Q2 2021 Markel Corp Earnings Call
[music].
Good morning, and welcome to the Markel Corporation second quarter 2021 conference call.
All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be an opportunity to ask questions to ask a question you May Press Star then 1 on your Touchtone phone to withdraw your question. Please press Star then 2.
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 a variety of known and unknown risks.
<unk> 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 under the captions risk factors and safe Harbor and cautionary statement in our most recent annual report on form 10-K, and quarterly report on form 10-Q.
We may also discuss certain non-GAAP financial measures in the call today, you may find the most directly comparable GAAP measures and a reconciliation to GAAP for these measures in our most recent form 10-Q, which can be found on our website at www Dot Markel dot com in the Investor Relations section.
Please note this event is being recorded.
I would now like to turn the conference over to Tom Gayner Co Chief Executive Officer. Please go ahead.
Good morning, and thank you welcome to the Markel Corporation second quarter 2021 earnings call I'm joined this morning by my co CEO Richie Whitt.
And our CFO Jeremy Noble our goal as always is to provide you with some insights on how things are going here at Markel and to answer any questions you have about your business.
I'm, especially pleased to offer today's report.
Now been at Markel for 30, and a half years that means it's quarter number 122 frankly.
Frankly, some quarters are better than others and this is 1 of those quarters, that's better as such it's fun to be able to share. This report with you.
The headline is that all 3 engines of Markel performed well and provided great thrust in the first half of 2021.
The even better news is that none of the engines red lined to get their piece.
People are working hard and the financial outcomes reflect the excellent as well as hard work, but these are the sorts of results at Markel can and should produce over long periods of time.
We've got an insurance business, producing solid underwriting profits and growing at the same time, we have.
Got a collection of unique and wonderful businesses and our Markel ventures operations that produced excellent financial results and their growth.
And we've got an investment operation that protects the financial underpinning of Markel and earned strong financial results at the same time.
These outcomes flow directly from the underlying values held by the people of Markel as an organization. We are dedicated to serving our customers our fellow associates and our shareholders to provide us with the capital to operate this business our.
Our structure as we continue to work to build 1 of the world's great companies is truly win win win and we're delighted to share. The first half report card with you and the good marks on all the subjects.
We know that winning over time is a long term game.
1 quarter, 1 half of the year do not begin to describe or justify what we are trying to do.
But in order to win a National Championship you do have to win some individual games along the way this quarter and the first half are just a few games. We know that we have and will continue to lose a few games along the way, but the long term results should not get us relegated.
More importantly, we're excited about our prospects and the actions we've taken as managers to improve the likelihood that we'll continue to produce excellent results overtime.
Thank you for your ongoing support and confidence as we have done so.
We appreciate that more than you can imagine and we look forward to your thoughtful questions.
At this point I'm going to turn the call over to Jeremy who will review the financial results from the first half Richard will then discuss our insurance operations and then I'll come back with a few comments on our ventures, an investment engines. Following that we will open the floor for questions Jeremy.
Thank you Tom and good morning, everyone as Tom referenced we are halfway through the year and are very pleased with the outstanding performance across each of our 3 operating engines as our insurance investments and ventures operations each contributed meaningfully to our efforts to build shareholder value.
Looking at our underwriting results gross written premiums were $4.3 billion from the first half of 2021 compared to $3.7 billion from 2020, an increase of 15% or increased premium volume reflects both strong growth from new business as well as ongoing favorable pricing trends across most of our product lines.
Most prominently within our professional liability and general liability product lines in both our insurance and reinsurance segments.
Retention of gross written premiums was 85% for the first half of 2021, which is up 1 point from the same period last year, primarily driven by changes in the mix of business within our reinsurance segment.
Earned premiums increased 14% to $3.1 billion in the first half of 2021 versus the same period last year, primarily due to higher written premium volume within our professional liability and general liability product lines.
