damages and attorneys' fees. In June 2019, MCIM, Markel Corporation, and Mr. Belisle agreed to commence binding arbitration to finally, fully and confidentially resolve the claims and counterclaims alleged in the action, and the Belisle suit was dismissed with prejudice in July 2019. In late July 2020, the parties commenced settlement discussions and reached a final agreement on July 28, 2020. 

Thomas Yeransian v. Markel Corporation

In October 2010, we completed the acquisition of Aspen Holdings, Inc. (Aspen). As part of the consideration for that acquisition, Aspen shareholders received contingent value rights (CVRs). Based on a valuation of the CVRs as of their December 31, 2017 maturity date, we paid $9.9 million to the CVR holders on June 5, 2018, which represents 90% of the undisputed portion of the final amount we believe we are required to pay under the CVR agreement.

Prior to the December 31, 2017 CVR maturity date, the CVR holder representative, Thomas Yeransian, had disputed our prior estimation of the value of the CVRs. On September 15, 2016, Mr. Yeransian filed a suit, Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), alleging, among other things, that we are in default under the CVR agreement. The suit seeks: $47.3 million in damages, which represents the unadjusted value of the CVRs; plus interest ($18.8 million through September 30, 2020) and default interest (up to an additional $15.7 million through September 30, 2020, depending on the date any default occurred); and an unspecified amount of punitive damages, costs, and attorneys' fees.

At the initial hearing held February 21, 2017, the court stayed the proceedings and ordered the parties to discuss resolving the dispute pursuant to the independent CVR valuation procedure under the CVR agreement. The parties met on April 5, 2017, but were unsuccessful in reaching agreement on a process for resolving the dispute. We subsequently filed a motion to stay the litigation and compel arbitration, and, on July 31, 2017, the court issued an order granting that motion.

On September 20, 2018, a new judge was assigned to the case. On October 12, 2018, the court denied both Mr. Yeransian's motion to reconsider the order staying the litigation and compelling arbitration and our motion for sanctions against Mr. Yeransian for violating the confidentiality of mediation proceedings. The court subsequently (1) on December 3, 2018 ordered Mr. Yeransian to provide the court and us with the identity of an actuarial firm to participate in the selection of independent experts for the CVR valuation process under the CVR agreement and (2) on December 11, 2018 denied Mr. Yeransian's motion for judgment that we had waived our right to require Mr. Yeransian's participation in the CVR valuation process. On July 8, 2019, the Court granted our motion for instructions as to how the independent experts are to conduct the CVR valuation process and denied Mr. Yeransian's motion to have a hearing officer appointed to oversee the valuation process. The independent experts, who were jointly selected by the parties, have been engaged and are conducting the valuation process.

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On November 13, 2018, Mr. Yeransian filed a second suit, Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware), which also alleges that the Company is in default under the CVR agreement. The second suit seeks the same monetary damages and relief as the original suit. We filed a motion to stay this suit until the arbitration for the original suit has concluded and the CVR holders have received the remainder of the final amount due under the CVR Agreement. The court granted that motion on August 6, 2019.

On June 5, 2020, Yeransian filed a third suit, Thomas Yeransian v. Markel Corporation (U.S. District Court for the District of Delaware). Similar to the first and second suits, the third suit alleges that the Company is in default under the CVR agreement and, in addition, has interfered with the current, on-going arbitration for the CVR valuation. The third suit seeks the same monetary damages and relief as the original suit and the second suit, as well as other declaratory and non-monetary judgments and orders. We filed a motion to stay this suit.

We believe Mr. Yeransian's suits to be without merit. We further believe that any material loss resulting from the suits to be remote. We do not believe the contractual contingent consideration payments related to the CVRs, as ultimately determined by the independent experts in the valuation process, will have a material impact on the Company's liquidity.

Item 1A. Risk Factors

Other than the risk factor discussed below, or as discussed elsewhere in this report, including under note 15 (Commitments and Contingencies) and note 16 (Developments Related to COVID-19) of the notes to consolidated financial statements or under "Management's Discussion and Analysis of Financial Condition and Results of Operations," including "Developments Related to COVID-19" and "Brexit Developments," or under "Legal Proceedings" in this report, there have been no material changes with regard to the risk factors previously disclosed in our 2019 Annual Report on Form 10-K.

