Markel Group Inc.

Good morning and welcome to the Markel Corporation second quarter 2021 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To withdraw your question, 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 Statement in our most recent annual report on Form 10-K and quarterly report on Form 10-Q. We may also discuss certain non-GAAP financial measures in the call today. You may find the most directly comparable GAAP measures and a reconciliation to GAAP for these measures in our most recent Form 10-Q, which can be found on our website at www.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.

Good morning. Thank you. Welcome to the Markel Corporation second quarter 2021 earnings call. I'm joined this morning by my co-CEO, Richie Witt, and our CFO, Jeremy Noble. Our goal, as always, is to provide you with some insights on how things are going here at Markel and and to answer any questions you have about your business. I'm especially pleased to offer today's report. I've now been at Markel for 30 and a half years. That means it's quarter number 122. Frankly, some quarters are better than others, and this is one of those quarters that's better. As such, it's fun to be able to share this report with you. The headline is that all three engines of Markel performed well and provided great thrust in the first half of 2021. The even better news is that none of the engines redlined to get there. People are working hard and the financial outcomes reflect their excellent as well as hard work. But these are the sorts of results that Markel can and should produce over long periods of time. We've got an insurance business producing solid underwriting profits and growing at the same time. We've got a collection of unique and wonderful businesses in our Markel Ventures operations that produced excellent financial results, and they're growing. And we've got an investment operation that protects the financial underpinning of Markel and earned strong financial results at the same time. These outcomes flow directly from the underlying values held by the people of Markel. As an organization, we are dedicated to serving our customers, our fellow associates, and our shareholders who provide us with the capital to operate this business. Our structure, as we continue to work to build one of the world's great companies, is truly win, win, win. And we're delighted to share the first half report card with you and the good marks on all the subjects. We know that winning over time is a long-term game. One quarter wins. and one half of a year do not begin to describe or justify what we are trying to do. But in order to win a national championship, you do have to win some individual games along the way. This quarter and the first half are just a few games. We know that we have and will continue to lose a few games along the way, but the long-term results should not get us relegated. More importantly, we're excited about our prospects and the actions we've taken as managers to to improve the likelihood that we'll continue to produce excellent results over time. Thank you for your ongoing support and confidence as we've done so. We appreciate that more than you can imagine, and we look forward to your thoughtful questions. At this point, I'm going to turn the call over to Jeremy, who will review the financial results from the first half. Richard will then discuss our insurance operations, and then I'll come back with a few comments on our ventures and investment engines. Following that, we will open the floor for questions. Jeremy?

Thank you, Tom, and good morning, everyone. As Tom referenced, we are halfway through the year and are very pleased with the outstanding performance across each of our three operating engines, as our insurance investments and ventures operations each contributed meaningfully to our efforts to build shareholder value. Looking at our underwriting results, gross written premiums were $4.3 billion for the first half of 2021, compared to $3.7 billion in 2020, an increase of 15%. Our increased premium volume reflects both strong growth in new business as well as ongoing favorable pricing trends across most of our product lines, most prominently within our professional liability and general liability product lines in both our insurance and reinsurance segments. Retention of gross written premiums was 85% for the first half of 2021, which is up one point from the same period last year, primarily driven by changes in the mix of business within our reinsurance segments. Earned premiums increased 14% to $3.1 billion in the first half of 2021 versus the same period last year, primarily due to higher written premium volume within our professional liability and general liability product lines. Our consolidated combined ratio for the first half of 2021 was a 90, which included $68 million or two points of losses on winter storm urine. This compares to a 103 combined ratio for the same period last year, which included 12 points of losses from COVID-19. Excluding the loss impacts of winter storm URI and COVID-19 in both years, our consolidated combined ratio for the first half of 2021 was an 88 compared to a 91 for the same period of 2020. This improvement reflects a four-point improvement in our attritional loss ratio and a one-and-a-half-point improvement in our expense ratio, which were partially offset by a lower benefit from prior year loss reserve releases. With regards to prior year loss reserve development, prior year loss reserves developed favorably by $226 million in the first half of 2021, compared to $268 million in the first half of 2020. Turning to our investment results, net investment gains included in net income were $1.2 billion in the first half of 2021, and were primarily attributable to an increase in the fair value of our equity portfolio, driven by favorable market value movements. This compares to net investment losses of $770 million in the first half of 2020, which reflected the impact of significant declines in the fair value of our equity portfolio in the first quarter of 2020, driven by the unfavorable market value movements resulting from the onset of the pandemic, followed by a partial recovery in the second quarter of 2020. As I mentioned in prior calls, given our long-term focus, variability in the timing of investment gains and losses is to be expected. With regards to net investment income, we reported $193 million in the first half of 2021, compared to $184 million in the same period last year. Investment income continues to be impacted by the low interest rate environment we currently face. Net unrealized investment gains decreased $162 million net of taxes during the first half of 2021, reflecting a decline in the fair value of our fixed maturity portfolio, resulting from an overall increase in the interest rates since the end of the year. Now I'll cover the results for our Markel Ventures segment. Revenues from Markel Ventures increased to $1.8 billion for the first half of 2021, compared to $1.2 billion for the comparable period a year ago. The increase reflects a more significant contribution of revenues from Lansing Building Products, which was acquired in April of 2020. Additionally, operating revenues increased across our consumer and building products businesses, equipment manufacturing businesses, and transportation-related businesses, due in part to lower sales volumes at most of these businesses in 2020 as a result of the economic and social disruption caused by the pandemic, as well as further increases in demand within our consumer and building products businesses, reflecting increases in consumer spending. EBITDA for Markel Ventures was $220 million for the first half of 2021, compared to $173 million for the same period last year. The year-over-year increase is attributed to increased sales volumes and a more significant contribution from Lansing. Looking at our consolidated results for the first half of the year, our effective tax rate was at 21% in both 2021 and 2020. We reported net income to common shareholders of $1.3 billion this year compared to a net loss to common shareholders of $484 million last year. And comprehensive income to shareholders for the first half of this year was $1.2 billion last year. compared to a comprehensive loss to shareholders of 260 million in the first half a year ago. Finally, I'll make a few comments on cash flows, capital, and our balance sheet. Net cash provided by operating activities was $813 million for the first half of 2021, compared to $489 million for the same period last year. Operating cash flows in the first half of this year reflected the impact of higher premium volume in our insurance segment. Invested assets of the holding company were $4.9 billion at June 30th, compared to $4.1 billion at the end of the year. The increase reflects our May issuance of $600 million of 31-year unsecured senior notes with a coupon of 3.45%, the proceeds of which will be used to retire $350 million of notes to mature next July, with the remainder being available for general corporate purposes. Total shareholders' equity stood at $14 billion at the end of June. up 9% compared to $12.8 billion at the end of the year. During the first half of 2021, we repurchased 51,000 common shares of our stock under our outstanding share repurchase program. Overall, a great set of numbers in each of our engines through the first six months. However, our attention has already turned to the back half of the year as we focus on executing against our business plans. With that, I'll turn it over to Richie to talk more about our insurance businesses.