Q3 2025 Markel Group Inc Earnings Call

Speaker #3: Good morning and welcome to the MARKEL GROUP INC. . Third Quarter 2025 conference call . All participants will be in listen only mode .

Speaker #3: Should you need assistance , please signal a conference specialist by pressing the star key , followed by zero . After today's presentation , there will be an opportunity to ask questions , to ask a question you may press star followed by the number one on your touchtone phone .

Speaker #3: To withdraw your question , please press star one again . During the call today , we may make forward looking statements within the meaning of the private securities Litigation Reform Act of 1995 .

Speaker #3: 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 .

Speaker #3: Additional information about factors that could cause actual results to differ materially from those projected in the forward looking statements is included in that press release .

Speaker #3: For our third quarter 2020 results , as well as our most recent annual report on Form 10-K and Quarterly Report on Form 10-q , including under the caption Safe Harbor and Cautionary Statement and Risk Factors .

Speaker #3: We may also discuss certain non-GAAP financial measures during the call today . You may find the most directly comparable GAAP measures and reconciliation to GAAP for these measures .

Speaker #3: In the press release for our third quarter 2025 results , or in our most recent form 10-q , the press release for our third quarter 2020 results , as well as our form 10-K and form 10-q , can be found in our website at .

Speaker #3: Hp.com . In the Investor Relations section . Please note this event is being recorded . I would now like to turn the conference over to Thomas Gayner Chief Executive Officer .

Speaker #3: Please go ahead .

Speaker #4: Good morning , and thank you very much . Welcome , and thank you for joining us for today's call . I'm delighted to be joined by my colleagues , Brian Costanzo , our CFO , and Simon Wilson , our CEO of Markel Insurance .

Speaker #4: We're also joined by Mike Hayden , our COO for the question and answer portion of the call . And Markel Group . We're committed to relentlessly compounding your capital and building shareholder value .

Speaker #4: I'm happy to report that so far in 2025 , we continued to do exactly that . I'm particularly pleased that throughout the first nine months of 2025 , every reportable segment made positive contributions to the value of the Markel Group .

Speaker #4: They also did so in a capital efficient way . Generating significant cash flows that helped fund our ongoing share repurchases and build up of liquidity .

Speaker #4: The first nine months of 2025 stand as compelling evidence of how our differentiated model works . Brian will provide more on our detailed financial performance in a minute , and Simon will speak about our ongoing improvements in our insurance business .

Speaker #4: But before I turn the call over to them , I would like to say a bit more about our progress . This year .

Speaker #4: First , as you know , our board and management have been intensely focused on improving our core insurance business . We've taken many decisive actions over the last few years , including one exiting , underperforming businesses .

Speaker #4: Most notably reinsurance , two making key leadership changes including appointing a new insurance company CEO with a proven track record of success , and three implementing key organizational and structural changes to improve accountability , including shifting most of our overhead directly into the businesses .

Speaker #4: I'm pleased to report that these actions are beginning to translate into results as we achieved a combined ratio of 93% within Markel Insurance in the third quarter , compared to 97% in the comparable period .

Speaker #4: While this was aided by light cat activity this year , looking underneath some of the lines , we exited the improvement in our core insurance business is becoming clearer .

Speaker #4: We believe this is just the beginning . The improvements in insurance profitability so far provide evidence that our actions are starting to drive better results .

Speaker #4: I think it's also worthwhile to point out that we have reported favorable reserve development on an annual basis . Each year for more than two decades now .

Speaker #4: This reflects our inherent conservatism and commitment to financial integrity . Simon will provide more comments on our insurance business , but the headlines are that we're doing more of what works and less of what does not .

Speaker #4: We are simplifying the business, increasing accountability at the front lines, and setting the stage for renewed growth and improved profitability in all of the businesses we own.

Speaker #4: And oversee . Our CEOs have continued to run their businesses with professionalism long term focus and extreme skill . Navigating through volatile and uncertain economic conditions to deliver strong returns on capital and profitability .

Speaker #4: The Markel Group system also continues to generate significant cash flow , offering further evidence of the strength of our model over the trailing five years ending September 30th , 2025 , our cumulative operating income was nearly $13 billion .

Speaker #4: This incoming cash gives us financial strength and offers us flexibility to pursue opportunities we understand with partners . We trust . While returning capital to our shareholders at the same time , our opportunity set is significant , we can reinvest in our existing businesses or expand into new public or private businesses .

Speaker #4: Much of our growth capital has been deployed in the industrial , consumer and other and financial sectors where over decades we have developed a core set of competencies around culture , capital and leaders , each of which adds to our ability to relentlessly compound your capital .

Speaker #4: I've also noted that we've earned strong returns on those investments . In the five year period of 2020 to 2024 . The insurance , industrial , financial and consumer , and other segments of Markel Group paid dividends up to the holding company of approximately $2.2 billion .

Speaker #4: We invested $1.7 billion in acquisitions and additional interest in our existing businesses , primarily in the industrial and consumer sectors . All while supporting substantial growth in insurance .

Speaker #4: Regarding share repurchases . From the end of 2020 to the end of Q3 2025 . We've returned approximately 1.9 billion of capital to shareholders via repurchases .

Speaker #4: Again, while strengthening the balance sheet, share count was reduced from 13.8 million to 12.6 million. In our investment operations, we continue to remain focused on preserving and protecting your capital.

Speaker #4: We earned 8.4% on our equity investments so far in 2025 . The book yield on our Fixed income is 3.5% , and our reinvestment yield was 4.2% .

