Q1 2023 Markel Corporation Earnings Call
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During the call today, we may make forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
Good morning, and welcome to the Markel Corporation first quarter 2023 conference call all participants will be in a listen only mode.
They are based on current assumptions and opinions concerning 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 our most recent annual report on Form 10-K and quarterly report on.
On Form 10-Q.
Including under the caption safe.
Safe Harbor and.
Yeah.
Cautionary statements and risk factors, we also discuss certain non-GAAP financial measures during 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.
Our Form 10-K and Form 10-Q can be found on our website at www Dot Mark Hill Dotcom.
In the for investors section. Please note. This event is being recorded I would now like to turn the conference over to Tom Gayner, Chief Executive Officer. Please go ahead.
Good morning, Thank you Chantelle and welcome to the first quarter Mark call Conference call.
The Tom Gayner, you CEO .
Joined today by my New colleague Teri Gendron started as our CFO in mid March I'll remind you that means she was here for all of two weeks of our first quarter given that tenure will probably asked her all of it really hard questions.
Additionally, Jeremy Noble President of our insurance operations is also on the call with us today.
As always we remind you that a mark how we focus on the long term.
We've been in business since 1933 generations of the Markel family and have been public since 1986 every action. We take remains focused on the long term success of Markel all of US are committed to building one of the world's great companies. We define a great company is one driven by win win win.
Sure.
We do our best to make sure that our customers win by doing business with us that our associates win by being part of this organization and that our shareholders win too high and durable returns on their capital.
We're more oriented towards Timeframes of 90 years in the 90 days that make our quarters, but we do enjoy the process of sharing our quarterly report card with you.
You are the owners of this business and we appreciate the chance to discuss how things are going well, we're working on and any highlights or low lines happening at your company.
We look forward to your thoughtful questions on our circumstances.
As to 2023, we've got good news to share with you we're off to a good start.
As David Letterman might say compared to the negative headlines that tend to dominate the news here's today's list of the top 10 things to be happy about as a shareholder of Markel number tab. All three engines of Martell produced positive results in the first quarter. The beauty of the design of our three engine system as it is.
Long as any single one of them is doing well that can create enough thrust to drive the whole ship forward.
Not all three will always be positive in every quarter and every year, but in the vast majority of quarters and years, we make forward progress. The first quarter of 2023 was one where there were there was positive thrust and insurance ventures and investments.
<unk> earned premiums in our insurance operations grew to $1 97 billion up from $1 76 billion a year ago, we continue to produce profitable growth through careful and disciplined underwriting.
Number eight the insurance operations produced meaningful underwriting profits, while our combined ratio of 94 is a bit above our targets. We are proud of that result, it reflects both underwriting discipline and our commitment to integrity and conservatism in the way. We report these results to you.
As we stated consistently we wish our loss reserves to be more likely to be redundant that decision. We continue to meet that crucial goal as witnessed by yet another quarterly report with favorable development of prior year reserves, we do not accomplished at 100% of the time, but we get pretty darn close to meeting that standard.
While we remain in an environment of inflationary pressures, both social and monetary.
Think that continuing to report reserve redundancies as a big accomplishment, we remain committed to that goal as we have been for decades.
Seven recurring investment income grew to $159 million up from $92 million as we continued to invest at higher and higher interest rates number six of interest operations set records in revenues and EBITDA that growth was almost entirely organic as we didn't do any acquisitions during 2022, it's an apples.
Apples comparison.
Number five we continued to purchase attractively priced publicly traded equity securities that met our four part test of buying profitable businesses with good returns on capital and not too much leverage for them by managers with equal measures of talent and integrity with reinvestment opportunities and capital discipline at fair prices during the <unk>.
First quarter, we bought a net of $65 million of public securities.
Number four we continued to repurchase our own shares.
During the first quarter, we bought $81 million of Markel shares our recurring investment income largely provided the cash we used to buy additional common stock and our own shares.
Number three our unrealized gain on our portfolio of publicly traded equities reached $4 9 billion.
Number two while there is no mark to market of the value of our Markel ventures operations captured by GAAP accounting I would assert that record revenues and EBITDA with strongly suggest that those businesses continue to increase in value.
Number one inbound phone calls from potential acquisitions started to reappear during the first quarter. This seems like a logical consequence of the disruption caused by rising interest rates and volatility in financial markets and that ought to lead to opportunities for us over time.
