Earnings call transcript: Markel Group beats Q2 2025 EPS expectations

Markel Group Inc. (MKL) reported its second-quarter 2025 earnings, showcasing a remarkable performance that exceeded analysts’ expectations. The company posted an earnings per share (EPS) of $49.67, significantly outpacing the forecasted $24.9, resulting in a 99.48% surprise. Despite a slight revenue miss, the stock rose by 1.92% in premarket trading, reflecting investor confidence. InvestingPro analysis reveals the company maintains a "GREAT" financial health score of 3.02 out of 4, supported by strong profitability and cash flow metrics.

Key Takeaways

• Markel Group’s EPS of $49.67 far exceeded the forecast of $24.9.
• Revenue came in at $4.6 billion, slightly below the $4.81 billion forecast.
• Stock price increased by 1.92% in premarket trading.
• Strategic restructuring and operational improvements are underway.
• Positive investor sentiment despite revenue miss.

Company Performance

Markel Group’s overall performance in Q2 2025 was strong, driven by significant improvements in operating income across its ventures and investment divisions. The company reported consolidated operating income of $1.1 billion, compared to $410 million in the previous year, showcasing robust growth. The ventures segment saw a 7% increase in revenues, while operating income rose by 17%.

Financial Highlights

• Revenue: $4.6 billion, slightly below the $4.81 billion forecast.
• Earnings per share: $49.67, a 99.48% surprise over the forecast.
• Ventures revenues: Up 7% to $1.55 billion.
• Investments operating income: $822 million, up from $100 million last year.
• Net investment income: $228 million, slightly up from $220 million last year.

Earnings vs. Forecast

Markel Group’s EPS of $49.67 was a significant surprise against the forecast of $24.9, marking a 99.48% beat. However, the revenue of $4.6 billion fell short of the expected $4.81 billion, a 4.37% miss. The substantial EPS outperformance overshadowed the revenue shortfall in investors’ eyes.

Market Reaction

Following the earnings announcement, Markel’s stock rose by 1.92% in premarket trading, reaching $2,045. This increase reflects investor optimism, as the stock approaches its 52-week high of $2,075.92. Trading at a P/E ratio of 14.86 and slightly above its Fair Value according to InvestingPro models, the stock’s positive momentum underscores confidence in the company’s strategic direction. With 6 additional ProTips and comprehensive valuation metrics available on InvestingPro, investors can gain deeper insights into Markel’s true value potential.

Outlook & Guidance

Markel Group anticipates continued improvement in its attritional combined ratio in the second half of 2025, with further progress expected in 2026. The company is also focusing on running off its global reinsurance book over the next two to three years, maintaining investment flexibility, and continuing its share repurchase program.

Executive Commentary

"We are back in the game, and we’re ready to start winning again," stated Simon Wilson, CEO of Markel Insurance, highlighting the company’s renewed focus and strategic initiatives. Tom Gaynor, CEO, emphasized, "We continue to set our reserves at conservative levels that we believe will be more likely redundant than deficient."

Risks and Challenges

• Revenue miss could indicate challenges in top-line growth.
• Exiting product lines may lead to short-term revenue declines.
• Mixed performance in the insurance market could affect future results.
• Potential adverse development in D&O risk managed book.
• Uncertainty in the global economic environment.

Q&A

During the earnings call, analysts inquired about the capital release from the reinsurance runoff and the performance of the workers’ compensation segment. Executives also addressed concerns about adverse developments in the D&O risk managed book and clarified third-party reserve reviews.

Full transcript - Markel Corp (MKL) Q2 2025:

Kelvin, Conference Call Moderator: Good morning, and welcome to the Markel Group Second Quarter twenty twenty five Conference Call. All participants will be in listen only mode. After today’s presentation, there will be an opportunity to ask questions. During the call today, we may make forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning on a variety of known and unknown risks.

Actual results may differ materially from those contained in or suggested by such forward looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward looking statements is included in the press release for our second quarter twenty twenty five results as well as our most recent annual report on Form 10 ks and quarterly report on Form 10 Q, including under the caption Safe Harbor and Cautionary Statements and Risk Factors. We may also discuss certain non GAAP financial measures during the conference call today. You may find the most directly comparable GAAP measures and reconciliation to GAAP for these measures in the press release for our second quarter twenty twenty five results or in our most recent Form 10 Q. The press release for our second quarter twenty twenty five results as well as our Form 10 ks and Form 10 Q can be found on our website at www.mklgroup.com in the Investor Relations section.

Please note this event is being recorded. I would now like to turn the conference over to Tom Gaynor, Chief Executive Officer. Please go ahead.