The COVID-19 pandemic has had, and may continue to have, material adverse effects on us. The effects of the COVID-19 pandemic, and U.S. and international responses, are wide-ranging, costly, disruptive and rapidly changing. The COVID-19 pandemic has had, and may continue to have, material adverse effects on our underwriting, investment, Markel Ventures and other operations, and on our results of operations and financial condition. Factors that give rise, or may give rise, to those effects include, or may include, the following, as well as others that we cannot predict:
•Executive, legislative or regulatory mandates or judicial decisions that require retroactive coverage of business interruption claims stemming from the COVID-19 pandemic or to expand the scope of other types of insurance or reinsurance coverages, for example, workers' compensation insurance;
•Regulatory actions:
◦prohibiting or postponing the cancellation or non-renewal of insurance policies in accordance with policy terms or requiring renewals on current terms and conditions;
◦requiring the coverage of losses irrespective of policy terms or exclusions;
◦relaxing policyholder reporting requirements for claims, which may affect coverage under our claims made and claims made and reported policies;
◦requiring or encouraging premium refunds;
◦granting extended grace periods for premium payments; and
◦extending due dates to pay past due premiums;
•Rapidly and dramatically changing business conditions and compliance obligations, including as a result of federal and state executive orders and regulatory guidance;
•Disruptions, delays and increased costs and risks related to working remotely, having limited or no access to our facilities, workplace re-entry, employee safety concerns and reductions or interruptions of critical or essential services. Those effects may include, among others:
◦an inability, or a decreased ability, to provide our insurance and non-insurance products and services, provide customer service, pay third parties in a timely manner or perform other necessary business functions; and
◦exposure to additional and increased risks related to internal controls, data security and information privacy, both for the Company and for our suppliers, vendors and other third-parties with whom we do business;
•Illnesses suffered by key employees, or a significant percentage of our workforce or the workforce of our agents, brokers, suppliers or outsourcing providers, which could prevent or delay the performance of critical business functions;
•Illnesses suffered by employees who have continued to work, or who have or will return to work, in our facilities may expose us to increased risk of employment related claims and litigation;
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•Lawsuits and other legal actions challenging the promptness of coverage determinations or the coverage determinations themselves on claims under applicable insurance or reinsurance policies, including, among others, business interruption claims, resulting in increased claims, litigation and related expenses;
•Delays in the reporting of non-COVID-19 claims, and the settlement of those claims, due to a variety of factors, including "stay-at-home" and similar orders instituted by many governmental authorities, potentially increasing the severity of those claims and reducing the predictability of the underlying statistical data used in establishing reserves, particularly for longer-tailed lines of business;
•Reduced demand for our insurance and non-insurance products and services due to reduced global economic activity, which could adversely impact our revenues and cash flows;
•Adverse impacts on our revenues and cash flows due to:
◦premium refunds or delayed receipt of premium payments;
◦delayed payment of reinsurance recoverables; and
◦expedited claims payments in response to regulatory requirements;
•Adverse effects on future cash flows or earnings of one or more of our underwriting, Markel Ventures or other acquired businesses, which could result in an impairment of goodwill or intangible assets and, in turn, a charge to net income;
•Increased needs for capital at our regulated insurance and reinsurance subsidiaries and non-insurance subsidiaries and the constraints that may be placed on our liquidity and other uses of holding company capital;
•Insured or reinsured losses from COVID-19-related claims could be greater than our reserves for those losses;
•Volatility and declines in global financial markets, defaults on fixed maturity securities (including corporate bonds, mortgage-backed securities and securities issued by municipalities, foreign governments and non-sovereign foreign institutions), and declines in interest rates and dividend payments, which have reduced, and could continue to reduce, future investment results and the fair market value of our invested assets;
•Deterioration in global financial and economic conditions, which have had, or could have, a broad range of material adverse effects on our businesses, and on our results of operations and financial condition, including, among others:
◦increased reinsurance costs and the inability to obtain the desired kinds and amounts of reinsurance;
◦furloughs and lay-offs of employees;
◦downgrades, or changes in outlook, by rating agencies of the financial strength or debt ratings of the Company or our insurance or reinsurance company subsidiaries;
◦reduced ability to access capital;
◦inability of our key vendors and contract counterparties to perform or pay the obligations required of them on a timely basis, or at all; and
◦increased credit risk, including credit risk related to our fixed maturity investments and receivables from insureds, reinsurers and customers;
•Delayed or reduced management and incentive fees from our insurance-linked securities operations, due to the resolution of COVID-19 related claims, adverse impacts on our ability to maintain or raise third party capital for existing or new investment vehicles and increased risks related to our management of third party capital;
•A failure to satisfy financial covenants under our revolving credit agreement, which can be adversely affected by a significant decline in our consolidated net worth, including due to the impact of changes in fair value of our equity investments and, to a lesser extent, impairments in our fixed maturity investment portfolio, or impairment of our goodwill and intangible assets. While we currently have no debt outstanding under our revolving credit facility, a failure to satisfy the financial covenants under the revolving credit agreement, unless waived or amended, would result in our inability to borrow or secure letters of credit under that facility;
•Increases in the number of consumer complaints challenging coverage or claims decisions under applicable insurance policies;
•Increases in the number of potential fraudulent claims made under insurance policies due to the economic hardships experienced by companies and individuals as a result of the COVID-19 pandemic; and
•Increases in local, state and federal taxes to pay for costs incurred by governmental expenditures associated with the COVID-19 pandemic.