The net of all of these things is that Mark health continues to produce wins for our customers our associates and our shareholders across the board with that I'll turn it over to Terry to provide you with the numbers that flush out some specifics behind the top 10 list. Jeremy will then pick up some commentary on our insurance operations and then.
I'll follow up with a few thoughts about vectors in investing and after that we'll take your questions Terry.
Thank you Tom and good morning, everyone.
Wouldn't be happy or it can be part of the my account team. It's been just a short while but I can already see it evolve in my account culture plays in our long term success.
Onto our first quarter results.
As Tom remark 2023 is off to a good start affecting graphic and meaningful contributions from each of our three engine.
Starting off with our underwriting operations.
Written premiums were $2 7 billion for the first quarter of 2023 compared to $2 5 billion in 2022, an increase of 6%.
Our increased premium volume reflects new business volume and more favorable rates across many of the product lines within our insurance segment with the most notable growth coming from our personal lines property and marine and energy product lines, while we saw lower premium volume within our professional liability product lines, where we are adjusting our writings.
In reaction to changes in market conditions and downward pressure on rates within certain classes.
Retention of gross written premiums was 83% in 2023, which is down three points from the same period last year the.
The lower retention in 2023 compared to 2020 to reflect higher session rates on our professional liability and personal lines product lines within the insurance segment.
Our marine and energy product lines within the reinsurance segment as well as changes in mix of business within the reinsurance segment.
Our consolidated combined ratio for the first quarter of 2023 with a 94%.
This compares to an 89% for the first quarter last year, which included $35 million or two point of net losses and loss adjustment expenses attributed to the Russia, Ukraine conflict.
The increase in the consolidated combined ratio reflects a higher attritional loss ratio and the impact of less favorable development on prior accident years loss reserves in 2023 compared to 2022 within our insurance segment.
Prior year loss reserves developed favorably by $71 million in the first quarter of 2023 compared to $96 million in the first quarter of 2022.
The decrease was due to favorable development on our general liability and professional liability product lines in our insurance segment, and 22, which we did not experience in 2023.
We remain cautious and conservative in our approach to reducing prior year loss reserves on a longer tail general liability and professional liability lines given the current uncertain economic environment.
Turning to our investment results.
Net investment gains were $373 million in the first quarter of 2023 and reflect an increase in the fair value of our equity portfolio driven by favorable market value movement.
This compares to net investment losses of $358 million for the comparable.
<unk> quarter in 2022, which reflected a decrease in the fair value of our equity portfolio driven by unfavorable market value movement.
As you've heard US say many times before we focus on long term investment performance expecting variability in equity markets and the timing of investment gains and losses from period to period.
We will continue to measure investment returns over longer periods of time.
At the end of March the fair value of our equity portfolio included cumulative unrealized holding gains of $4 9 billion.
With regard to net investment income.
We reported a $159 million in the first quarter of 2023 compared to $92 million in the same period last year.
The increase is largely attributable to higher interest income from our money market and short term investments due to higher short term interest rates in 2023.
Additionally, interest income on our fixed maturity securities increased.
The higher yield and higher average holdings compared to last year.
The change in net unrealized investment losses included in other comprehensive income for the first quarter of 2023 net of taxes was an increase of $164 million compared to a decrease of $521 million in 2022.
These movements correspond to changes in the fair value of our fixed maturity portfolio, resulting from changes in interest rates.
Recall that we typically hold our fixed maturities until they mature and we generally expect unrealized holding gains and losses to reverse in future periods as bonds mature.
Our fixed maturity maturity portfolio had an average rating of AAA as of March 31, and there are no current or expected credit losses within the portfolio.
Now I'll cover the results of our Markel ventures segment.
Revenues from Markel ventures increased 16% to $1 1 billion in the first quarter of 2023 up from $950 million for the comparable quarter last year the.
The increase reflects strong organic growth and improved pricing across many of our businesses.
EBITDA from Markel ventures increased 25% to $120 million for the first quarter of 2023 from $96 million during the same period last year.
The increase reflects higher revenues and improved operating results at our transportation related and equipment manufacturing businesses.
Before turning to the consolidated results for the quarter.
There was one new item I'd like to draw your attention to related to the new accounting standard on long duration insurance contracts that we adopted January one, which impacts our portfolio of life and annuity reinsurance contracts.
Because our portfolio is in run off many of the provisions of the new standard don't apply to our book.
This meaningful change is the requirement to update the discount rate on our reserves each quarter with the impact reflected in other comprehensive income.