Our consolidated combined ratio for the first half of 2021 was <unk> 90, which included $68 million or 2 points of losses on winter storm Yuri.
This compares to a 1% to 3 combined ratio for the same period last year, which included 12 points of losses from COVID-19.
Excluding the loss impact from winter storm, Yuri and COVID-19 in both years, our consolidated combined ratio for the first half of 2021 was an 88 compared to a 91 for the same period in 2020. This improvement reflects a 4 point improvement in our Attritional loss ratio and a 1.5 point improvement in our expense ratio.
Which were partially offset by a lower benefit from prior year loss reserve releases.
So the gross of prior year loss reserve development prior year loss reserves developed favorably by $226 million.
In the first half of 2021 compared to $268 million from the first half of 2020.
Turning to our investment results.
Net investment gains included in net income was $1.2 billion from the first half of 2021 and were primarily attributable to an increase from a fair value of our equity portfolio driven by favorable market value movements. This compares to net investment losses of $770 million in the first half of 2020, which reflected the impact of significant declines in the.
Fair value of our equity portfolio in the first quarter of 2020, driven by the unfavorable market value movements, resulting from the onset of the pandemic followed by a partial recovery in the second quarter of 2020.
As I mentioned in prior calls given our long term focus variability in the timing of investment gains and losses to be expected.
With regards to net investment income, we reported a $193 million in the first half of 2021 compared to $184 million from the same period last year investment income continues to be impacted by the low interest rate environment. We currently face.
Net unrealized investment gains decreased $162 million net.
Net of taxes during the first half of 2021, reflecting a decline in the fair value of our fixed maturity portfolio, resulting from an overall increase in the interest rates since the end of the year.
Now I'll cover the results from our Markel ventures segment revenues from Markel ventures increased to $1.8 billion from the first half of 2021 compared to $1.2 billion for the comparable period, a year a year ago.
The increase reflects a more significant contribution of revenues from Lansing building products, which was acquired in April of 2020. Additionally, operating revenues increased across our consumer and building products businesses equipment manufacturing businesses and transportation related businesses due in part to lower sales volumes in most of these businesses in 2000.
<unk> 'twenty as a result of the economic and social disruption caused by the pandemic as well as further increases in demand within our consumer and building products businesses, reflecting increases in consumer spending.
EBITDA from Markel ventures was $220 million from the first half of 2021 compared to $173 million from the same period last year. The year over year increase is attributed to increased sales volumes and a more significant contribution from Lansing.
Looking at our consolidated results for the first half of the year, our effective tax rate was 21% from both 2021 and 2020, we reported net income to common shareholders of $1.3 billion.
<unk> this year compared to a net loss to common shareholders of $484 million last year and comprehensive income to shareholders for the first half of this year was $1.2 billion.
Compared to a comprehensive loss to shareholders of $260 million in the first half a year ago.
Finally, I'll make a few comments on cash flows capital and our balance sheet net cash provided by operating activities was $813 million for the first half of 2021 compared to $489 million from the same period last year operating cash flows from first half of this year reflected the impact of higher premium volume in our insurer.
Segment.
Invested assets at the holding company were $4.9 billion at June 30, compared to $4.1 billion at the end of the year. The increase reflects our may issuance of $600 million, a 31 year unsecured senior notes with a coupon of 345% the proceeds of which will be used to retire $350 million of notes that mature next July with a.
Remainder being available for general corporate purposes.
Total shareholders' equity stood at $14 billion at the end of June up 9% compared to $12.8 billion at the end of the year.
During the first half of 2021, we repurchased 51000 common shares of our stock under our outstanding share repurchase program.
Overall, a great set of numbers in each of our engines through the first 6 months. However, our attention has already turned to the back half of the year as we focus on executing against our business plans and with that I'll turn it over to Richie to talk more about our insurance businesses.
Thanks, Jeremy and good morning, everyone.