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One or more of these factors resulting from the COVID-19 pandemic, and others the Company cannot anticipate, could have material adverse effects on the Company's results of operations and financial condition; and the extent of these effects will depend, at least in part, on the scope, severity, duration and subsequent recurrences of the pandemic. In addition, the Company may take steps to mitigate potential risks or liabilities that may arise from the COVID-19 pandemic and related developments and some of those steps may have a material adverse effect on the Company's results of operations and financial condition. Even if an unfavorable outcome does not materialize, these factors, and actions the Company may take in response, may have a material adverse impact on the Company's reputation and result in substantial expense and disruption.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations," including "Developments Related to COVID-19," and the notes to consolidated financial statements in this report, including note 16 (Developments Related to COVID-19), for additional discussion of effects COVID-19 has had, and could have, on our businesses, results of operations and financial condition.

In addition, it is important to note and emphasize, the COVID-19 pandemic also may have the effect of triggering or intensifying many of the risks described under "Risk Factors" in our 2019 Annual Report on Form 10-K, including without limitation, the risks discussed under the following headings:
•We may experience losses or disruptions from catastrophes;
•The failure of any of the methods we employ to manage our loss exposures could have a material adverse effect on us;
•The effects of emerging claim and coverage issues on our business are uncertain;
•We use analytical models to assist our decision making in key areas such as pricing, reserving and capital modeling and actual results may differ materially from the model outputs and related analyses;
•Our results may be affected because actual insured or reinsured losses differ from our loss reserves;
•Changes in the assumptions and estimates used in establishing reserves for our life and annuity reinsurance book could result in material increases in our estimated loss reserves for such business;
•We may be unable to purchase reinsurance protection on terms acceptable to us, or we may be unable to collect on reinsurance we purchase;
•Our efforts to develop new products, expand in targeted markets or improve business processes and workflows may not be successful and may increase or create new risks;
•Our insurance companies and senior debt are rated by various rating agencies, and a downgrade or potential downgrade in one or more of these ratings could have a material adverse effect on us;
•The amount of capital that our insurance subsidiaries have and must hold to maintain their financial strength and credit ratings and meet other requirements can vary significantly from time to time and is sensitive to a number of factors, some of which are outside of our control;
•Our insurance subsidiaries are subject to supervision and regulation that may have a material adverse effect on our operations and financial condition;
•Our investment results may be impacted by changes in interest rates, U.S. and international monetary and fiscal policies as well as broader economic conditions;
•We invest a significant portion of our shareholders' equity in equity securities, which may result in significant variability in our investment results and net income and may have a material adverse effect on shareholders' equity. Additionally, our equity investment portfolio is concentrated, and declines in the value of these significant investments could have a material adverse effect on our financial results;
•We may require additional capital in the future, which may not be available or may only be available on unfavorable terms;
•Our failure to comply with covenants and other requirements under our revolving credit facility, senior debt and other indebtedness could have a material adverse effect on us;
•Our liquidity and our ability to make payments on debt or other obligations depend on the receipt of funds from our subsidiaries;
•The legal and regulatory requirements applicable to our businesses are extensive. Failure to comply could have a material adverse effect on us;
•Losses from legal and regulatory actions may have a material adverse effect on us;
•Employee error and misconduct may be difficult to detect and prevent and may result in significant losses;
•We manage our global operations through a network of business entities, which could result in inconsistent management, governance and oversight practices;
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•We have substantial international operations and investments, which expose us to increased political, operational and economic risks;
•General economic, market or industry conditions could lead to investment losses, adverse effects on our businesses and limit our access to the capital markets;
•We may not find suitable acquisition candidates or new ventures;
•The integration of acquired companies may not be as successful as we anticipate;
•Impairment in the value of our goodwill or other intangible assets could have a material adverse effect on our operating results and financial condition;
•The loss of one or more key executives or an inability to attract and retain qualified personnel could have a material adverse effect on us;
•Information technology systems that we use could fail or suffer a security breach, which could have a material adverse effect on us or result in the loss of regulated or sensitive information; and
•Outsourced providers may perform poorly, breach their obligations to us or expose us to enhanced risks.

For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement contained in this report, see "Safe Harbor and Cautionary Statement."

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Item 6. Exhibits
Exhibit No. Document Description
3.2
The registrant hereby agrees to furnish to the Securities and Exchange Commission, upon request, a copy of all other instruments defining the rights of holders of long-term debt of the registrant and its subsidiaries.
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101
The following consolidated financial statements from Markel Corporation's Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, filed on October 27, 2020, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income (Loss) and Comprehensive Income, (iii) Consolidated Statements of Changes in Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements.**
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Indicates management contract or compensatory plan or arrangement
**    Filed with this report.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, this 27th day of October 2020.

Markel Corporation
By: /s/ Thomas S. Gayner
Thomas S. Gayner
Co-Chief Executive Officer
(Co-Principal Executive Officer)
By: /s/ Richard R. Whitt, III
Richard R. Whitt, III
Co-Chief Executive Officer
(Co-Principal Executive Officer)
By: /s/ Jeremy A. Noble
Jeremy A. Noble
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
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