Tom Gaynor, Chief Executive Officer, Markel Group: Thank you, Kelvin, and good morning. This is indeed Tom Gaynor. It’s my great pleasure to welcome you along with Brian Costanzo, our CFO and Simon Wilson, the COO of Markel Insurance, to our second quarter twenty twenty five conference call. Mike Heaton, our COO, will also be available and join us for the Q and A portion. At Markel Group, we are a diverse and resilient family of businesses with insurance at the core.

We aspire to be the best home for our businesses. Over the past few years, we’ve made significant changes, all with the goal of relentlessly compounding your capital over time. We continue to take actions towards this goal. On today’s call, beyond providing an overview of our results, we’ll provide an update on some of our recent steps to improve our insurance business and enhance the financial reporting and disclosures for the insurance operations to better align it with the business’ strategy and provide more detail for investors. As we announced earlier this year, we appointed Simon Wilson as the new leader of Markel Insurance, who along with his team is making great strides to improve that business with a point of emphasis on our U.

S. Markets. Markel has been a leading specialty insurance company dating back to 1930, but every great company must continually renew itself, zealously pursue excellence and look for ways to improve. We are no different. We’re working on that pursuit of excellence in our insurance operations by continuing to simplify and place more autonomy and accountability in the hands of individual business leaders through clear ownership of separate profit and loss statements.

We’ve seen this decentralized approach work in our international operations. This is not a new idea. It’s also the approach that characterized our U. S. Operations for most of their long history.

It’s the approach that will plant seeds for the future and put our Cornerstone Insurance business back in the top tier. Those seeds will take time to fully bear fruit in our operating numbers, but I believe that increasing accountability and expense efficiency will lead to improved results over time. Also, yesterday, we announced the next big step in the insurance business’ simplification, specifically the decision to sell our reinsurance renewal rights and to stop writing new business through our global reinsurance operation. As a reminder, we entered reinsurance when we acquired Ultera over ten years ago. When the Markel insurance team began to refocus on its core competitive advantages, it became evident that we should focus on our more core lines of business.

While decisions like these are never easy, I am confident this step is necessary to deliver on our commitment within the Markel style to be a market leader in each of our pursuits. Simon and the team also simplified the organizational structure of our U. S. Wholesale and specialty operations during the quarter and consolidated the business under the leadership of Wendy Houser. Simon will take you through the details, but essentially, we have combined our previous insurance and reinsurance segments while creating four distinct operating divisions of U.

S. Wholesale and Specialty, U. S. Programs and Solutions, International and Global Reinsurance, which we’ve now placed in Toronto. Brian will provide more detail later regarding how we have resegmented the reporting for our insurance businesses to align with how we’re running them going forward.

Again, we believe this will provide investors with greater transparency, allowing them to better track our performance. Finally, we increased our loss estimates and strengthened reserves within our discontinued U. S. And European risk managed D and O professional liability products, which is in runoff, and within our global insurance reserves global reinsurance reserves, establishing a higher level of management margin as we put the book into runoff. Our years of pursuing growth in our risk managed D and O product line have proven an expensive lesson.

It’s one that we have learned from and are responding to through the simplification and improvement work in our insurance operations. Despite putting up additional reserves for our U. S. And European risk managed D and O and global re exposures, it’s important to note that we reported six points of overall favorable reserve development for Markel Insurance in the first half of the year. We continue to set our reserves at conservative levels that we believe will be more likely redundant than deficient.

Our favorable reserve development in aggregate continues to validate that statement. We’ve reported favorable reserve development for over twenty years in a row, and our goal is to continue to extend that record. Also, the investments we hold against those reserves generate significant investment income. For example, overall recurring investment income from interest and dividends reached $467,000,000 for the 2025 compared to $441,000,000 a year ago. With respect to our public equities, the always volatile mark to market changes in the carrying value of our equity securities was a positive $431,000,000 for the 2025 compared to a positive $772,000,000 in the prior year.

Switching to our ventures operations. Revenues year to date grew to 2,700,000,000 compared to $2,600,000,000 and operating income grew to $310,000,000 versus $281,000,000 The Ventures businesses funded all ongoing capital expenditures internally while generating cash for use at the holding company to repurchase shares and other general purposes. Our leaders within these businesses continue operating with autonomy, accountability and excellence, driving great returns for shareholders. These businesses, along with our underwriting profits and investment income, added to liquidity, which we have been building intentionally. Our significant cash and short term investment balances reflect our desire to retain optionality across a broad set of future potential market environments.

As for the price of your shares, each Markel Group share closed at $19.97 on 06/30/2025, compared to $15.76 a year ago and $923 five years ago on 06/30/2020. Our fully diluted share count now stands at 12,800,000.0 compared to 13,100,000.0 a year ago as we continue to repurchase our shares. Over the last five years, the price of each share of Markel Group compounded at an annual growth rate of over 16%. Over the last thirty nine years of our existence as a public company, that number has been approximately 15%. So to restate the fundamentals, in our largest business, we provide specialized forms of insurance all around the world.