Speaker #4: We aim to be thoughtful stewards of capital and seek to match our liabilities by investing in only the highest rated fixed income securities .

Speaker #4: The safety first approach has served us well . We are then able to utilize the strength of our balance sheet to invest in the areas where we see the best opportunities to deploy capital .

Speaker #4: As part of our board led review , we also committed to improving our financial disclosures to ensure that you can better see where our earnings come from , how we allocate capital to its highest and best use , and how capital has performed overall .

Speaker #4: And in all parts of the Markel Group system . Last quarter , we enhanced our disclosures for the insurance operations to better align it with the business's strategy and provide more detail for investors .

Speaker #4: This quarter . As you can see from our 10-q and the supplemental materials we provided yesterday evening . We have provided additional new disclosures , including now reporting our business results into four segments insurance , industrial , financial , and consumer .

Speaker #4: Other . I'm sure it will take a little time for everyone to process and digest our new disclosure format , but I hope you will find it helpful in how it describes the ways our diversified set of businesses reinforce our overall financial strength and stability , and how our significant reinvestment options and highly efficient and low cost capital allocation all work together to generate steady and diverse cash flows and relentless compounding of your capital over time .

Speaker #4: We believe that a key part of our success has always been how our board and leadership team maintain strong oversight over the company's operational , financial and value performance , always evaluating ways to improve .

Speaker #4: With that , I'd like to turn things over to Brian . I look forward to answering your questions after he and Simon provide you with an update .

Speaker #4: Brian .

Speaker #5: Thank you . Tom . Good morning everyone . As Tom mentioned , after a listening tour with our investors earlier this year , we decided to undertake the effort , partnering with our board and third party advisors to further enhance our financial disclosures .

Speaker #5: MARKEL GROUP INC. evolution created the opportunity to take a fresh look at how we report our financial results to shareholders . We released the first part of these changes in the second quarter to align with our reorganized Markel Insurance segment .

Speaker #5: Last night we released the remainder of our changes across Markel . We are excited to hear your feedback . We believe that these changes will help investors both better understand your company and provide improved insights into how both Markel Group as a whole and its family of businesses , businesses are performing .

Speaker #5: While I will reference several of these changes as I walk through our quarterly results , the primary changes to our financial disclosures include changing how we present investment gains and losses to provide investors with a better sense of recurring operating results from our businesses through first moving to presentation of investment gains and losses to outside of revenues .

Speaker #5: And second , introducing a new metric for adjusted operating income , which excludes investment gains and amortization expense from our operating results . We also reorganized our business results into four reportable segments Markel Insurance , Industrial , Financial and consumer , and other and shifted to adjusted operating income as our segment performance metric for each of our reportable segments collapsed .

Speaker #5: Our investment segment into the new reportable segments . Introduced new consolidated and segment level KPIs such as organic revenue growth and return on equity for Markel Insurance .

Speaker #5: And finally , updated business descriptions to help investors more Fulsomely understand our family of businesses across the variety of industries in which we operate .

Speaker #5: We also created a reporting changes guide for shareholders , along with supplemental recast financial information that aligns with our new segment structure for the trailing seven quarters .

Speaker #5: We filed both by an 8-K last night , and they are available to you now on the SEC's website and our Markel Group website .

Speaker #5: We hope these tools are helpful in navigating through the changes in our financial disclosures. With that, let's turn to the results for the period, starting with our consolidated results.

Speaker #5: Consolidated revenues were up 7% for the quarter and 4% year to date . Revenues in all periods are conformed based on our updated measurement , which excludes net investment gains from our total revenues .

Speaker #5: All reportable segments were up year over year for both the quarter and year to date periods . Operating income for the quarter was 1 billion versus 1.4 billion in the comparable period last year .

Speaker #5: Operating income includes net investment gains , which as historically been the case , drove most of the year over year variance . Net investment gains were 433 million for the quarter , compared to 918 million in the comparable period last year .

Speaker #5: Our new metric of adjusted operating income totaled 621 million for the quarter , up 121 million , or 24% , versus the same period last year .

Speaker #5: A quick reminder that adjusted operating income excludes net investment gains and amortization expense . We believe this metric will provide better insights on the recurring operating performance of our businesses .

Speaker #5: Insurance contributed 153 million of the adjusted operating income increase for the quarter , and 100 million . Year to date , due to improvements in underwriting results and increases in net investment income .

Speaker #5: The other segments were relatively flat compared to last year . For both periods , operating cash flows for the first nine months were 2.1 billion .

Speaker #5: Comprehensive income to shareholders was 793 million for the quarter , and 2 billion for the first nine months of this year . Turning now to our operating segments , starting with our Markel Insurance segment , results from our Markel Insurance segment now include underwriting and insurance activities , along with the results from our investments that are held by Markel Insurance subsidiaries .

Speaker #5: This change to a balance sheet view . Let it be clear what the after tax returns on our insurance capital are on an annual and five year average basis due to the inclusion of equity securities within our insurance capital ?

Speaker #5: We believe a five year average metric is a better gauge of long term performance . The average after tax return on equity for Markel Insurance for the five year period of 2020 through through 2024 was 12% .

Speaker #5: Underwriting gross written premiums were up 11% year over year for the quarter , and 4% year to date , driven by growth in our personal lines .

Speaker #5: General liability lines and our international lines . For the year and our reinsurance professional lines in the quarter . The increase in reinsurance professional lines was driven by the timing of two large contract renewals that occurred prior to the execution of the renewal rights deal .

Speaker #5: Premium volume for the quarter within our wholesale and specialty division was down 6% versus last year due to the exit of our U.S. risk-managed professional liability lines earlier this year, and down 1% excluding the 5% impact from these exited lines.