All prior periods have been restated as required by the new accounting standard, which was most impactful to our other comprehensive income for 2022, given the significant increases in interest rates throughout the year.
The impact of updating the discount rate for our life and annuity benefit reserves as of December 31, 2022 resulted in a net benefit of $89 6 million to the accumulated other comprehensive loss compared to the amount we previously reported.
Looking at our consolidated results for the quarter.
Our effective tax rate for the first quarter of 2023 was 20%.
The estimated annual effective tax rate is 22% in the first quarter of 2023 compared to 21% in the same period last year.
We reported net income to common shareholders of $489 million for the first quarter of 2023 compared to a net loss to common shareholders of $52 million in the same period, a year ago, largely attributed to the year over year swing and changes to our public equity portfolio valuation.
Comprehensive income to shareholders for the first quarter of 2023 with $646 million compared to a comprehensive loss to shareholders of $512 million in the first quarter of 2022 with both fixed maturity and public equity valuations at the largest drivers.
Finally, I'll make a few comments on cash flows capital and our balance sheet.
Turning to cash flows net cash provided by operating activities was $284 million for the first quarter of 2023 compared to $415 million for the first quarter of last year operating.
Operating cash flows in the first quarter of 2023 reflected strong cash flows from each of our operating engine, but most significantly within our underwriting operations given the strong premium volume in recent periods.
Within our underwriting operations operating cash flows in the first quarter of 2023 were net of a $125 million payment made to complete a retroactive reinsurance transaction to feed our run off book of UK Motor casualty business.
Total shareholders' equity stood at $13 7 billion at the end of March compared to $13 2 billion at the end of the year.
During the first quarter of 2023, we repurchased 63000 shares of our stock under our outstanding share repurchase program, which is consistent with the number of shares repurchased in the first quarter of 2022.
All in all we're pleased with the start of the year producing strong results that reflect the benefit of our three engine architecture. We're confident in the strength of our business and the contribution each makes and building shareholder value over time.
With that I'll turn it over to Jeremy to talk more about the insurance agents.
Thanks, Terry Great to have you here and good morning, everyone.
I am pleased to be with you today to recap our 2023 first quarter insurance engine results. We are off to a nice start to the year with total revenues within the insurance engine, surpassing $2 billion for the quarter generated pre tax operating income of $152 million.
An increasing float while we invest in increasingly attractive yields.
We will now share a few thoughts on our first quarter results from across our collection of insurance businesses, which include our insurance and reinsurance underwriting operations State National program services operations and the filler insurance linked securities operations.
Looking first at our insurance segment.
For decades, we've said, we will walk away from business is not adequately priced and does not meet our profitability targets. The first quarter of this year is a good example of us displaying rate adequacy discipline.
Top line gross written premium growth within our insurance segment came in at 8%.
That being said, we actually grew nicely in a number of product areas, where we have a high degree of confidence around margins.
The advantage of improved pricing environment in property and grew in areas such as inland marine binding personal lines and select London market Marine and energy classes. However.
However, we are not comfortable with the pricing trend in the professional liability space, particularly in much of the large account DNO space. As a result, we are shrinking selectively, allowing some business to lapse and being very discerning around new accounts. Another example is in excess casualty lines, where we saw some contraction as the pace of new business.
This slows a bit and we're pushing hard for rate and are willing to let existing business flaps, where we are.
But to get it.
Doing what we said we will do.
Another highlight for this quarter.
We continue to see benefits from our actions taken to minimize volatility in our underwriting results through actively managing our net exposure to natural catastrophes, we experienced minimal losses in the quarter from winter consecutive storm events.
Within our insurance operations, we produced a combined ratio of 94 up seven points from a year ago due to higher attritional loss ratio and prior accident years' loss ratio, which admittedly is above our target.
However, we are confident about the strength of our current portfolio. While also displaying caution as we acknowledge the current levels of uncertainty around insurance market conditions at the moment.
Another area, where we remain consistent and do as we say.
As with regards to our loss reserving philosophy, we continue to take a cautious view on loss reserving given the continued uncertainty in the market around loss trends and impacts from various forms of inflation in particular within our longer tail professional and general liability lines over the past few quarters, we've raised our attritional loss.
As in many of our general liability and professional liability sub classes as these trends have become more apparent leading to a year over year increase in the attritional loss ratio within our insurance operations.