We’re dedicated to earning an underwriting profit from doing so, and we have for decades. We allocate those underwriting earnings to investing in minority or majority owned equity investments, which can earn higher returns than available from traditional fixed income securities. We then take the income earned from our investments, ventures and underwriting and operations and rinse and repeat and do it all over again. By consistently following this strategy, we’ve created a flywheel that continues to relentlessly compound the value of your company over decades through constantly allocating capital to its highest and best use. Finally, our Board level review is ongoing.

I hope you can see from the evidence that we continue to act when we see opportunities to build the value of your company every day. With that, I’d like to turn the call over to Brian Costanzo to update you on the numbers. Brian?

Brian Costanzo, Chief Financial Officer, Markel Group: Thank you, Tom. Good morning, everyone. At the start of 2024, we began reporting Markel Group segment operating income for our investments, ventures and insurance engines. Operating income is a key driver of our intrinsic value and long term incentives. If you must pick one metric for our scorecard, operating income is the best place to start.

We use five year periods to keep that scorecard because the expected volatility in the mark to market of our equity portfolio normalizes over longer periods. Over the past four calendar years plus the first six months of this year, we have accumulated operating income of just over $11,000,000,000 In the 2025, consolidated operating income was $1,100,000,000 versus $410,000,000 in the same period one year ago. The biggest driver of the year over year difference was changes in unrealized gains on the equity portfolio, which flows through GAAP operating income distorting quarterly year over year comparisons. Within our insurance engine, which includes our Markel Insurance business along with our State National and Nephila businesses, operating income was $128,000,000 for the 2025 versus $177,000,000 in the same period one year ago. The decline in year over year was driven by less favorable prior year loss development and a higher expense ratio.

Markel Ventures revenues were up 7% in the second quarter or $1,550,000,000 in the 2025 versus $1,450,000,000 in the comparable period one year ago. Ventures operating income was up 17% year over year in the 2025 or $2.00 $8,000,000 in the second quarter of this year versus $177,000,000 in the same period last year. These increases were driven by the contributions from EPI, which we began consolidating in the 2025 and Valor, which we acquired last year, along with increases within our construction services businesses, partially offset by decreases from our transportation businesses. Since EPI and Valor are newer businesses for the family, we thought context on each would be helpful. The multiyear nature of EPI’s education placement contracts provides stability to its quarterly results.

The company sponsors an exchange visitor program for teachers. It serves school districts in the Southeast and Mid Atlantic U. S. States. It serves the market with favorable long term demand trends.

This plus EPI’s sterling reputation gives that business good revenue and earnings visibility with a steady growth profile. Fowler services the cyclical commercial and residential construction markets, where the latter has experienced softening conditions of late. However, the growing importance of proper erosion control and stormwater protection provides Valor with a backdrop for growth over cycles. Our equity finance approach and capital discipline factors in cyclicality when we underwrite businesses. We are thrilled to welcome both businesses to the family.

Turning over to our investments. Investments operating income was $822,000,000 for the 2025 and $100,000,000 for the same period one year ago. Our equity portfolio returned 5.4% in the second quarter with $597,000,000 in mark to market gains, which are included in our Q2 twenty twenty five operating income versus $116,000,000 in losses in the comparable quarter last year. While we expect to see short term fluctuations in our equity portfolio when measuring them on a quarterly basis, over the long term, our public equity portfolio has created excellent returns and now has a cumulative unrealized gain of $8,300,000,000 We continue to take advantage of our low cost and tax efficient structures, long term holding lens and allocating a portion of our incoming cash flows to compound capital in our public equity portfolio. Net investment income was $228,000,000 in Q2 twenty twenty five versus $220,000,000 in Q2 twenty twenty four.

While net investment income from our fixed portfolio increased, declines in short term interest rates caused the year over year increases in interest income to moderate. In Q2 twenty twenty five, our fixed income book yield was 3.5% and our short term investments yield was 3.9%. We continue to add new fixed income investments at higher yields approximating 4.2% versus maturing bonds with yields approximating 3.4%. 96% of our bond portfolio was held in fixed income securities that are rated AA or better. As we have previously discussed, we seek to materially match our fixed income portfolio in both duration and currency to our net loss reserve liabilities.

During the second quarter, the dollar weakened against our two primary transactional foreign currencies, the euro and the British pound. We reported a net loss from foreign currency in the quarter of $192,000,000 which was substantially offset by positive movements in foreign currency within our fixed income portfolio that is included within other comprehensive income. During the second quarter, we also made a change to our capital stack through the redemption of our $600,000,000 6% preferred stock. The coupon rate on that instrument would have reset to current market rates exceeding 10% had we not redeemed the security this past quarter. I will now spend a little more time discussing our Markel insurance underwriting operations, our largest cornerstone operating business.