At the halfway point of this year, we've put ourselves in position to achieve or possibly exceed the goals. We set for 2021, we've realized significant premium growth across both our insurance and reinsurance operations at the same time, we've achieved double digit rate increases in insurance and reinsurance most.
We see continued runway to capture strong growth and price increases throughout the remainder of the year.
Excuse me after being slightly behind our target in the first quarter due to an unusually high cat activity, we had an excellent second quarter to bring our combined ratio for the 6 months to 90% right in line with our 2021 target.
We continue to find growth opportunities across all of our insurance platforms potential new investment offerings to fill up expanded program offerings at state National and the completion of the long awaited initial capital raise at large funds.
While we realize there's a long way to go in 2021 and that the pandemic continues to throw all of this curve balls.
We like where we stand today and are extremely optimistic about the rest of this year and beyond.
Now I will discuss our insurance operations, which include our underwriting operations State National program services operations and insurance linked securities operations.
So kicking off with the insurance segment gross written premiums in the insurance segment for both the quarter and year to date periods were up 17% over prior periods, just under $3.5 billion in total premium writings from 6 months.
Earned premiums were up 16% in the quarter and 14% from the 6 months due to the continued premium growth across multiple quarters.
Premium growth in both periods was driven by continued strong new business growth along with the impact from rate increases across several product lines, most notably in our professional liability and general liability product lines.
The vast majority of our growth continues to be in our preferred product offerings.
As discussed in prior quarters, we continue to see favorable rate environments within most of our product lines with the exception of workers' compensation and look to continue to capitalize on the current market conditions.
Combined ratio for the insurance segment second quarter was <unk> 84 versus <unk> 88 last year. The 4 point decrease in the combined ratio for the quarter was primarily due to lower attritional loss ratios within the general liability property and professional liability lines again due in part to benefits from achieving higher premiums.
Rates.
The combined ratio for the first 6 months of the year in the insurance segment was 87 compared to 103 last year.
The current year combined ratio includes $43 million or 2 points of underwriting losses from winter storm year.
While prior year combined ratio includes $293 million or 13 points of underwriting losses from COVID-19, which were recorded in the first quarter from 2020.
Excluding the impact from losses from catastrophes in COVID-19, and the combined ratio decreased by 4 points year over year primary driven primarily driven by lower attritional loss ratio in our professional liability general liability and property product lines.
Higher earned premiums for both the quarter and year to date within our insurance segment had a favorable impact on their expense ratio and an unfavorable impact on our prior years' loss ratio.
Next turning to our reinsurance segment, there's a lot to unpack in our results and I think they are best understood. If we try to focus on year to date results.
Let me begin with a reminder, that starting in the first quarter of this year, we transitioned our reinsurance property lines, our reinsurance underwriting operations to be managed by our to fill a ILS operations.
We will continue to see the impacts from the reinsurance property transition throughout the remainder of this year.
Gross written premiums were up 10% in earned premiums were up 11% on a year to date basis premium growth was driven by higher premiums in our general liability and professional liability lines, partially offset by lower premiums in our property lines Primo.
Premium growth in our professional and general liability lines was driven by premium growth in underlying portfolios.
Reinsured double digit rate increases and new business opportunities.
There is no accident the places we're growing in both insurance and reinsurance.
Our casualty and professional liability lines. These are areas that we have historically been very strong and at Markel.
The combined ratio for the first 6 months within the reinsurance segment was 105 versus 102 last year driven by a higher prior accident years' loss ratio, partially offset by a lower current year current accident year loss ratio and expense ratio.
Through the first 6 months of 2021, we experienced $50 million of adverse prior year loss reserve development compared to $2 million a year ago.
Almost 2 thirds of this prior accident Years' development relates to COVID-19 losses on property business interruption exposures.
Again that was recorded in the first quarter of 'twenty, 1 and.