Speaker #5: Our international and programs and solutions divisions both had strong growth in underwriting premiums in the quarter, at 25% and 12%, respectively. Earned premium was up 5% for the quarter and 2% year to date due to increased growth in more recent quarters.

Speaker #5: Adjusted operating income for Markel Insurance was $428 million for the quarter , up from $276 million in the same quarter last year . The combined ratio for the quarter came in at just under 93% , compared to 97% last year .

Speaker #5: The four point improvement consisted of lower Cat activity , which drove three points of the difference , with lower losses from CPI contributing another point for the year .

Speaker #5: The combined ratio stands at 95% for both periods . The results from our run off global reinsurance division added two points to both our current year quarter to date and year to date combined ratios .

Speaker #5: Our international division continues to produce fantastic results for the year , with a year to date combined ratio of 84% . The quarter and year to date expense ratio of 36% is slightly higher than a year ago .

Speaker #5: Higher expenses were primarily driven by higher personnel costs , primarily within our international division , and increased third party professional fees and severance costs .

Speaker #5: Prior year loss development was consistent at six points . Favorable in both the quarter and year to date periods . In both years .

Speaker #5: For our 2025 year to date results , favorable favorable development across several product classes across the globe was partially offset by adverse development in our reinsurance casualty lines and in our discontinued Risk managed professional liability lines .

Speaker #5: Both of which were recognized during the first half of this year . Investment income within our insurance operations was up 10% for the quarter and 9% year to date , due to higher interest rates and volume of investments held within our fixed income portfolio .

Speaker #5: As a reminder , 96% of our fixed income portfolio is rated double A or better . Moving next to beyond our Markel Insurance segment and starting with the industrial segment , revenues were 1 billion , up 5% versus the same quarter one year ago , driven by increased industrial production activity and demand in the wind .

Speaker #5: Wind energy , construction and building products industries . Partially offset by softening demand in the auto industry . Adjusted operating income was 101 million for the quarter , versus 112 million in the same quarter a year ago , down 9% year over year , driven by softening demand in the auto industry and higher raw material and labor costs across several businesses .

Speaker #5: Next , within our consumer and other segment revenues and adjusted operating income within the consumer and other segment have a significant seasonal variability due to the timing of sales of ornamental plants , which are heaviest during the second quarter of the year .

Speaker #5: Revenues were $291 million, up 10% versus the same quarter a year ago. Revenue growth benefited from the acquisition of EP and higher sales volume of ornamental plants.

Speaker #5: Adjusted operating income was $17 million for the quarter versus break even in the prior year . The increase year over year was driven primarily by the contribution of EP and increases from operating leverage resulting from the higher sales of ornamental plants .

Speaker #5: Next , within our financial segment , revenues for the quarter were 162 million , up 16% year over year due to higher fronting fees and earned premium within our program and lender services .

Speaker #5: Products . Adjusted operating income was $61 million for the quarter , down 23% from the same period last year , driven by favorable loss development on the run off reinsurance contracts for Markel CatCo Re , which were recognized in the third quarter of 2020 for all of which was attributable to noncontrolling interests .

Speaker #5: Excluding that impact adjusted operating income across our other businesses was up notably in line with the revenue growth . Finally , regarding capital allocation for the year , we repurchased shares totaling totaling 344 million , reducing our share count to 12.6 million shares from 12.8 million at the end of last year .

Speaker #5: With that , let me pass it over to Simon to discuss more about Markel Insurance .

Speaker #6: Thank you . Bryan . Good morning everyone . It's great to be with you on the call today to discuss a solid set of results for Markel Insurance for the quarter with a combined ratio in the low 90s in GWP growth of 11% versus Q3 last year .

Speaker #6: This growth is mainly being driven by a high performing international and personal lines divisions where prior year strategic investments in new people , products and systems are paying off , where our performance is more challenged or market conditions are less favorable , we are concentrating on improving the portfolio and as such , growth is muted .

Speaker #6: Cycle management remains at the forefront of our minds , but we are taking advantage of areas where we have developed competitive advantage . The team at Markel Insurance couldn't be more aware that we need to demonstrate genuine progress to you .

Speaker #6: It is good to be started along that path . The coordinated set of recent actions are beginning to have an impact on the organization step by step .

Speaker #6: We're working toward achieving our full potential . Step one . The first big step we took began in earnest around two years ago when we began reshaping our portfolio with a particular focus on casualty and professional classes in the US .

Speaker #6: In both areas , we have made meaningful changes to tighten our risk appetite , as well as improving pricing and terms where we were unable to achieve the required improvements in specific areas .

Speaker #6: We made the decision to exit lines as a result , we've seen tangible benefits . Our year to date combined ratio within our recurring business stands .

Speaker #6: In the high 80s , this factors in two items versus our reported combined ratio . First , excluding the three and a half point impact from exited lines , the largest of which are our US and European risk managed professional lines , along with CPI .

Speaker #6: And second , a two point drag in the overall combined ratio from the Global Reinsurance Division . Results . We're now seeing improved and more consistent underwriting performance in the divisions where these changes were implemented .

Speaker #6: I remain excited by the sequential improvement . It's still early days , but we believe these early outcomes validate the tough decisions we made to set a stronger foundation of future growth .

Speaker #6: Step two, with the portfolio streamlined and greater discipline in place, our next big step began earlier this year, shifting our focus from simply pruning the portfolio and exiting unprofitable lines to actively pursuing profitable growth.

