Markel’s Nephila suffers 25% cut to Q1 premium, but stems AuM erosion

Markel’s ILS unit Nephila suffered a reduction in Q1 ceded premiums via parent Markel and its fronting operations, but did manage to stem the decline in total managed assets for the first time in nearly two years.

Markel fronting arrangements delivered $236.9 million to Nephila reinsurers in Q1 gross written premium, down 25% from a bolstered prior year period, notes to Markel's Q1 2023 financial statements indicated.

Premiums ceded directly from Markel via a quota share arrangement likewise fell nearly 17% year on year to $13.5 million.

Revenues and core operating results on the ILS division are also down notably, although Markel does not provide pro forma numbers that would adjust for the 2022 sales of two MGAs that feed business to Nephila. Management only generically admitted to “lower revenues in our fund management operations.”

Despite the decline in new premiums, Nephila managed to stem the slide in total assets under management.

End-Q1 assets under management of $7.2 billion was flat from the prior quarter reading. Net AuM had fallen consistently quarter by quarter since a peak of $9.8 billion at end-Q1 2021.

Beyond the sums sent to Nephila, Markel’s broader fronting operations suffered a decline in Q1 production and cessions.

Speaking during the group’s A1 earnings call, Markel’s president of insurance Jeremy Noble put the decline to termination of select programs which had been expected and frequently result from a client receiving a rating upgrade, a regulatory license to handle its own business or following an acquisition. Noble indicated that while further such development may be in line, the new business pipeline looks “strong.”

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