And we also had the reallocation of COVID-19 reinsurance recoveries between insurance and reinsurance segment in the second quarter of 'twenty, 1 that with no change in our overall Covid estimates that was just a reallocation of reinsurance recoveries and finally unfavorable movement on prior year's could.
<unk> events.
The lower current accident year loss ratio. This year was due to a 2 point reduction from natural cat events with $25 million of 5 points from the losses on winter storm year in this year and $32 million or 7 points of losses from COVID-19 last year.
And a 2 point reduction in the Attritional loss ratio due to the reduction in the loss ratio in our property lines.
The lower expense ratio year to date was due to lower compensation and general expenses due to the transfer of our reinsurance property line and the impact of higher earned premiums.
If you exclude prior accident year loss development and natural catastrophe losses, our tradition, our attritional combined ratio is benefiting from the runoff of our property portfolio and the year to date performance of our retro reinsurance portfolio for.
For our ongoing core specialty casualty and professionally reinsurance lines, we are achieving pricing on the 21 underwriting year that we believe will ultimately meet our underwriting return objectives of 90% combined or better.
However, this is going to require several quarters to materialize in our reported results as we continued to recognize earnings from less profitable contracts written in more recent years and we execute our philosophy of establishing reserves that are more likely redundant than deficient.
We are working hard to position this book for profitability moving forward.
Next I'll touch on our program services and ILS operations, both of which are reported as part of other operations.
At state National we continue to see strong gross written premium volume.
From those operations with premium volume of $761 million and $1.4 billion for the current quarter and year to day periods, resulting in a year to date production growth of 40% pre.
Premium growth was due to both the expansion of existing programs and additional new programs premium in the first quarter of 2020 was also impacted.
By the 1 time unfavorable adjustment of $55 million related to the in force cancellation of a program.
As a reminder, almost all of the gross written premium within our program services operations as ceded we continue to see a strong pipeline for program services opportunities in the current with the current market conditions.
Moving to our ILS operations, our ILS operations consist of the results from the Philip plus startup and operating expenses related to large pie.
For the quarter operating revenues within our ILS operations increased due to growth and theyre going to fill up MGA operations.
For the year revenues from the ILS operations are down due in part to lower average assets under management at the fill up in the first 6 months of 'twenty, 1 versus the 6 first 6 months of 'twenty.
Partially offset by growth from our MGA operations.
Assets under management and if so what were $9.8 billion as of June 32021.
We continue to identify new areas of opportunity to deploy capital and have several opportunities in the works for the second half of 'twenty, 1 and into the first half of 'twenty 2.
Finally, we'd like to make a comment regarding large fine. We're very excited that we were able to raise approximately $100 million of investor capital of large PON as of July 1 this year.
Of which Marc held contributed $19 million as an investor starting in the third quarter of this year portion of the results from our retro reinsurance books will transition from our underwriting result, within the reinsurance segment 2 management fees as part of our ILS operations with our expectations.
And that over time, all results from our retro reinsurance product move into ILS operations with Markel retaining our participation as an investor.
Finally, I'll finish up with a few market comments, but also obviously happy to talk about that when we get into questions.
As we entered the third quarter, we see continuing pricing momentum in almost all lines, our insurance rate increases continue to average in the low double digits.
Reinsurance rates, which as we've previously discussed have lagged primary insurance pricing are also now averaging in the low double digits.
We believe that pricing momentum will continue as a multitude of factors such as low interest rates recently elevated cat activity, social and CPI inflation, COVID-19 losses, and economic uncertainty are likely to persist throughout the rest of this year and into 2022.
<unk>.
We continue to see benefits to our business as the economy recovers from the impact of COVID-19, obviously, we're all paying close attention to developments with the Delta variant.
Small businesses and construction business, which are meaningful parts of our portfolio are showing signs of recovery and it is showing up in our premium writings.
To sum it all up we're in a great position as we move into the second half of the year and we are very excited for the opportunities we continue to see thanks.
Thanks for your time today, and I'd like to turn it over to Tom. Thank.