First, I want to call attention to the changes in our external reporting this quarter within our insurance operations to align with our recent organizational and management changes. We have resegmented our insurance operations and are now reporting our Markel Insurance business under Simon’s leadership as one segment. As Tom mentioned, this new segment combines our previous insurance and reinsurance segments while providing more detail by breaking this segment into four operating divisions: U. S. Wholesale and Specialty, Programs and Solutions, International and our Global Reinsurance division, which we have placed into runoff.

We believe our expanded disclosures will help investors better understand the performance and underlying drivers of our insurance business going forward. You can see a breakdown of our quarterly and year to date results by operating division within our 10 Q. These changes are an initial step in our commitment to adapt and improve our external reporting. We expect to make further improvements to our reporting in the second half of this year and look forward to providing updates on our progress. I’ll now provide a bit more detail on the results of our new Markel Insurance segment.

Underwriting gross written premiums were down 2% for the quarter and up 1% on a year to date basis versus the comparable periods last year. The decline in gross written premiums in the second quarter was driven by a 26% decline from Global Reinsurance due to the timing of renewal on large contracts and a decline of 5% with our U. S. Wholesale And Specialty Division due to the impact of exiting our U. S.

Risk managed D and O product line. Programs and Solutions gross written premiums were up 8% in the second quarter versus the same period one year ago driven by growth in Personal Lines. Further, international was up 5% in the second quarter year over year with growth across multiple product lines. For all of Markel Insurance, net earned premium was up 3% on a consolidated basis in the second quarter and 1% year to date versus the same period one year ago. Our more modest earned premium growth reflects growth within many areas of our portfolio, offset by the impact on gross written premiums from the underwriting actions in certain U.

S. Casualty and professional liability lines that we’ve taken to improve profitability. We expect the impact on earned premiums from these underwriting actions to reduce in the second half of this year, while continuing to improve our overall attritional loss ratio. The Markel Insurance combined ratio was 96.9% versus 93.8% in the same quarter one year ago. Adverse develop in certain now discontinued product lines negatively impacted our combined ratio for the quarter.

Our U. S. And European risk managed D and O professional liability lines added $127,000,000 or six points to the second quarter overall combined ratio. Adverse development within our Global Reinsurance division added $50,000,000 or two points to the Markel Insurance combined ratio. Further, losses from our collateral protection CPI product added another $26,000,000 or one point to our current accident year attritional loss ratio.

Excluding the impact from these runoff products, our Markel insurance combined ratio for the quarter is in line with our long term targets. Our current accident year’s loss ratio was 64.5% in the 2025 versus 66.6% in the same period one year ago, reflecting the impact of our underwriting actions along with lower losses on our CPI product this year versus last year. Prior year loss development was 3.8% favorable on the combined ratio in the 2025 versus 7.2% favorable in the comparable period last year. The lower favorable development year over year is the result of the reserving actions I just discussed in our runoff risk managed D and O and global reinsurance product lines, while our ongoing book produced favorable loss takedowns, most notably within our property and marine and energy product lines. Our expense ratio was 36.3 in the 2025 versus 34.5% in the comparable period.

50 basis points of the increase was driven by one time severance and increased holding company allocations related to professional fees. The remainder was driven by increases in controllable expenses. We acknowledge that our expense ratio is not where it needs to be and are committed to reducing the controllable expense ratio within our insurance operations over time. As a reminder, beginning in 2023, we began taking a series of decisive actions, which we believe will better position the Insurance business for profitable growth in the future. First, we took corrective actions through exiting several product lines, including primary casualty retail, business owners policy, risk managed excess construction, risk managed architects and engineers and CPI.

Second, across our portfolio, we meaningfully reduced the construction mix in our casualty portfolio. We changed the terms and conditions to eliminate certain exposures to subcontractors, reduced limits on excess lines and implemented premium caps in challenging states. We have been achieving double digit rate increases across the casualty portfolio this year and are walking away from risks that are not adequately priced. Third, we took further actions in 2025, including combining our risk managed public D and O to a single access point within our Bermuda platform in our Programs and Solutions division and placed our U. S.

And European platforms for this line into runoff. We also announced yesterday the transition of our global reinsurance business into runoff through the sale of renewal rights to Nationwide. Premiums will continue to be earned in this division over the next two to three years due to the multiyear nature of contracts. Further, we will have some renewal contracts processed in the third quarter and premium writings going forward will largely be tied to adjustments on in force contracts. We expect the accumulation of all these actions to be accretive to our 2025 and 2026 results, but they will put short term pressure on Markel Insurance’s gross written premium growth.

We continue to hold loss reserves at a level that we believe is more likely redundant than deficient. Our reserve strengthening within our runoff books this quarter includes management actions intended to put these reserves at a level above our actuarial best estimate, creating a higher degree of confidence in the reserve’s adequacy. We expect our reserving philosophy to continue to produce prior year loss takedowns in future periods. We expect all of our actions to drive an improved attritional combined ratio in the back half of 2025 and continued improvement into 2026. With that, I will turn it over to Simon.

