Markel Corporation Q2 FY2025 earnings call

• Insurance Business Improvements: Appointed Simon Wilson as Markel Insurance CEO. Simplified organizational structure, combined Insurance and Reinsurance segments into 4 operating divisions. Sold Global Reinsurance renewal rights and placed in runoff. Simplified US Wholesale and Specialty operations. Increased loss estimates/reserves in discontinued U.S. and European risk-managed D&O products.
• Ventures Performance: Revenues/operating income growth from EPI (education stability) and Valor (construction erosion control).
• Investments Strategy: Public equity portfolio has cumulative unrealized gain of $8.3B. Actively manage fixed income portfolio to match loss reserves. Redeemed $600M preferred stock to avoid higher coupon reset.

Insurance Segment

• Gross Written Premiums: Down 2% Q2, up 1% YTD. Global Reinsurance down 26% Q2 due to large contract renewal timing; US Wholesale and Specialty down 5% from exiting U.S. risk-managed D&O. Programs and Solutions up 8% (personal lines growth); International up 5% (multiple product lines).
• Net Earned Premium: Up 3% Q2, 1% YTD. Combined ratio 96.9% Q2 vs 93.8% Y/Y (impacted by discontinued products and Global Reinsurance). Excluding those, combined ratio in line with long-term targets. Accident year loss ratio 64.5% Q2 vs 66.6% Y/Y. Expense ratio 36.3% Q2 vs 34.5% Y/Y.

Ventures Segment

• Revenues: YTD $2.7B vs $2.6B Y/Y. Operating Income: $310M vs $281M Y/Y. Driven by EPI (education placement contracts stability) and Valor (construction markets with erosion control growth), partially offset by transportation declines.

Investments Segment

• Operating Income: $822M Q2 vs $100M Y/Y. Equity portfolio returned 5.4% Q2 with $597M MTM gains. Net Investment Income: $228M Q2 vs $220M Y/Y. Fixed income book yield 3.5%, short-term investments 3.9%. Foreign currency net loss $192M Q2.

• Insurance actions expected accretive to 2025-2026 results but pressure GWP growth short-term.
• Expect improved attritional combined ratio in back half of 2025 and continued improvement in 2026.
• Ventures to navigate construction cyclicality, leveraging erosion control/education growth.

• Insurance: Adverse development in discontinued D&O, Global Reinsurance, CPI; short-term GWP impact from underwriting actions.
• Market: Equity portfolio MTM fluctuations; foreign currency exchange rate impacts.
• Operational: Construction cyclicality affecting Ventures; medical inflation pressure in workers' comp.

Q: Reinsurance runoff capital and proceeds A: Capital will diminish as business runs off, investment income continues. Proceeds from renewal rights not disclosed, but flexibility in reinvestment Q: Programs and Solutions MGA business A: ~1/3 of premium from delegated underwriting programs, performed well, long-term focus Q: Workers' comp line and medical inflation A: Gradual takedowns, monitoring medical inflation, book profitable Q: Ventures construction services environment A: Business complicated, navigating uncertainty, transportation offset Q: Risk-managed D&O adverse development A: Actuaries saw severity/frequency exceed expectations, management added margin of safety, placed in runoff Q: Reinsurance third-party review A: Same third party reviewed reinsurance book, management added prudency for runoff