Speaker #6: Our strategy is based on a clear go to market structure , where we have created a series of distinct panels , each headed by a leader who has full responsibility and accountability for the performance of their unit .

Speaker #6: This structure pushes decision making closer to the customer and allows for greater speed and response time . Specific actions . We have taken are as follows .

Speaker #6: We have collapsed our matrix reporting structure in the US . We reorganized into four simple and distinct divisions . We removed reporting of state .

Speaker #6: We move reporting of state , national and Nephila into Markel Group . We aligned our financial reporting to the new structure so that we can clearly see where there is underperformance that needs to be addressed .

Speaker #6: We can also see where we are having success , enabling us to divert investments to these areas to continue to fuel profitable growth .

Speaker #6: We moved over 80% of the people that previously worked for the central functions into the newly created PNL . This provides transparency over costs for business owners and also ensures that the work of these individuals is fully aligned with business needs .

Speaker #6: And on our last earnings call , I announced the exit of global . We . Every single one of these changes were designed to simplify our business model and enhance our ability to provide market leading specialty insurance products to brokers and customers around the world .

Speaker #6: Beyond these organizational changes, we strengthened our margin of safety by increasing reserves, particularly in our reinsurance division and our risk-managed or large account U.S.

Speaker #6: No book . This continues Markel's tradition of conservative reserving , which protected our balance sheet through cycles of uncertainty . We've consistently held reserves that are more likely redundant than deficient , demonstrated through 20 consecutive years of favorable prior year loss , reserve releases .

Speaker #6: Step three . Now that we've made our way through the bulk of the necessary organizational changes , we are turning our focus to execution , including developing bottom up , customer focused business plans via new PNL owners for 2026 and beyond .

Speaker #6: I'm confident these plans will enhance the experience of our customers , which will in turn grow the business and ultimately increase our profitability .

Speaker #6: While we are still early in the game , the overall energy and execution I am witnessing across the business continues to be encouraging .

Speaker #6: First , let me share a story about our US personal lines business that illustrates the impact of the changes we have made as we reorganize the business into distinct panels .

Speaker #6: One business unit that stood out for the right reasons was our personal lines business based out of Wisconsin. This organization has been growing strongly over several years with excellent profitability.

Speaker #6: Jeff May runs the business and outlined a plan to overhaul the technology stack over the next two years . In our previous structure , this investment opportunity hadn't managed to rise sufficiently up the priority list .

Speaker #6: But now that Jeff sets the priorities for his business , the plan was very much on the table . We took the decision to go ahead with the implementation within days , and Jeff and his team are now implementing a system which will consolidate our position as the market leader in On's homeowners business in the US .

Speaker #6: With expectations to grow this business to over $1 billion a year in annual GWP. Second, there is a story about how we are doing more with less in our core.

Speaker #6: US wholesale and specialty business . After taking the helm in late April this year , Wendy has set about reorganizing her business . Wendy reduced the total number of regions from 8 to 4 , simplifying our go to market structure and creating the opportunity to reduce costs .

Speaker #6: Some tough decisions were made , particularly around people , but we're now operating the business at a lower salary base than before without impacting levels of service .

Speaker #6: The four regions have full personnel responsibility with an excellent line of sight into the financials , and so I expect this recent cost discipline to continue .

Speaker #6: Stories like this exist throughout Markel Insurance . The new structure helps bring them to the surface and enables us to do several things at once .

Speaker #6: If our business leaders have well thought out plans , we are ready and willing to support them . What will success look like as stories like this compound ?

Speaker #6: What can you as investors track to know that things are progressing early? Progress isn't always obvious right away in the numbers, especially in long-tail insurance.

Speaker #6: It will first show up in the way our people think . The speed at which we move and serve , and the trust and credibility we're restoring with our partners and our customers .

Speaker #6: Some of the signposts or leading indicators were monitoring include employee engagement scores , customer net promoter scores , growth in submission count , increase in our quote rate , improvement in our quote to bind ratio and growth in new business within our targeted areas .

Speaker #6: As these indicators start to move in the right direction , the financials should take care of themselves . The conference in San Diego last month , Wendy Houser , the president of our wholesale and Specialty division , said very pointedly to the press that we're back .

Speaker #6: Our leadership team is confident in the changes we've made . It will take time to show up , but with each passing day , the team is working together in new and better ways .

Speaker #6: I'm excited about our position in the marketplace , whether it is in our top quality international operations , our niche business units such as surety , personal lines or our improving core US wholesale and special division , we have plenty of runway to grow and to grow profitably .

Speaker #6: We'll continue to work hard to make that a reality. With that, I'll hand you back to Tom.

Speaker #4: Thank you Simon . And with that , we'll open the floor for your questions .

Speaker #3: We will now begin the question and answer session to ask a question . You may press star , followed by the number one on your touch tone phone .

Speaker #3: If you are using a speakerphone , please pick up your handset before pressing the keys to withdraw your question , please press star , then one again .

Speaker #3: At this time we will pause momentarily to assemble our roster . Your first question comes from the line of Andrew Kligerman of TD Cowen .

Speaker #3: Please go ahead .

Speaker #7: Thanks for taking my question and good morning . Good morning . To start in morning . And I'd like to start in the insurance division with the expense ratio at 36% , which is relatively high versus specialty peers .

Speaker #7: And then kind of contrast it with what you're doing in technology. Spend and how to make the company more efficient.

Speaker #7: Could you could you talk on the interaction of those two dynamics and where the where the expense ratio could go over the next few years ?

Speaker #4: Thank you, Andrew. I'll ask Brian to start off addressing that.