Simon Wilson, CEO of Markel Insurance, Markel Group: Thanks, Brian. On the last quarterly call, I spoke about my natural inclination to keep things simple. Today, I want to speak about two things. First, I want to provide some straightforward insight into the latest results of Markel Insurance and second, I’ll summarize the actions that we’ve taken to implement the changes required to make Markel the world’s preeminent specialty insurer. First, the results.

A 97% combined ratio at this stage in the cycle isn’t where I aspire to be, yet the 97% result represents an average of our performance across all lines. The underlying story is that we have three specific pockets of pain in the business and many areas that are highly profitable. The specific pain points are as follows: Pain point one, CPI has been an issue for several quarters. This quarter, we added a further $25,000,000 to the reserves for this class. While the CPI pain continues to linger a little, this issue has now stabilized somewhat, and we expect this trend to continue over coming quarters.

Pain point two. As Brian mentioned, our exit portions of our risk managed or large cap executive assurance D and O business added $127,000,000 of losses in the quarter or six points in terms of the combined ratio. This is an area that we identified as a persistent challenge in the latter part of 2024, and we put the business into runoff in February. As you would no doubt expect, as the new CEO of Markel Insurance, I was keen to look at the IBNR that had been set against this class as part of the latest reserving exercise. And I felt that we needed to act strongly to get ahead of the losses that we’ve continued to see in U.

S. Large cap D and O business, especially on the 2020 and 2022 underwriting years. Pain point three, our global reinsurance business has been loss making for several years. This quarter, we saw further adverse development of $50,000,000 equivalent to just over two points on reported combined ratio. This business writes around $1,200,000,000 of GWP per annum, and in my opinion, is subscale.

A strategic decision was required to either scale the business to something more meaningful or to divest it. Given the focus on driving our position in the specialty insurance market, it was clear to me that the best course of action was to sell the renewal rights for our global reinsurance book and put the remainder of the book into runoff. Outside these three pockets of pain, all of which have been put into runoff alongside the strengthening of the reserves that we have set against them, the ongoing business is performing strongly with an underlying combined ratio below 90%. Our International division deserves special mention as the standout performer with a sub-eighty percent combined ratio for the quarter. The second key area that I wanted to address this morning is organizational change and specifically the changes that we’ve made to the business to set us up for long term success.

Good strategy involves stopping doing things that aren’t working. My previous comments addressed this, but it also involves focusing resources on areas where we can build lasting competitive advantage. Since March 2025, we have fundamentally reorganized Markel Insurance to enable us to focus on The U. S. And international specialty insurance markets that we know best.

Of all the changes made, the most strategically significant were to our core U. S. Specialty operations. The changes to our U. S.

Business will simplify how brokers access Markel, reduce channel conflict and provide much greater clarity on business ownership and performance. We’ve aligned financial reporting against the new structure, which allows us to hold leaders accountable for their unit’s performance. In simple terms, we divided our U. S. Operations into two divisions.

The first is U. S. Wholesale and specialty. As President, Wendy Houser is responsible for our core lines of specialty business, property, casualty, professional and binding, which is sold through both wholesale and retail channels. Wendy moved quickly to simplify her organization from six regions down to four Northeast, Southeast, Central and West, each with a single leader fully accountable for their region’s P and L.

Each regional leader, in turn, has identified an individual to run each of the four core product lines in their region. This provides clarity to our brokers about who the key decision makers are, and in turn, will allow us to respond to those brokers more quickly than ever before. Alex Martin is the President of the Second Division, our Programs and Solutions business. In this role, Alex is responsible for a portfolio of five specialty business units, each of which targets a specific product, distribution channel or customer type. Specifically, those business units are surety, workers’ comp and small commercial, personal lines, Bermuda and programs and alliances.

Each of these business units also has a clearly identified leader fully accountable for their associated P and L. The third division of Marco Insurance is our international business, which is led by Andrew McMillan. This organization has operated for several years now consistent with how we reorganized The U. S. Business, and the excellent results speak for themselves.

A final major change that was required to align costs with the business units is the federation of our corporate and shared service departments into the relevant divisions. This decentralizes significant portions of departments such as IT, finance and claims into the business units that they directly support. The colleagues in these teams are now more strongly aligned with the business. The associated costs are now more transparent and directly attributable to the P and L owners who will decide how best to utilize those resources. We expect these changes will allow us to run the business more efficiently going forward.

In total, we have now federated more than 70% of all corporate and shared service personnel, over twelve fifty people, into the business units over the past three months. To further solidify our ability to oversee and drive Markel Insurance forward, we have named Henry Gardner Chief Risk Officer, Ben Harris as Chief Commercial Officer and Christian Stobbs as Chief Strategy and Corporate Development Officer. I’m a fervent believer in clarity of business ownership, aligned P and Ls and allowing business leaders to make decisions as close to the customer as possible. Responsibility and accountability go hand in glove. Getting to the point where everyone within Markel Insurance is clear on their roles and responsibilities has been our north star for all the changes that have occurred throughout the past three months.

