Markel Group Inc.

Good morning and welcome to the Markel Corporation fourth quarter 2020 conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch tone phone. To withdraw from the question queue, please press star then two. During the call today, we may make forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. 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 under the captions risk factors, and safe harbor and cautionary statements in our most recent annual report on Form 10-K and quarterly report on Form 10-Q and earnings release filed on Form 8-K. We may also discuss certain non-GAAP financial measures in the call today. You may find the most directly comparable GAAP measures and a reconciliation to GAAP for these measures in the earnings press release, which can be found on our website at www.markell.com. in the investor relations section. Please note this event is being recorded. I would now like to turn the conference over to Tom Gaynor, Co-Chief Executive Officer. Please go ahead.

Thank you and good morning, everyone. And thank you is the key and operative word to start off this message. The 18,000 employees of Markel turned in a wonderful performance in every dimension in 2020. And I just want to start off the call on behalf of Richie and Jeremy and everybody. thanking the associates of Markel for their work throughout 2020. It was not an easy year. Markel's a holding company, and I think the thing that we hold most dear are our ideas and our values of taking care of our customers and our associates. We think that creates a win-win-win architecture where our associates win by being part of Markel, our customers win by doing business with us, and our shareholders win because when we do those first two things, we produce good returns on capital. and we think that is the ultimate form of sustainability. All three engines of Markel fired in 2020 and provided positive thrust, but it might not have seemed that way at various points of the year, especially early on in the early days of the pandemic. The great philosopher Mike Tyson said, everybody has a plan until they get punched in the mouth. Well, we got punched in the mouth in the early days of the pandemic, but our plan is to build Markel in such a way that we can take We can get in the ring with Mike Jason. We can take the punch in the mouth and keep on fighting. That's 2020 in a nutshell. Markel is a resilience machine. Our three engines withstood the blows from the early days of 2020, and our 18,000-plus associates adapted and figured out how to recalibrate and accomplish our mission of taking care of our customers, our associates, and our shareholders. I'm pleased this morning now to spend a little time with you, reviewing the results. And with that, I'm going to turn it over first to Jeremy Noble, our CFO, to discuss the numbers. Rich, you've already talked about our insurance operations. I'll hop back on to talk about investments and ventures, and then we'll open it up for your questions. With that, Jeremy, thank you.

Thank you, Tom, and good morning, everyone. Following a year that reflected significant volatility and widespread impacts attributed to the COVID-19 pandemic, we are proud of the results we delivered across all three of our engines in 2020, which demonstrate the strength and resilience of our businesses. Our underwriting operations delivered an underwriting profit despite elevated levels of catastrophic events and significant losses attributable to the global pandemic, as we benefited from achieving meaningful rate increases and growth in new business. Our Markel Ventures operations saw strong top and bottom line performance amid challenging economic conditions, and we achieved solid investment returns despite volatile market conditions and historically low interest rates. Looking at our operating results, gross written premiums were $7.2 billion for the year, compared to $6.4 billion in 2019, an increase of 11%. This increase was attributable to our insurance segment, which reported gross written premiums of $6 billion an increase of 13% compared to a year ago. This premium growth is attributable to both new business and improved pricing within our professional liability and general liability product lines, as well as our personal lines and marine and energy product lines. Gross written premiums with our reinsurance segment were consistent with 2019 at roughly $1.1 billion. Year-to-date retention of gross written premiums was 83% in 2020, which is down one point from 84% a year ago. Earned premiums increased 11% to $5.6 billion in 2020, primarily due to higher written premium volume in our insurance segment. Our consolidated combined ratio for 2020 was a 98 compared to a 94 last year. For the fourth quarter of 2020, we reported an 89 combined ratio compared to a 93 a year ago. Our full year 2020 combined ratio included 360 million, or six points, of underwriting losses attributed to the COVID-19 and 169 million or three points attributed to natural catastrophes. This compares to $100 million or two points of catastrophe losses in 2019. Excluding the impacts of COVID-19 and natural catastrophes, our combined ratio for 2020 improved due to a three-point improvement in our attritional loss ratio and a one-point reduction in our expense ratio arising from improved performance within our insurance segment in 2020 compared to 2019. With regards to prior year loss reserve development, consistent with our reserving philosophy, prior year loss reserves developed favorably by $606 million in 2020 compared to $535 million in 2019. Turning to our investment results, net investment gains included in net income were $618 million in 2020 compared to $1.6 billion in 2019. and were primarily attributable to an increase in the fair value of equity securities, which experienced significant market volatility during the year. The impact of significant declines in the fair value of our equity portfolio in the first quarter, driven by unfavorable market value movements resulting from the onset of the pandemic, were more than offset by increases in the fair value of our equity portfolio over the last three quarters of 2020. As I mentioned in previous calls, Given our long-term focus, variability in the timing of investment gains and losses is to be expected, and we may continue to see volatility in the equity markets due in part to economic uncertainty caused by the pandemic. With regards to net investment income, we reported $372 million in 2020 compared to $452 million last year. The decline is largely due to lower short-term interest rates as well as lower holdings and lower yields on fixed maturity securities in 2020. Net unrealized investment gains increased $353 million net of taxes during 2020, reflecting an increase in the fair value of our fixed maturity portfolio, resulting from declines in interest rates. Now I'll cover the results of our Markel Ventures segment. Revenues from Markel Ventures increased to $2.8 billion for 2020, compared to $2.1 billion last year. This increase reflects the contribution of revenues from our recent acquisition of Lansing Building Products, which we completed in late April, and VSC Fire and Security, which closed during the fourth quarter of 2019. Excluding the contributions of Lansing and VSC, operating revenues within our Markel Ventures operations decreased compared to 2019 as a result of lower sales volumes attributed to the economic and social disruption caused by the pandemic. EBITDA for Markel Ventures was $367 million for 2020 compared to $264 million a year ago. reflecting the contributions of Lansing and VSC, as well as growth and improved operating results at certain of our businesses. Looking at our consolidated results for the year, our effective tax rate for 2020 was 17% compared to 21% in 2019. The lower effective tax rate in 2020 is primarily attributable to a tax benefit that was recognized in 2020 for accumulated losses on certain investments we sold. We reported net income to common shareholders of $798 million for 2020 compared to net income to common shareholders of $1.8 billion a year ago. Comprehensive income to shareholders for 2020 was $1.2 billion compared to $2.1 billion a year ago. Finally, I'll make a few comments on cash flow as capital and our balance sheet. Net cash provided by operating activities was $1.7 billion for 2020. compared to $1.3 billion for 2019. Operating cash flows for 2020 reflected higher premium collections as we've seen strong growth in our insurance segment over the past several quarters, as well as greater cash flows for Markel Ventures given increased earnings. Invested assets of the holding company were $4.1 billion at the end of December, compared to $4 billion at the end of 2019. The increase in holding company invested assets was due in part to the proceeds from our May preferred shares offering offset by funds used to acquire Lansing earlier in the year. Total shareholder's equity stood at $12.8 billion at the end of December, compared to $11.1 billion at the end of 2019. We ended the year with a very strong balance sheet. We are well positioned to be opportunistic around deploying capital, including to support growth in our insurance operations, given the attractive opportunities we are seeing in the specialty insurance marketplace. With that, I'll turn it over to Richie to talk more about our insurance businesses.