Speaker #5: Sure . Maybe say a couple things there . First of all , where we are this year , we're kind of right where we thought we would be for this year .

Speaker #5: If you if you mix in the fact that we've had some product exits , some contraction in a few spots where we needed to shore up the overall underwriting results , that does carry a little bit of a burden on the expense ratio .

Speaker #5: The other piece , I would say , is where we are growing . If you think about those classes , international lines in Europe , expansion in Asia , US surety , those lines are very , very profitable for us .

Speaker #5: But they do shift the mix between the loss ratio and the expense ratio that are added to the expense ratio overall. From an investment standpoint, we.

Speaker #5: Simon mentioned the investment in the personal line space. Now that we have the individual businesses, we have an investment portfolio that's out there.

Speaker #5: We're looking to make the investments that we need to to kind of shore up our results . Overall , while we're focused on expenses and managing those , and we expect to bring those down over time , we're really focused on the combined ratio and the overall profitability of the business .

Speaker #5: And in our return on equity, the new metric that we put out there, and that overall kind of capital return and the returns that we produce inside of insurance. Maybe the last thing I'll mention there is we talked about the exit of Global Re and that division.

Speaker #5: And while that division has poorly performed from a perspective and been a drag on the results , two points kind of in the quarter and year to date , that division does have a lower than kind of normalized expense ratio for us .

Speaker #5: So as that premium burns off at around a 28 expense ratio , that will be a little bit of a drag on the overall ratio expense ratio .

Speaker #5: As the earned premium remixes back to the insurance side . .

Speaker #6: And maybe , Brian , I might just add a couple of points on this . Andrew , as well as Simon . Look , I'm I'm obsessed with the combined ratio .

Speaker #6: That's the most important metric that we have overall . Brian talked about the mix between some of our other business units , which have been performing incredibly well the last few years , and the odd thing is there , mainly they've had a high expense ratio .

Speaker #6: Now , what I wouldn't say is that a high expense ratio leads to a great combined ratio that isn't that's not the point here , but what we do need to be very conscious of is as we look to the expense ratio and we look to reduce it , and we and we , we very much are focused on on that as a , as a , you know , a strategic imperative .

Speaker #6: We need to do that in areas where we're actually cutting costs out of the business , which are frictional costs . There are some costs here where they are genuine investments , like the personal lines thing .

Speaker #6: We need to do that in areas where reported heighten the expense ratio for a couple of years in that area . But in the long term , that creates a heck of a lot of scale potential within a business like personal lines where I'm really looking for the the rubber to hit the road is in these individual panels and looking at individuals who want to invest in the business .

Speaker #6: That case has to be rock solid , because anything which is just , you know , sort of fat within the organization , I think that's going to get highlighted a lot more than it has been in , in previous years .

Speaker #6: Now . And we're going to go after that . We're going to go after it hard . So the point I'll make is we have got to focus on the expense ratio .

Speaker #6: It is in the context of the most important metric that we have is the combined ratio . But we're looking to get rid of expenses that aren't additive to the business .

Speaker #6: But we're not going to stop investing in areas that I think has got a great potential to build a franchise over a period of time .

Speaker #6: So it might be a bit bumpy . Over 26 . And Brian spoke about Global Re . There , but believe me , we will be focused on that metric as we go through 26 and into 27 .

Speaker #6: It's an area where we do need to improve . .

Speaker #7: Very helpful . And then maybe just thinking about gross written premium , which was strong at 11% . And , you know , I mean , international has been , you know , just a really bright spot .

Speaker #7: But looking at us wholesale and specialty , I think Brian said ex the , the exit of the risk managed US risk management business , it was up about 5% .

Speaker #7: And then in programs and solutions we saw 17% increase . Could you give a little color on where you're seeing the successes in programs and us wholesale and specialty respectively ?

Speaker #5: Yeah , maybe maybe I'll start Andrew on the wholesale and specialty . So the reported result was down six five of that six points .

Speaker #5: We were down was the impact of the risk managed product line exit . So down one , excluding that relatively flat , what I would what I would say there is you think about the three products we write there professional casualty property casualty is up .

Speaker #5: What we're being very selective , but we're getting good rate on that business . You know low double digit rate on kind of primary higher than that on more excess lines .

Speaker #5: So the growth is not growth . And exposure . It's growth driven by rate property . We are trying to grow . But there's a little bit of challenge in the rate environment .

Speaker #5: There . Professional has been relatively holding flat . We've been growing a little bit in our our management liability lines and some of the commercial professional , but that is an area property and the professional space , where growth in the future is where we're targeting .

Speaker #6: Yeah . And obviously , let's talk about we'll talk about wholesale and specialty . First . You just mentioned the sort of the nuts and bolts of that .

Speaker #6: Brian , that I would say , Andrew , we've got to get to grips with the loss ratio situation in that business . That's what's been hurting us .

Speaker #6: That's why we've made those decisions to exit lines in the various areas . And and frankly , you know , casualty is a difficult class of business at the moment to get the price right .

Speaker #6: We can see that . So . Selective in terms of our risk appetite making the right decisions in terms of additional pricing . And those two bits and combination should get us to the combined ratio that work for us .

Speaker #6: But we're not we're certainly not putting our foot to the floor in the casualty area , even though the rating is pretty , pretty attractive in some respects .

Speaker #6: Just because the exposure there is equally is equally probably tricky in terms of where to place your chips in that particular area . Elsewhere in in wholesale and there's competition in in the professional and the property .

Speaker #6: We think that we've got a really good mousetrap in those two areas to attract business into Markel . The clarity of the new structure , I think , is paying dividends with our partners .