We also increased our current year loss ratio within our professional liability lines this quarter due to exposures arising from our recent bank failures.
We also are maintaining a cautious approach relative to prior accident year loss take those prior year favorable development is lower year over year as we saw minimal development across our general liability and professional liability product lines compared to more favorable development a year ago.
We continue to be quick to strengthen reserves in the pre COVID-19 soft market accident years, when we see or anticipate increased claims activity encouragingly, we're seeing favorable actual versus expected trends in the more recent accident years.
Given our conservative reserving approach, we are generally holding off on releasing reserves and allowing more time to gain greater certainty over the longer term loss trends.
Turning next to our reinsurance segment.
I am pleased to report that we continue to show profitability improvement with a 91 combined ratio for the quarter compared to <unk> 95, a year ago, our re underwriting actions within the portfolio over the past few years continue to show up in the reinsurance results.
The 4% decrease in gross written premiums within the reinsurance segment was due to lower premiums in our professional liability and credit and surety lines par.
Partially offset by higher premiums in our general liability and marine and energy lines. All of these movements are largely attributed to either premium adjustment activity for timing differences related to renewables. This is most notable in our transaction liability book within our professional liability product lines, where deal flow has dropped considerably over the past few.
Quarters, resulting in lower ultimate premium volumes.
Lower premium adjustment activity creates an increase in our current year Attritional loss ratio, which is an offset which was offset by a decrease in our prior accident years' loss ratio.
Next I'll touch on our program services and other fronting operations and ILS operations, both of which are reported as part of our other operations.
Phil ILS and state National program services teams continue to remain focused on capturing market opportunities building their value proposition to clients and partnering with our underwriting divisions take advantage of synergies available within our multifaceted insurance platform.
As a reminder, almost all of our gross written premium from our program services and other fronting operations to ceded.
Total premium production within our program services and other fronting operations totaled $778 million this year versus $879 million a year ago.
Premium decrease was due to a termination of certain programs, which was expected terminations.
Terminations will occur in part because periodically a partner obtains a rating agency increased our regulator licensing approval or is acquired and moves away from needing a fronting model.
The good news is as we continue to see a strong pipeline of opportunities in the current market and our ability to handle more complex transactions in this space differentiates us from competitors.
Within the <unk> ILS operations revenues and expenses for the year were down due to the impact of selling our velocity and velocity MGA operations last year as well as from the impact of lower assets under management, which stands at $7 2 billion at the end of the period.
As a reminder, we realized a gain of $107 million in the first quarter of last year related to the sale of a majority stake number lofty MGA operations.
While our current results and our fillers with lower levels of <unk> experience. We continue to work hard to raise capital across all three of our strategies property catastrophe climate and specialty lines.
Current pricing environment and property when combined with our initiatives around transparency of risk assessment and portfolio construction leads us to conclude that the risk return proposition is as compelling as it has ever been.
Turning to market commentary and outlook submission activity and new business opportunities generally remained strong in the first quarter outside of professional lines clients are still turning to specialty market solutions, given current levels of uncertainty and ongoing economic activity, our diverse product and risk management capabilities, our specialty underwriting expertise.
<unk> strong reputation in the marketplace are particularly compelling in more uncertain times like these.
Just a couple of comments on rate.
Across our portfolio rates are holding up fairly well and broadly in our estimation or keeping up with our view of trend. We have many products where rates were up 5% to 10%, particularly most lines where rate adequacy is more in focus the biggest exceptions are property to the good with rates accelerating more meaningfully from the start of the year and risk.
Managed large account Dino to the bad where prices continued to decrease rate increases in large account excess casualty have also continued to slow which concerns us.
I want to reiterate that we are focused on achieving rate adequacy across the entirety of our portfolio and where we are unable to obtain sufficient rate increases or effectively adjust terms and conditions where limits. We are walking away from accounts that do not meet our profitability targets. These actions may have the effect of slowing the growth trend from what we've seen over the.
Past couple of years, but given the breadth of product offering. We have we are confident we will find pockets that are attractive to grow and we will.
Remained very optimistic around our mid and longer term profitable growth objectives.
Thank you and with that I will turn things back over to Tom.
Thank you Jeremy.
Markel ventures, we enjoyed a wonderful first quarter as Terry reported revenue grew to $1 1 billion up from $950 million that.
That growth was almost entirely organic as there were no ventures acquisitions in 2022.
EBITDA grew to $120 million up from $96 million a year ago.