In summary, since April, we have restructured Markel Insurance into three core operating divisions consisting of 16 underlying P and Ls. Each P and L has a clearly identified leader who is empowered to make decisions on behalf of their business. To better align resources with these P and Ls, we have federated over 70% of all colleagues from the central and shared organizations into the divisions. The divisions will now decide how best to utilize this resource. The global reinsurance division has been put into runoff, and the renewal rights have been sold.

We’ve done a lot in a short span of time. Every decision has been taken with the sole focus of Markel becoming the world’s preeminent specialty insurer. There is a long way to go, and this will take time. But we are back in the game, and we’re ready to start winning again. With that, I will hand you back over

Tom Gaynor, Chief Executive Officer, Markel Group: to Tom. Thank you, Simon. With that, Kelvin, would you please be so kind as to open the line for questions.

Kelvin, Conference Call Moderator: Thank you, Tom. We will now begin the question and answer Your first question comes from the line of Andrew Kligerman of TD County. Please go ahead.

Andrew Kligerman, Analyst, TD County: Perfect. Good morning.

Tom Gaynor, Chief Executive Officer, Markel Group: Good morning.

Andrew Kligerman, Analyst, TD County: Good And my first question is around the reinsurance going into runoff. Could you share with us the capital that you might free up in doing so as well as the proceeds that you’re going to get from renewal rights? It strikes me that there’s a significant amount of cash that could be freed up. And what might you do with that? That’s the second part of the question.

Tom Gaynor, Chief Executive Officer, Markel Group: Right. Then let me turn to Brian to address that. Thank you.

Brian Costanzo, Chief Financial Officer, Markel Group: Yes. Andrew, I’ll say two things. On the first side, so in terms of the capital, we will see capital relief over time as we reduce the premium volume that we write and the reserves run down. But as we move into runoff, the reserves still sit on our books, the capital, which is a vast majority of the capital tied in those long tail reserves still sits there. And more importantly, the investments that back those reserves continue to earn returns for us that run through our net investment income and our equity appreciation that occurs.

In terms of the financial considerations, we’re not going to disclose the terms of the deal and what the cash considerations were for the renewal rights.

Tom Gaynor, Chief Executive Officer, Markel Group: Andrew, let me add a little color to that. This is Tom. So Brian accurately talked about the capital requirements and if you recall the orange and blue capital discussion from the annual report a couple of years ago. So he correctly reminded you that the investments that are associated with that are still on the books and will earn investment income because the capital requirements, regulatory rating agency things will begin to diminish as the business runs off. What that does open up the flexibility and optionality for how it can be invested.

So when they’re in reserves, we keep them in pretty plain vanilla fixed income securities. As we make investment income and have reduced capital requirements, we can have a broader lens as to how those proceeds will be reinvested over time.

Andrew Kligerman, Analyst, TD County: Got it. And if I could just follow-up on that one question. As I think about a pretty sizable $1.2 in premium and typically premium to surplus is one to one over time, over a few years. Am I thinking about it the right way that maybe $1,000,000,000 in capital could be freed? I know it takes a bit of time, but just to check there on how I’m thinking about it.

Brian Costanzo, Chief Financial Officer, Markel Group: That is correct. It will take a while to get to that point though, because you’ve still got contracts in force. We will be earning premium for the next three years, call it, a lot of the deals that we wrote. They’re multiyear in nature. Quota share deals that we write, we earn those over two years.

So you’re still going to have new earned premium coming through the back half of this year, all of 2026 and even into 2027 that will keep some of the capital requirements there. That capital requirement will slowly work its way down over time as both the earnings diminish and then the reserves start coming down accordingly.

Simon Wilson, CEO of Markel Insurance, Markel Group: It’s worth it. Andrew, it’s Simon. It’s worth saying we do always have an option to look at the market for a deal that would release that capital sooner. But as Tom and Brian have both said, we’re earning good investment return from that capital that stands here today. We retain the option value to maybe release that capital earlier, but there will be kind of a cost associated to that over time.

So we’ll continue to look at that. We’ll balance the position as we see how the market moves. One other point I’d like to raise just while we’re the subject of global REITs, hopefully cover it off. Probably what wasn’t mentioned in our statements there was just the vast number of the underwriting community that went from our global REE operations over to Ryan Re, who are going to be running this book on behalf of Nationwide in the future. That is a really important part of the deal, for us to see that book just sort of continue and the people to continue with it.

So we’re really excited to see what can be done in the future with that, and we wish our people well in their new shop.