Thank you Richard.
Jeremy gave you the numbers and I won't belabor them.
But as Larry David might say, they're pretty pretty good.
And I believe them to be sustainable over the long term.
Now here are the main takeaways from my point of view first our balance sheet is in great shape, we extended our debt maturities by issuing $600 million at a rate of 345% with a 31 year maturity in may.
Our cash and short term liquidity stands at roughly $7.5 billion.
And our equity investment portfolio stands at over $8 billion against the cost from that of $2.8 billion.
Those numbers suggest that we've got a very conservative balance sheet and plenty of liquidity to deploy as we find opportunities to do so.
Investment markets and opportunities to acquire additional Markel ventures businesses.
Somewhat limited due to what I would describe it as pretty high levels of overall pricing. Despite that reality, we've been able to use our financial strength and deploy capital. Following the 4 part triage that we've laid out in the annual report over many years.
First we continue to fund internal growth opportunities in our insurance and ventures businesses the.
The solid growth in our insurance premiums requires capital to write business and we've got it as.
As written premiums produced underwriting profits over time, those underwriting profit has become available to allocate across the 360 degree range of capital allocation opportunities we enjoyed markel.
Our Markel ventures operations are also growing and producing excellent results.
Overall, the ventures businesses are quite capital efficient absent acquisitions, they tend to grow and to produce capital at the same time.
It's Martha Stewart would say that's a good thing.
Second while we would while we did not make any acquisitions during the first half of 2021.
We continue to participate in many discussions and we see unique opportunities that come from our existing network of businesses, we're already in and the people who are already on our team.
Our reputation has dependable partners and is a great home for long term oriented people and businesses continues to grow.
We're continuing to see unique opportunities to deploy capital productively and grow Markel as a direct result.
I think this is a growing competitive advantage for us.
The value of being long term dependable and trustworthy partners continues to compound over time.
I believe this is our ex factor, it's our magic formula that will produce future opportunities to deploy capital productively overtime.
Third we continue to make modest purchases our publicly traded equity securities.
Spiked a record level of the overall market, we continue to find well priced and attractive equity investment opportunities, we continue to invest systematically and regularly in public equities.
We've got room to do more as opportunities and circumstances present themselves over time, they have and I believe they will.
Fourth we continue to methodically repurchase shares of Markel as we have the ability to fund the first 3 categories still have money leftover and find markel stock attractively priced.
To close thank you again for your support and your share of dedication to making Markel 1 of the world's great companies. We are delighted to report the progress against that goal in the first half of 2021, and we look forward to continuing to work away at it and the years to come.
That we'd be delighted to answer your questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
Ladies and speakerphone, please pick up your handset before pressing the keys.
Your question. Please press Star then.
2.
Our first question today comes from Jeff Schmitt with William Blair.
Hi, good morning.
Just.
Looking at growth levels and rate levels in the insurance segment professional liability general liability.
Compounding rates for several years now.
I presume you're at rate adequacy have been for some time, but.
Are you seeing any signs of increasing competition, there or do you think the market is still kind of right deficient I mean, it seems like a good opportunity to continue expanding your margins there.
Hey, Jeff Yes.
You know rates have been very good and professional and casualty.
And.
I do think.
I think we've been at rate adequacy for quite a while.
I do think there is concern in the.
The industry around.
Just what may happen with.
Claims inflation, social inflation and things of that sort.
And so I think that has kept pressure on rates I think also just the fact that.
It takes a lower combined ratio today to generate acceptable returns given the interest rate environment. So I think theres a lot of factors at play.
As I mentioned in my in my prepared remarks.
Professional liability and casualty aware Markel is really.
Made it today.
The decades, I mean that is where we where we.
We have always performed extremely well and we like that business and we'd like to grow in it when the opportunities there so.
Rates continue to be solid I think as other people have said I think they've plateaued, but we don't see them falling off which is which is nice to see.