It is indeed appropriate to remember that the D of EBITDA is a real cash expense capital expenditures in the first quarter, which you can find in the statement of cash flows in the financial statements and which lead to the accrual accounting calculation of D totaled $37 million for all of Markel in fourth quarter.
Most of that does relate to Markel ventures, but I hope that calculation gives you some comfort that remain attentive to the ultimate free cash flows that the ventures businesses generate after all cash expenses.
The management teams of interventions operations continue to demonstrate operational excellence creativity, adaptability and discipline amidst an ongoing jumbled economic environment.
Inflationary pressures are real and the economic fallout from higher interest rates as well as overall tightening credit condition makes the job of delivering those sorts of results harder and harder.
Could not be more grateful and proud of the team for how they continue to manage through the daily challenges of running their businesses.
As I mentioned earlier in the call. We are starting to have some early conversations with people looking to join the Markel ventures family and I would hope that some of them will come to fruition in the fullness of time.
We'll be thoughtful and disciplined stewards of your capital as we consider possibilities.
In our investment operations, we reported recurring investment income of $159 million up from $92 million a year ago that reflects the higher interest rates were receiving as we invest the cash flows of our normal operations I expect that number to continue planning given the current levels of interest rates.
And our equity holdings and enjoyed a positive return of five 3% during the first quarter, our unrealized gain reached $4 9 billion and we have invested in additional net $65 million into a publicly traded equity portfolio.
I would also point out that both our equity and fixed income operations. We have nothing to report to you about the recent headlines of bank failures real estate defaults or other burst of speculative bubbles, we simply werent there.
We were at home doing their homework session erkki eating vegetables and go into bedded reasonable out we were having fun in their own way.
To sum up I am delighted with our position we continue to build balance sheet strength GAAP accounting statements captured that well in the case of our insurance and investment operations.
Accounting doesn't do as good a job capturing the intrinsic value of growth of our ventures operations.
Value doesn't show up in the balance sheet in the same way that it does with insurance and investments that doesn't make that growth any less rigor as.
As I consider our overall position at Markel I feel a little bit like Bud light year, when he says to infinity and beyond are on the way.
So with that we'll now open the floor for your questions about galactic, an existential issues insurance market pricing trends tax rates or anything else you'd like to talk about shoretel would you be disadvantaged to open the floor.
We will now begin the question and answer session.
Ask a question you May press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press star one again at this time I'll pause momentarily to assemble our roster.
Our first question comes from Charles Gold with Chris Your line is open.
Thank you good morning.
Congratulations on the continued progress I had a question about share repurchases.
I know you have a program little the automatically.
Increases your appetite.
As the price.
Okay.
Lower.
Does that program eliminate all.
Striction the window being open or not open.
Well you are correct.
We tried to do what we think is rational so we pick our own intrinsic calculation of what we think Marcelo is worth and we.
Make rational repurchase decisions based on that calculation and the other capital allocation opportunities that we look at we have designed this to be able to try to be consistent and our ability to repurchase stock.
On a regular basis.
The window question are you able to buy stock this morning.
The answer to that is yes.
Good.
Thanks, so much.
Thank you.
Our.
Question comes from Mark Dwelle with RBC capital markets. Your line is open.
Yes, good morning.
A couple of questions.
First.
Notice there was.
Notable reserve release related to the Cat <unk> unit I guess that ran through the other segment.
What I wanted to check is sort of an accounting question and then ultimately is is that amount that benefit that shows up in the other segment is that ultimately then neutralized by a higher.
The minority interest or.
Minority interest charge down further in the financial statements.
Yeah, Hey, Mark it's Jeremy.
That's right. So you may recall, we entered the settlement first quarter of last year and as part of that we consolidate the markel CAC to re enter the Mark Heller financial statements. So you just get noise above the line and below the line. So it shows up as you pointed out in the other operations and then it's eliminated a below the line through Noncontrolling interest change.
What that highlights is that the reserves continue to run off favorably in that inure to the benefit of the investors.
Today.
Just a side question on that.
That was my main point was really just ultimately doesn't hit.
The run rate earnings.
To the extent that you have that.
Oil development. This quarter was that the byproduct of a reserve analysis or review or was that.
Some continued innovations is.
Is that book continues to run down.
Yes more of the latter mark.
Finalizing physicians and commutation activity and just closing the deals out.
Very good thanks.
The second question that I had related to.
I guess the.
The accident year margins in the insurance segment.