Speaker #6: The broker partners that are out there . I think that will continue to attract business back into Markel . That's within appetite and at the right price .

Speaker #6: Although there will be continued headwinds from the market conditions in those specialty . two areas . Programs and Yeah , solutions . Really nice business areas .

Speaker #6: There, it’s very discreet. I think we mentioned personal lines where we feel we've got probably a better product and a really good way of interacting with that particular area.

Speaker #6: We're also seeing a lot of growth and a lot of growth opportunity in the program space and business that's run by Jeff Lamb here.

Speaker #6: That is an area where it's clear that many of the large wholesale brokers are investing a heck of a lot of resource into those into that program space that provides opportunities to us .

Speaker #6: We are highly, highly selective in that space. But just the number of new opportunities that are coming through the desk is driving a degree of growth there.

Speaker #6: And we think we've picked some , some good programs to be on which are which are growing within the marketplace . And finally , I'd probably call out , you know , you know , the workers comp business and the surety business continue to be really solid businesses for us .

Speaker #6: And we think we've picked some , some good programs to be on which are which are growing within the marketplace . And finally , I'd probably call out , you know , you know , the workers comp business and the surety business continue to be really solid businesses

Speaker #6: within the both in the Markel Insurance world . We've now called them out that much more . But because they've got those singular leaders on top , they are able to , you know , focus on the customers and focus on the actual products that they're getting over the line there .

Speaker #6: And I think that additional degree of independence is allowing those businesses to grow . And I think that will continue over time . So program solutions , I think there's some specific market conditions which continue to help us .

Speaker #6: I think the new structure helps those guys in wholesale and specialty . It's loss ratio . First , alongside the combined ratio . And I think as that stabilizes as we go into next year , I think our position in the market will help us continue to grow in that particular area in areas that we think we can make profit in .

Speaker #5: Maybe on the international side , I'll add that's a place where we've been consciously investing in people , you know , some of the driver of the elevated expense ratio is the personnel costs in that division .

Speaker #5: You're starting to see the fruits of that coming through the top line with growth in kind of expanded territories in Asia and Europe , along with product expansion , where we've been rolling out casualty products to more geographic regions .

Speaker #5: We've invested in people in both of those spaces, seeing that start to come through the top-line growth more pronounced this quarter.

Speaker #7: Thanks for the detailed responses .

Speaker #3: For next question comes from the line of Andrew Anderson of Jefferies . Please go ahead .

Speaker #8: Hey , good morning . Some some good favorable reserve development overall . If I were to maybe just pick at at one thing and a question here is I think you called out some adverse on international professional liability .

Speaker #8: Can you maybe just expand on that? Maybe what accident years? And the reason I ask is I think you were releasing from International Professional Liability in 2023 and 2024.

Speaker #5: Yes , that is correct . We did have a couple large claims come in and large claims . I've talking , you know , the 510 million ish type claims from a net standpoint to us , while we had adverse development , there , it's nothing to the range of the things we've been talking about the past few years .

Speaker #5: So it's a fairly modest amount . It just happened to be the driver in the period . We feel really good about overall , that book and the profitability in terms of the periods .

Speaker #5: You know , it's more it's not in the current year . It's more the couple back prior years than it is the current year or in years that are more deep into the tail .

Speaker #8: Gotcha . Thank you . And then just thinking about capital management buyback has been maybe a little bit lighter the last two quarters than I would have otherwise thought .

Speaker #8: So I would love to just hear your thoughts . Tom , on kind of capital deployment priorities , whether it's buyback and I think there might have been an article earlier this quarter just about insurance , M&A , perhaps being back on the table and maybe that was misconstrued and it was more of a comment around teams and technology for insurance M&A .

Speaker #8: But we'd just love to hear your overall thoughts there .

Speaker #4: Well , I think you answered the second part of the question when you asked it . So yeah , I think it was misconstrued .

Speaker #4: And we have successfully added teams and talent over the years , and we look to continue to do that . The first important principle is actions speak louder than words .

Speaker #4: The number one use of capital and capital deployment . We've had for the last couple of years has been buying back our own shares , we're price sensitive when we do so .

Speaker #4: Now . Fortunately , market seems to be acknowledging and understanding and appreciating a bit the changes we've we've made here . And you look year over year , the stock price was up at a given point in time 15 to 20% compared to what it had been last year .

Speaker #4: So we we respond to that . We're sensitive to that . We continue to buy stock through our program on a , on a on a daily basis .

Speaker #4: And you can expect us to continue to do that . And you can expect us to be very rational and buy more of the price is low , buy less as the price moves up and our and our largest single capital allocation choice has been to to repurchase shares in rough , rough numbers over the course of the last five years .

Speaker #4: The share count at Markel at its highest , was just a bit shy of 14 million shares , and it's now down to 12.6 .

Speaker #4: So in rough numbers , that's 10% of the shares that have been repurchased . The next 10% reduction , I don't think that will take five years , especially at these kind of prices .

Speaker #4: So that might happen in 3 to 5 years . So 110% tranche is done . Another 10% tranche under way . So we'll be buying back stock .

Speaker #8: Thank you .

Speaker #3: Your next question comes from the line of Mark Hughes of Truist . Please go ahead .

Speaker #9: Yeah . Thank you . Good morning . When we think about international versus the US , you've talked about some of the expense versus loss ratio dynamics .

Speaker #9: Is the combined ratio opportunity better internationally . Is there just a better loss environment .

Speaker #4: Before before Simon answers that question , we've talked about international the US . First thing I thought about was the Ryder Cup . And the US needs to do better .

