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Summary Of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2023

Basis of Presentation. The consolidated balance sheet as of June 30, 2023 and the related consolidated statements of income (loss) and comprehensive income (loss) and changes in equity for the quarters and six months ended June 30, 2023 and 2022, and the condensed consolidated statements of cash flows for the six months ended June 30, 2023 and 2022 are unaudited. In the opinion of management, all adjustments necessary for fair presentation of such consolidated financial statements have been included. Except for the adjustments described in note 1 c), such adjustments consist only of normal, recurring items. Interim results are not necessarily indicative of results of operations for the entire year. The consolidated balance sheet as of December 31, 2022 was derived from Markel Group'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 Group and its consolidated subsidiaries, as well as variable interest entities (VIEs) that meet the requirements for consolidation (the Company). All significant intercompany balances and transactions have been eliminated in consolidation. The Company consolidates the results of its Markel Ventures subsidiaries on a one-month lag, with the exception of significant transactions or events that occur during the intervening period. Certain prior period amounts have been reclassified to conform to the current period presentation.

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

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

Life and Annuity Benefits

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

Recent Accounting Pronouncements

Accounting Standards Adopted

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


(dollars in thousands)	January 1, 2021
Reverse reserve deficiency adjustment related to unrealized gains on underlying investment portfolio of available-for-sale securities	$	119,548
Apply updated discount rate to the liability for future policyholder benefits	(138,865)
Increase in life and annuity benefits	(19,317)
Decrease in deferred tax liability	4,057
Decrease in accumulated other comprehensive income, net of taxes	$	(15,260)

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


	December 31,
(dollars in thousands)	2022		2021
Decrease (increase) in life and annuity benefits	$	113,396	$	(19,759)
Decrease (increase) in deferred tax liability	(23,813)		4,149
Increase (decrease) in accumulated other comprehensive income (loss), net of taxes	$	89,583	$	(15,610)

Changes in the discount rate on the liability for future policyholder benefits also resulted in an increase, or benefit, of $63.2 million and $79.2 million to the other comprehensive loss previously presented for the quarter and six months ended June 30, 2022, which was comprised of the following adjustments.


(dollars in thousands)	Quarter Ended June 30, 2022		Six Months Ended June 30, 2022
Reverse benefit included in change in net unrealized gains (losses) on available-for-sale-investments, net of taxes, related to reversal of previously recognized reserve deficiency adjustment	$	—	$	(44,682)
Change in discount rate for life and annuity benefits, net of taxes	63,198		123,891
Increase in other comprehensive loss, net of taxes	$	63,198	$	79,209

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

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