I mean I appreciate that you guys have always been very conservative.
Suspect that will probably ultimately be the answer to the question I'm going to ask but.
I mean, it doesn't seem consistent to me that you could have a pricing environment, where youre, saying pricing is running level with or better than loss trend and then you would need 300 basis points more of accident year margin.
Related to our book of business that is.
Reasonably homogenous with the book you wrote a year ago can you just comment on that part.
Where I might be off on that.
Well I think Mark you are you are right to kind of highlight that so we.
We clearly as we as we kind of spoke to throughout the course of last year. We were we were seeing.
[noise] confluence events rising interest rates that were compounding social inflation, becoming more clear the effects of the courts working through their tastes backlogs and we witnessed actual loss frequency and severity in excess of our expectations. So we took action and ultimately that resulted in some adverse development in the fourth quarter, which.
As Tom alluded to earlier, we detest that.
So what we're highlighting is acting with caution acting with prudence and you're exactly right. We will built in an additional margin of safety.
In our 23 accident year, and how we opened the year up as we continue to look to gain more credibility around how the 2000 22022 years are performing now Fortunately too.
<unk> 2019, and prior pre Covid softer market years, where we had experienced in development.
We had some we didn't experienced meaningful loss reserve development, we were pretty neutral on those years in total.
The trends continue to be somewhat positive with regards to actual loss experience compared to expected 2000 22022.
And to your point, we're actually probably doing a little bit better right now on rate to start 'twenty three than we anticipated and also contemplation of of rate and exposure change acting as rate relative to trend. So what we're left with is being cautious acknowledging it's one quarter acknowledging.
The first quarter of the year, allowing a little bit more time to apply credibility to the trends that we've seen and just acknowledging that there is uncertainty around insurance market conditions at the time, but I do think that that is a is a.
A bit of extra layer of margin of safety right now.
That's a helpful helpful discussion I appreciate that.
A question for you Tom I guess.
Within Markel ventures.
Are you seeing any particular signs of the economic slowdown that CNBC tells me is occurring all around me.
Your 16% growth rate would suggest that's not so much the case.
It's obviously a very diverse book of business is so maybe some are doing superlative and some are kind of just.
Alone.
Yes.
Want to dwell on the answers here.
To try to make our economic.
Economic forecast, but.
It is.
Comparable that you could just feel the credit conditions, which.
During the first quarter wasn't until after the close of the quarter that you had some of the bank failure issues some headlines about <unk>.
Office buildings for the key is being turned in with us and we see it feel that a bit but it's not the sort of thing we have any control over and I do want to reiterate I think the people running those businesses are just doing a fantastic job and the spread of businesses that we have.
To provide a wide degree of exposure to just general economic conditions.
So I wouldnt draw any.
Too much in the way of conclusions.
So people are still buying a lot of house plants and stuff like that.
I know I feel better when I do I hope I would recommend in the same period.
Thanks for the answers guys Thats all my questions.
Thanks Mark.
Our next question comes from John Hawks, with Santa more management. Your line is open.
Alright, Thank you and good morning, everyone.
First question for Jeremy.
Program services you mentioned.
<unk> client.
Leaving for whatever reason and it was a very tough compare do you expect that to grow for calendar 2023.
It's a great question, John I don't know that I want to be in the prediction game again and grow grow quarter over quarter grow in prior year comps and I'm not exactly sure, even which one you would be pointing to.
Much of the activity that we would have anticipated with regards to changes in the programs.
Was occurring over the back half of last year and into this year, but there is still can be some changes in that in that space as I think I commented on.
Fortunately I think the new business pipeline is pretty strong and to be honest with you we're starting to see some.
Commented before that there is rising levels of competition and a lot of new players and we're starting to see some cracks in some of that state National I think is very much a longstanding durable.
<unk> platform has great relationships and it's very good at dealing with larger and more complex deals. So that helps us get a lot of inbound calls.
Feel pretty good about the new business pipeline, but I'm, not going to predict where that where that will play out.
Okay. My second question for you.
Move on.
You know when you think about the rhetoric in the industry rate.
Rate increases on top of rate increases.
No.
Compounding for a number of years more business moving to the E&S marketplace.
And then as we have.
Been through your <unk>.
Gross written premium growth was 8%, which is the lowest in a while and your retention was a little bit lower than the previous year.
It's on the one hand, the industry rhetoric rhetoric has had a great.
Premium increases are and you're slowing down so I know you've addressed this in a couple of times, but any.