Andrew Kligerman, Analyst, TD County: Thanks for the helpful answers on that. And then just to follow-up, I I I also like that you you kind of broke out those segments. And just trying to get a little more clarity around programs and solutions. When I think about programs, how how much of the of the segments business is written by MGAs? And, you know, what what are some of the more prominent areas in in which you do that?

Tom Gaynor, Chief Executive Officer, Markel Group: Right. It’s good. Just looking at papers right now to Yeah. Tend to give you some more precise numbers than I have to give you.

Brian Costanzo, Chief Financial Officer, Markel Group: Yeah. So I call it roughly a third is coming from delicate delegated underwriting programs within that just under a billion of underwriting premium. There’s a handful of larger programs that make that up along with a number of smaller, call it, 20 ish, 40 ish million dollar programs. That’s one of the five kind of pillars in that group that’s managed by Jeff Lamb, and he kind of oversees all the delegated underwriting arrangements and programs that we contract out with.

Andrew Kligerman, Analyst, TD County: And and has that business performed very well over the last few years?

Brian Costanzo, Chief Financial Officer, Markel Group: Yeah. Obviously, I mean, you’ve got a you’ve got a number of programs in there. So you’ve always got some going very well, some not. But on the whole, it’s performed well

Tom Gaynor, Chief Executive Officer, Markel Group: for us.

Simon Wilson, CEO of Markel Insurance, Markel Group: I was talking to Jeff Lamb the other day on this, Andrew, and we think of every 100 programs that come as an opportunity through the door, we’ll get interested in 10, maybe quote on eight, we’ll end up writing two or three. So it’s one of those kind of filtering mechanisms where it has to hit the mark in terms of specialty profitability, can we add some value. We do look for these programs to be long term in nature. This isn’t a really transactional business. We’d love to embed ourselves with these programs.

They’re really partners as much as anything out there in the marketplace. And I do think I will say this, I think it will be a growing sector of The U. S. Specialty market over the next two or three years. So I think being good at this area is very, very important

And it’s not about premium. This is about profit. And every single time we look at one of those delegated opportunities.

Andrew Kligerman, Analyst, TD County: I appreciate the insights.

Kelvin, Conference Call Moderator: Your next question comes from the line of Maxwell Fritzsche of Truist. Please go ahead.

Maxwell Fritzsche, Analyst, Truist: Hi, good morning. Thank you. I’m calling in for Mark Hughes. Any comment on the workers’ comp line? How much did that contribute to the quarter’s favorable development?

And then are you seeing any emerging signs of medical inflation pressure there?

Tom Gaynor, Chief Executive Officer, Markel Group: Brian will speak to that.

Brian Costanzo, Chief Financial Officer, Markel Group: Yes. So we’ve kind of continually seen what I’ll call gradual takedowns in our workers’ comp line. That’s been going on for two, three, four years, similar to the rest of the industry. We have a smaller book there than some others focused on kind of micro cap workers’ comp. It has performed very well for us over a number of years.

Certainly, medical inflation is a watch area in that space. Maintaining rate adequacy, making sure that we’ve got admitted filing rates that cover the loss cost is a heavy focus of that line. It’s growing modestly, kind of combination of growth. There’s a little bit of negative rate environment in that space, but nothing too dramatic going on there. Yes.

Simon Wilson, CEO of Markel Insurance, Markel Group: And one on the pharmaceutical bit in particular, so that aspect, the tariffs situation more broadly is something that we keep an eye on. One of the things I like about the new structure is that, that workers’ comp bucket business is very much segregated, so we can keep a close eye on both the rates and any of the inflation that’s coming through. So a lot of this is out of our control, but we’ll see it. And I think we’ll see it a lot sooner than we may have done previously. So it’s an area that we’re keeping a watch on.

But at this point in time, Brian, I mean, does seem to be an area of business that’s been profitable. And so we’re confident in the book of business that we’ve got there.

Tom Gaynor, Chief Executive Officer, Markel Group: Let me add one bit of texture to Simon’s answer. The logical follow on from being able to keep an eye on something is that that would cause you to take actions when you observe data more closely than what would have been the case in the past. So, wanted to finish the finish the sentence there.

Maxwell Fritzsche, Analyst, Truist: Yes. Very helpful. And then does the 2Q current accident year loss pick in in Markel Insurance represent a good run rate for the back half of the year?

Brian Costanzo, Chief Financial Officer, Markel Group: Yes. I would generally say so. You’re starting to see the impact of the underwriting actions we’ve been talking about the last kind of eighteen months earned their way through. That has naturally kind of ticked down the accident year loss ratio year over year.

Maxwell Fritzsche, Analyst, Truist: Great. Thank you.

Kelvin, Conference Call Moderator: Your next question comes from the line of Andrew Anderson of Jefferies. Please go ahead.