Speaker #4: So we're working on that .

Speaker #6: I've been thinking about the Ryder Cup lots lately , but not really speaking about it . So there we are . Thank you for that reference , Tom .

Speaker #6: That's that's excellent . You know , I think there are plenty of places in the US where you can go after business from a loss ratio perspective , which is , which is very , very attractive .

Speaker #6: They typically are in the I would say lower exposed areas , but also almost lower premium type areas . They're kind of the small micro business .

Speaker #6: We at international have been building that side of our business for probably 10 to 12 years , and the loss ratio , let me tell you back in 1617 and international wasn't that great .

Speaker #6: But I think as we scaled up those retail operations that we've got in places like Europe , Canada , the UK regions and increasingly in our Asia Pacific business , the weighting of the business , which is that small micro business is really has grown within within that division .

Speaker #6: And we've seen the loss ratio come down consistently as a result . Quite a lot of the business that we're backing out of our London operations , I mean , people think about London as kind of large ticket volatile business .

Speaker #6: Well, quite a lot of the business that we back there is delegated authority business, where the ultimate customer is small and micro.

Speaker #6: So there's a very like heavy focus in our international business at the small and micro end of the risk area . Now that has two dynamics .

Speaker #6: One is typically a relatively low loss ratio , but it does go alongside that higher expense ratio . And frankly , I don't mind paying a little bit more to access .

Speaker #6: And service business , which is going to consistently perform at a lower loss ratio . I think that's a healthy kind of balance that we've got within the business .

Speaker #6: We do , of course , have larger ticket risks as well to to look at in the in the energy space , for example , in some of the marine risks .

Speaker #6: But by and large , we've got a relatively small micro focus with our international operations . And we've been really pleased with that .

Speaker #6: That's probably been lacking a little bit in some of our in the US portfolio as a whole . So we've been in the , the mid-market there and in recent years , and we've had poor results actually , in many of the areas where we've gone into the very large risk segment , things like the US large Ticket no is a perfect example of where we've gone down that route .

Speaker #6: So I do think over time , one of the things I'd like to bring with increased focus on technology , some of the teams of people that we're going to be bringing in in those programs and solutions businesses will be to go after that small and micro business within the US to an increasing level , and that will , over time , I think , bring down the loss ratio to a degree , you know , sort of maybe won't be exactly in line with international .

Speaker #6: But I do think there's a ton of opportunity in the US to go after . Maybe it's not just been a not been a huge focus of what we have been doing , but it will be a focus of what we'll be doing in the future and the investments that we'll be making .

Speaker #4: Are at risk of answering a different question than what you asked . My colleagues cautioned me on this all the time , because this is not going to help you model anything better for or make a quantitative point , but it's a qualitative point .

Speaker #4: That really drives the results over time . So this exact discussion is something that Simon and I actually talked about at some length when the two of us , along with some other colleagues , walked 130 miles last year from Pittsburgh , Pennsylvania , to Cumberland , Maryland , on the Great Allegheny Passage , and one of the things we talked about was , I mean , obviously , insurance is a business where it's never going to be perfect and you're always going to have losses .

Speaker #4: But what does it look like to have a loss ? What is the loss mean ? What is a way in which you can be compensated fairly for the size and scale of the losses you're taking ?

Speaker #4: And what should your overall profile be to understand and absorb the losses that are just part and parcel of this business ? So that effort has been underway for for a while .

Speaker #4: There have been some very thoughtful work done on where we should be and where we shouldn't be . And you're starting to see what I would call the green shoot of this quarter , where that's starting to pay off .

Speaker #4: But we look forward to green shoots coming up in the years to come . But I can assure you , a lot of thought and work and thoughtfulness has gone into the the way we approach the business .

Speaker #9: Appreciate that perspective . Curious to get your thoughts . If looks like storm season , at least domestically , is going to end up being pretty quiet , what do you think that means for property in 2026 ?

Speaker #4: Well , it's the old saying goes what you see depends on where you stand . And there's some people in various parts of the world right now that would not think that this was a benign storm season .

Speaker #4: So our thoughts and prayers are with them , that that's real damage . And one of the things we hang our hat on and we're proud of in this business is we help people get back on their feet when they've experienced either sudden and traumatic loss or gradual losses over time .

Speaker #4: Clearly , again , I think you've answered cat losses were lower this year than than what had been expected . And that that tends to put pressure on rates .

Speaker #4: The good news about Markel writ large is that we've spread a business . So we are not a cat dependent or or exclusively or even majority property oriented company .

Speaker #4: So this is the normal course of business.

Speaker #6: Yeah . And I'll pick up the exact point there . Tom , if I look at the portfolio overall property plays a relatively small a relatively small part of our overall offering .

Speaker #6: We're more of a casualty , professional lines and then sort of nuanced specialties that go alongside it . So , so probably relatively small .

Speaker #6: I do think , you know , you've you've seen insurance cycles before . If you look at the specific cycle within within property , there's going to be pressure on reinsurance .

Speaker #6: You know , as a buyer of reinsurance that should probably benefit us going into next season , but that will have a knock on in the primary markets where particularly in the .

Space, maybe a little bit higher than that, if you include the Lloyd's Market in as well, my sense is that it stays at that level and probably continues to edge up a little bit, just because of the, the sophistication of what we see from the wholesale Brokers and and and Retail Brokers trying to get into that space as well. So I like the fact that we play ens. We can move the rate. Um, as as we need to, we can change terms and conditions. I also like the fact that there is um a pull factor into that Marketplace due to the the strength of the

Of the wholesale Marketplace is just materially different than it was a decade ago.