Any other reactions to that.
Comment.
Yes, I think what we've been talking about for a period time. John is is that it's a little bit more of a nuance market. So theres a story within various product lines and that was a little bit of what I was trying to bring out in my earlier comments.
You could take professional laws and we write a lot of professional liability the lack of activity around.
Spacs and these facts in Ipos I mean across the industry has reduced the total flow of business in that space above and beyond just what's happening in the pricing environment that makes us.
Pulled back a little bit if you will but then we see other pockets, where we opportunistically believe we can grow and we did grow in the first quarter binding and inland marine and personal lines in our London market Marine and energy classes. So.
We'll see how that that portfolio balances, but some of those pockets on the general liability and professional liability side, a pretty big segments of our book, where we're a little bit more focus on rate adequacy, and we're going to push and if we just don't get the rate that we believe is appropriate we're willing to let some of that business flops.
So there is a bunch that's going into that story, but what I would say is I think that net net that that leads to a more healthy.
And even potentially a more balanced portfolio.
Right.
I mean, it was great to see reinsurance premium down and profits up so that was a great job.
And for Tom I was wondering if you could just.
Give us some more detail you have about $2 billion in <unk>.
And you alluded to.
The problems in the market that we're all aware of but could you talk about the <unk>.
How much is government guaranteed how much is private.
And any other kind of details you can give us on the risk of that holding thank you yes.
The vast majority of it is indeed agency and government guarantee sorts of things.
It would not be would tend to be stuff that we inherited through some of the.
Acquisitions, we've done over the years, we sort of let that continued to diminishing in runoff and we obviously scrutinize that and look at it we have no concerns about.
And the exposure to things that look vulnerable to us at this point.
Okay, and I just wanted to confirm.
I mean, you don't disclose it but you don't have any loan participations or and finance, the new commercial office buildings or whole loans or anything like that.
Okay. So it's all on liquid C MBS.
<unk>.
Okay. Thank you.
Okay.
Our next question comes from Bob <unk> with Janney. Your line is open.
Hi, Thanks, and good morning.
My question's, probably similar to what you've already answered.
But.
I just wanted to get your current thoughts on your your 10 five one <unk>.
Operational goals, you can see in light of the underwriting discipline and the caution you're mentioning the rate increase and slowing the pulling back from certain lines and the upward pressure on loss trends. It seems like at least to me you can either get the premium goal or the profitability go, but probably not both and I just wanted to know.
Your thoughts around that.
Yes, Bob it's Jeremy happy happy to answer that so I think it's important to add some context to what we mean and what we've talked about with with that vision around sort of 10, five one which is to say back in 2019, when we sort of started to establish the idea. We really were talking about what would need to be true.
Would we look like if we were to double the size of the company out numerically that was acknowledgment of $10 billion of premium by 2025, and because of our focus on profitability, we sort of established a $1 billion profit target, but what underpins all of that was to say what needs to be true with regards to talent.
To product distribution to territory to region to technology to data digital capable all of those sorts of things. So we continue to invest to make ourselves a bigger more resilient and more durable more longstanding insurance operation. So if we get to that.
And in 2025.
And all of those things I rattled off we're doing really well out in line with what our expectations are and the premiums not a $10 billion I'm not going to be terribly concerned because we acknowledge we have to operate through a market cycle and as you hopefully will depreciate for decades, we have spoken to the fact that we are about underwriting profitability.
<unk>, that's an incredibly component an incredibly important component part of how we contribute to the overall engines and dynamics of the Markel Corporation. So we're going to focus on underwriting profitability and we can still achieve a lot of those objectives. We will see on growth that's about managing the market cycle that being said at <unk>.
Rest of product offerings, the diversification we have.
There are plenty of ways that we can grow across a very broad product set. So I think I think I still feel pretty good about mid and longer term profitable growth objectives.
But we're not holding ourselves to a number.
Yes.
I have read that at your aspirational. So I know this is not the start or anything like that so yes. I was just curious to see if there were any.
Updated thoughts so thanks for the context of course.
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This concludes our question and answer session I would like to turn the call back over to Tom Gayner for closing remarks.
Thank you so much for joining us we would love to see you at our annual meeting enrichment on May 17th at two P. M. The Robin Center at the University of Virginia.
Between now and then we'll see you soon thanks.
Rich Richmond Richmond.
Don't go to shelf.
Thank you.
Thank you.
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