So.
Those are those are the areas that we are most comfortable and have seem to be most profitable from markel over the years and we're going to continue to push forward hard in both those areas both on the insurance and reinsurance side.
Okay.
And then in Markel ventures, just thinking about the Lansing building products company.
Building costs going up so much from inflation is that a business I mean can you pass those costs through completely.
Are you seeing are you seeing sort of margin contraction from from inflation can you maybe speak on on that.
Yes. This is Tom so far we have been able to pass through the price increases that we've seen there as really throughout all of Markel ventures.
Inflation, it's interesting to sort of see the press reported in the academic and governmental commentary I can tell you as a person responsible for running real businesses theres inflation everywhere and everything and every dimension. So we're getting that from our vendors, but our customers are getting that from us to the Ria.
<unk> business everything is costing more.
We're passing those costs through and there is simply no alternative to not doing that.
Okay, and that's not just didnt Lance and you're talking about across Markel ventures, you're sort of able to pass all those costs through.
Yes.
Okay. Okay. Thank you.
Oh.
Yes.
And again, if you have a question. Please press Star then 1.
Our next question comes from Phil <unk> with Deutsche Bank.
[laughter].
Yeah. Thank you good morning, I was hoping to talk about the ventures business.
I always get the field, but the but.
Total acquisition a bit frothy at least from there.
Our valuations, but I was wondering this the potential change to personal tax rates in any way create.
And the acceleration of potential acquisitions here.
I feel like if conversation or at least at this idea is usually apply to the independent agent or broker market, but I wasn't sure. If it was any way to apply to the venture operations as well just given the.
They make up most of the acquisitions, you've had recently right while in general in terms of acquisition prices and multiples that people are paying out there they are higher.
I've been saying this for the last 4 or 5 years. So we've not really been aggressively trying to.
Buy things or go out and make a lot of our outgoing calls but fortunately.
The reputation that's spreading out there based on what we've done and people who are already part of the family and friends. They know in networks and contacts and whatnot, we get some really fascinating inbound.
Calls from people looking to join up if possible and that's really where the deal flow is coming from and I think that continues that does not describe the general market that describes people who are looking for the very specific set of values and long term thinking of the way Markel does thing. So that's part of the X factor.
In terms of the frequency and intensity of those phone calls right now.
Potential changes in tax rates driving that my sense is yes, very much so people are thinking that.
I was.
Thinking about maybe selling some day and maybe.
Maybe that day has now so yes, we're getting a lot of loss.
Okay.
Is there a way for you could help us think about growth moving forward in the ventures business. So it feels like we lap the Lansing acquisition is going to be quote unquote normal whatever that means these days, but.
How do we think about growth versus economic rebound and how these 2 might move in coordination right.
Again, I would just encourage you to take as long.
You as you, possibly can and recognize that since 2005, when Markel ventures started at zero now, it's a $3 billion top line and on track for 400 million Bucks.
EBITDA. If you just took the first half and multiply it by 2.
That's not a forecast, but it's just the math of kind of where things stand so without a specific growth target or a specific growth plan, we're always trying to be better and if he can execute about being better the world tends to give you more to do.
Yes.
I appreciate the loans from you know Unfortunately, my models on a quarterly basis.
It's no more than the zone as well.
Moving over to Ritchie and on the volume.
I would just suggest you multiply something by more than 1 point up.
Yeah.
Got it.
And on the.
On the underwriting side Rusty I was hoping you could talk about the mechanics of rate versus trend and the extent to which we're realizing the the GAAP there as we earned through you've historically had a conservative reserving philosophy and.
So to me it might not be realizing the entirety of a rate versus trend, but maybe you could just help frame for us the nutritional benefit that we're seeing of rate versus trend or is it business mix.
What what's driving the improvements here.
I mean, we are it is clear we are starting to recognize some of that margin between the rates, we're achieving and where we believe trend is.