And the spirit of the writer cup. I was trying to think of some way to Heckle you all. But, uh, facts up today. So I guess I'll just, uh,

Uh, not, uh, not do that. So, appreciate the, uh, good answers. Have a great day. Thank you. Thank you.

Your next question comes from the line of true. Essence of peon Capital Market management. Please go ahead.

Fronting operations which are are sizable. Um, 1 is a housekeeping item and the other 1's, a, a more general question. Um, so first on the housekeeping item, uh, I was I was surprised that Markel Insurance.

Um, its fronting operations were so large. Um, as opposed to State National, is that mainly, um, business that's flowing through to NAFILA?

You got it drew? That's right. So we we buy for cated, kind of where the fronting is reported. So what sits in our programs and solutions division in the insurance segment, that is the business that we front on our Bermuda paper for, um, the filler. And that's the only thing that sits in there today, in that division, the State national business, the the traditional program Services business that sits in the financial services segment

Okay, thank you for that. Um, and for more general question, um, you know, a lot of alternative capital is seem to have flown into the ens market and there's a lot of new fronting carriers out there that

If clearly taken some share and I'm curious, are these new entrants?

Gaining share, mainly by relaxing collateral and capital requirements. And

If so, how how do you ensure the state and National doesn't relax its standards and uh and environment like that. Thank you. Yeah. Yeah. Thank you drew. It's, it's an excellent question. And clearly State and National was at the Forefront in the, the leader at really the Pioneer in developing the market. And when you're the leader in the first actor, you can kind of set terms and conditions in the, the Define the field and and have it as you like it in in every business in the world that I've ever observed in my lifetime. When somebody does, well, competition appears, uh, and the terms and conditions, uh, change and said in the, and evolve over time and fronting and State national work is is no different whatsoever. The good news is the culture, the long-term discipline, the return on Capital discipline. Uh, that is consistent with everything else. We do about Mark out, um, applies at at State national as well and they, they compete in the world in which they live, but they do

So with adherence to standards and values and discipline, that's consistent for the, for the rest of the organization. So, uh, we don't get to choose what the external environment is like, we get to choose the discipline, we have to face it. Um and we got a long history around here of doing, exactly that across the organization, no matter where, uh, you're talking about.

Yeah, and I, I, I appreciate that. And, um, I'm glad to hear it, but just, uh, just just quickly, as a as a follow-up, is it, are you seeing the, the new entrance, um, compete by relaxing collateral, and capital requirements? Or are they, mainly focused on pricing?

Uh, well, I think that, I mean, that that's really all the way of saying pricing. So it's, it's sort of a, a net price. Where do you define it? Uh, as as low as lower collateral. What, what have you? So it's it's price is the answer.

Thank you.

Your next question comes from the line of Andrew cler of TD Cohen. Please go ahead

Okay, thank you, uh, for taking my question again. Um, just following up on the prior question about fronting. Um, in in both segments, actually, in, uh, in insurance,

Uh, it was up 50 51%. Um,

1.8 billion in the last.

last 9 months and I'm kind of wondering, you know, what was driving that what what kind of gave you that upside and and and same thing in the financial segment where where operating revenues were up, uh, 18% in the 9 months to 513 million, I, I assume a big part of that was fronting and, uh, you know, maybe you could give give a little color on where you're seeing that and, you know, just be outlooks and in both segments for the fronting business

Environment. That that book is going to perform very well on the front end side and it's going to perform very well. Um, considering where we are this far in the year from an investor standpoint, with the low level of cat losses that are out there. So the vast vast majority of that is property cat business. Um, that's that's fronted in the program space. So, um, with the rate environment growth aspirations in the filler, that's really what drives the fronting revenues that we see in the programs and solutions division within within, um, program Services. It's kind of a mixture, you know, they they signed on some new programs, um, you know, as they naturally do and brought in some new business and then you just got underlying growth in their kind of wider range of programs. They're hitting kind of all product classes. Um, it's a, it's a pretty varied and mixed set of business there across property casualty, um, workers comp lines that they front and they just got natural growth coming from their producers, that are that are

Partnering with them to front business.

So it it sounds like in both segments, these Trends are are sustainable into 2026.

Yeah, I would say you're looking at, you know, the property Market is certainly going to be a bigger driver on the the the vision and then the filler fronting. Whereas it's going to be more broader Insurance Trends and our ability to kind of um, you know, add on new programs. In in the program space you can have chunky things come in and out you sign new agreements, you know, people either move on or if you're fronting for them because they're they've been downgraded from a rating standpoint. They cure that that program goes away so there can be some chunky movements from time to time in that program, Services business.

In both directions.

Okay. And and then in the industrial segment, um, you know there there was little pressure, I think, Brian you you you called out um, soft Auto demand and higher materials costs, uh, in the auto area despite despite uh, good performance in the other segments. Uh, do do you see this continuing to, uh, to play out over the next year or so?

Hey Andrew, it's Tom. Yeah, I would describe the this quarter and really this 9 months, it's just normal oscillation of the business. So we had some things that were white hot last year, that weren't quite as white hot this year. You have the Tariff noise and the general economic environment. So there's there's there's puts and takes, uh, across across the line. Um, and I think that's normal for this collection of businesses.

Okay, thanks a lot.

Again, if you have a question please press star, followed by the number 1.

This concludes our question and answer session, I would like to turn the conference back over to Tom gayner for any closing remarks. Please go ahead.

Thank you all for joining us. That concludes my closing remarks. See you next quarter. Thank you.

The conference call has now concluded. Thank you for attending today's presentation. You may disconnect