Andrew Anderson, Analyst, Jefferies: Hey, good morning. Within Ventures, you had highlighted some increased demand in construction services. Could you just talk about the environment there and pipeline, maybe how you’re thinking about the second half? And I realize there was a little bit of an offset from transportation within there.

Tom Gaynor, Chief Executive Officer, Markel Group: The the phrase I would use that we’ve we’ve bandied around is, you know, you have to burn more calories to get the same unit of output. So so business is complicated. The tariffs that Simon referred to, they’re they’re just all these different sorts of curveballs and forces out there. And and, again, I I take my hat off, and I thank the the CEOs and the leadership teams who are running those businesses. I think they’re doing a great job of navigating uncertainty and figuring out what the next state brings and taking reasonable thoughtful and skilled actions

Simon Wilson, CEO of Markel Insurance, Markel Group: to make the best of it.

Andrew Anderson, Analyst, Jefferies: Thanks. And maybe pivoting to insurance, the decision to exit the risk managed D and O book, could you elaborate a bit on what the actuaries found that led to the adverse development there?

Simon Wilson, CEO of Markel Insurance, Markel Group: Maybe I’ll kick off and then Brian will come through. But you’re right, we talked about large caps, generally U. S. Domicile large businesses. We were just saying, I think, I mentioned the year 2020, 2022, which we’re writing excess layer business there.

But typically, we were fairly now we look at it in hindsight, we were fairly low down for very large cap U. S. Businesses. And what we were seeing is that there are many, many court cases going through where these businesses were being sued. For some of

Brian Costanzo, Chief Financial Officer, Markel Group: the money, which we

Simon Wilson, CEO of Markel Insurance, Markel Group: were excess at one point in time, but given the kind of inflation and the legal environment in those years, what we thought was excess became almost like a working layer. So we were just in the wrong portion of that business we were. We certainly weren’t high enough. Unfortunately, that business has now been written, and we’re seeing the claims come through. We actually saw an acceleration of those claims probably during the course of 2023 and certainly during 2024 on those particular years of account.

So we’ve acted to stem the bleeding to a great degree, but we’ve got to take that news seriously. And I think you can see that with the reserving action that’s being taken. But maybe, Brian, you’ve got bit more color. Yeah.

Brian Costanzo, Chief Financial Officer, Markel Group: Maybe the only thing I’ll add is if you if you rewind back to 2023, we talked about this line back then as part of the kind of reserve review that we did. We had external parties come in and help us look at that. We had raised reserves in that in that product line at that time to kind of the high end of the range of kind of our view and the external views. What’s happened since then is kind of what Simon’s saying is particularly in probably the last six to nine months, claims severity and frequency have just exceeded the expectations of kind of any of the modeling that we had out there. And we felt it was necessary to take strong, aggressive action against that and put meaningful reserves up against what might happen in the future with the claims going forward.

So some of that was in reaction to what the actuaries were seeing. Some of that was management coming and saying, want to go above and beyond what the actuaries are recommending and put an additional level and margin of safety on top of the actuarial recommendation.

Simon Wilson, CEO of Markel Insurance, Markel Group: And I think that’s particularly true because we put this area into runoff. It’s just when you do that, you don’t want the distraction to be there time and time again. So I think the action we’ve taken now is to allow us to focus on the go forward book of business that we’ve got. And you never know what happens with these things, but we’ve gone very hard at that particular line of business intentionally.

Andrew Anderson, Analyst, Jefferies: Thanks. And that was sort of my next question here. I think the adverse in reinsurance, it was driven by a third party review, I believe, of the general liability. Did that same third party review insurance this period? I know you

Simon Wilson, CEO of Markel Insurance, Markel Group: mentioned you did it a couple

Maxwell Fritzsche, Analyst, Truist: of years ago, but was there a review from a

Andrew Anderson, Analyst, Jefferies: third party perspective of insurance this year?

Brian Costanzo, Chief Financial Officer, Markel Group: No. The review was the same third party that we used in 2023 to review the insurance, but the review this quarter was only on the reinsurance book. I would say something very similar to what I just said on our kind of reaction in reinsurance. We looked at their recommendation. We raised our recommendation to something that was around what the recommendation from their side was.

And then management came in because we’re putting it into runoff and went above kind of the actuarial recommendation and said we’re gonna put a level of prudency on top of that.

Andrew Anderson, Analyst, Jefferies: Thank you.

Kelvin, Conference Call Moderator: There are no further questions at this time. This concludes our question and answer session. I would now like to turn the conference back to Tom Gaynor for any closing remarks. Please go ahead.

Tom Gaynor, Chief Executive Officer, Markel Group: Thank you very much. We appreciate you joining us. We hope you enjoyed the update on the pace of progress of the way things are going here at Markel, and we look forward to connecting with you in about a quarter from now. Thank you.

Kelvin, Conference Call Moderator: The conference call has now concluded. Thank you for attending today’s presentation. You may now disconnect.

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