We have to be careful about that because we within reason, we can calculate the rate increases but trend.
It's an estimate.
First where were estimating what we think trend is but I mean, I think we've already got enough data enough information at this point that we have started to recognize some of that margin.
And I think we will continue to recognize more of that margin as we as we go forward.
We felt like we were comfortably ahead of trends.
Win rate increases sort of picked up started and they started I would say in most lines probably 3 years ago. They were nothing spectacular initially but over the last 2 years or last 18 months certainly.
They picked up substantially so.
Some of it is baked in there I couldn't tell you if it's.
20, or 30, or 50 or 80% I don't really know that's going to that's going to play out as as the actuaries give a much better sense of how trend is moving given what we're all seeing in terms of CPI inflation, and then of course social inflation.
Okay. Thank you.
Our next question comes from Scott <unk> with RBC.
Yes, good morning, I Wonder if you could talk about the reinsurance.
<unk>, which had significant premium growth that was much higher than it had been running the past few quarters and I. Appreciate that can be lumpy you mentioned a few areas, but I'm. Just wondering if we should expect to continue to see that in the second half of the year given it sounds it sounds like your commentary was a little more upbeat in terms.
You know the rates, you're seeing out there, but any thoughts on that.
Well.
The reinsurance growth I mean, it written your first comment it's lumpy. It's absolutely correct. It is lumpy individual contracts can especially you know, it's a fairly low premium base compared to our insurance operation. So.
Large contracts from a small premium base can can lead to large percentage changes and we saw that this quarter.
You know the reality is.
The reinsurance business is heavily weighted to the first half of the year and so I would expect unless you know a.
Deal comes up here or there.
We're probably going to trend.
At lower growth rates for the rest of the year, 1 because just the amount of business that's out there in the second half of the year and.
We're not really looking to grow other than the contracts we've already added this year. So.
Second half of the year, I mean, I can't promise anything of great a great piece of business could come across the transom tomorrow, and we might want to write it but I don't really expect much in the way of growth for the rest of the year.
Okay.
Definitely helpful and then the.
D E U.
You mentioned I guess it was the beginning of the year the efforts to discontinue the property reinsurance is there any any update on on.
I appreciate that also takes that sort of no debt that can take a while to play out but.
Yeah.
How much of an impact was it in the first half of the year as he started doing that yes.
Yes, it's going as we expected we stopped writing.
Premiums.
In the reinsurance unit on January 1 so starting with January 1st renewals, we stopped renewing in the reinsurance operations in those.
Those were.
Looked at by.
The fill up and the ones they wanted to renew they did the ones they didnt they didnt.
So we've been in run off on the underwriting side for for the last 6 months, probably the best way to explain it to you just in terms of limits exposed ex.
Down by over 50% at this point so it was a fairly quick.
Because of the size of the January 1 renewals than the April 1 renewals in the June 1st renewals, which are Florida not.
Not having renewed those through the first half of the year limits exposed on property as we enter wind season now are down by over 50% and we would expect by sometime next year.
That would be pretty close to zero by the end of next year, So moving along at pace.
Okay.
Stuff like the detail.
And then wondering if you could talk about the.
You mentioned to fill up some new opportunities in the back half of the year wondering if you could.
Washed out a little more and then the.
The large pine.
Congratulations on the launch and just wondering where are you. When you kind of feel like you can build that yeah, maybe any more detail on that on that.
Opportunities for that over time, and how many investors you retracted just any color there as well.
I have to be a little.
A little careful.
Because.
For SEC reasons, you can't be viewed as a marketing right.
Alright.
In terms of things you are doing but I can say.
What we're seeing is a lot of interest from investors in the spoke funds, we have multi investor funds and those have done very well over the years, but we're seeing more and more interest from investors to establish kind of their own trading strategy.
They may be interested in.
You know a certain return profile versus a certain risk profile by may be interested in ESG opportunities. So so we're definitely seeing more interest from investors and bespoke trading strategies and we're working with them to try to try to put those together.
Gather and we're hopeful that as we get towards the end of the year and as we get into 'twenty..2 we'll be able to have had been able to set up a few of those in terms of large pie.
The capital raise.
That moves about 40% of the current retro book into the large pond fund.
We are committed to keeping about 20% of the exposure from markel either either on our balance sheet or as an investor. So we've got a ways. We could go with the current portfolio in terms of our ability to grow the retro portfolio. It really depends on market conditions market conditions.
These are good right now.
And if they continue to be good we certainly could grow the retro portfolio, we're writing and add new investors.
But.
We're committed to we want that to be an underwriting that are done at an underwriting profit and and so it will depend on market conditions as we as we go through the renewals and get towards January 1 is really the big renewal date on retro business and we'll see where the market stands when as we approach that.
Okay Fair enough and then just the last 1 day I know, we're touching on a little bit earlier inflation, just general inflation and social inflation I'm wondering.
If I heard you right I think you were saying you know rate increases are outpacing loss cost trends, we're seeing core loss ratio improvement.
And so just to confirm you expect that to continue kind of into the second half of the year into 2022, then the debt.
You know continued improvement.
I think so I mean.
I think I've mentioned.
Admittedly it was it was pretty modest in the beginning but we've been seeing rate increases and we've been compounding rate increases for almost 3 years now.
You know I think we all believe I mean, you can see as Tom said, you can see it everywhere.
Inflation is out there I think that will impact.
Loss cost trends, but I.
We were comfortable because of where our starting point was.
That we are ahead of loss cost trends, but we have to be careful we.
We don't know exactly what loss cost trends are and so we don't want to recognize too much of that more likely redundant than deficient as our philosophy here and so we're going to be we're going to be careful as we bring that margin that we're seeing in into our results.
Right, Okay that makes sense I appreciate the answers thanks.
Thanks.
[noise] question is a follow up from Phil Stefano with Deutsche Bank.
Yeah, Thanks for taking the follow up.
I was hoping you could talk about capital usage and management. So you you've got a third of them in the ventures net.
Is obviously, creating capital.
Underwriting is consuming and investing I guess, maybe you can you can tell us is it creating we're consuming at this point.
Underlying that is how should we think about repurchases maybe you could give us just a refresher on the repurchase philosophy for the company as we think about capital looking ahead over the longer run of course, yes.
We talked about the the 4 part triage from written about it in the annual report for a number of years and I referred to earlier from the first thing is you fund the organic opportunities you have the people that are already on your team that are proven winners when they have opportunities to grow and deploy capital we want to support those people first and foremost top of the list second thing is <unk>.
Acquisitions, and we can do and half of the year, some insurance acquisitions and we've done the ventures acquisitions.
So as we see opportunities there, we want to have capital to seize opportunities when they present themselves.
The third thing is our publicly traded investment portfolio and we're modestly not massively modestly investing in public equities right now and then fourth is after we funded the first.
3 buckets.
It's Mark I'll stock appears undervalued and we have excess capital then the appropriate thing for us to do is to start buying in stock we.
Repurchase very modestly over the years, because we've always had a pretty robust set of opportunities from the first 3 buckets.
We suspended repurchases in the middle of this time last year, when we were operating under very different sort of conditions.
But we started that in the first quarter of this year and that continued through the second quarter and I think the thing you should expect from US is a steady and consistent and disciplined behavior.
Debt.
I hope to be able to continue.
Quarter after quarter year after year, so nothing nothing dramatic but just.
Steady at it which would be additive.
Alright I appreciate it thank you.
This concludes our question and answer session I would like to turn the call back over to Tom Gayner for any closing remarks.
Thank you very much. We appreciate you joining us and we look forward to catching up in 90 day intercept thank you.
The conference is now concluded. Thank you for attending today's presentation you may now disconnect.