Markel Group Inc.

Good morning and welcome to the Martel Corporation fourth 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 in our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including under the captions risk factors and safe harbor and cautionary statements. We may also discuss certain non-GAAP financial measures in the call today. You may find the most directly comparable gap measures and a reconciliation to gap for these measures in the earnings press release, which can be found on our website at www.markel.com in the For Investors 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 and thank you. This is indeed Tom Gaynor. I'm here with our co-CEO, Richie Witt. and our CFO, Jeremy Noble. It's my pleasure to welcome you to our call today. This call is a long-standing tradition with one simple goal. We view our partnership with our long-term shareholders as a critical element in how we manage Markel on a day-to-day basis. We need you as partners to achieve our long-term goal of building one of the world's great companies. As such, each quarter, following the release of our quarterly financial information, we connect on the phone for just a bit provide you with an update on our financial performance and say a few words about our plans and dreams for the next lap around the track. We deeply appreciate our long-term shareholder partners. We could not run Markel in the way we do without your support. Thank you for that. As always, the goal today is to keep you fully informed as partners in the business. To do so, Jeremy will start off by recapping the 2021 financial performance. Richie will then address the conditions and performance of our insurance engine. I'll finish up with some commentary on our ventures and investment engines, and then we will take your questions. Fortunately, this call is as fun as it gets. All three engines of Markel provided full thrust during 2021, and we're optimistic about our prospects in the coming year. The beauty of our three-engine architecture at Markel is that it creates resilience and durability to sustain and build the company over time. Any one engine can power us forward, but the forward pace picks up a bunch when all three engines fire at the same time. 2021 was such a year. We designed the three-engine approach in order to be able to make progress through thick and thin. That said, it's more fun to look at the numbers when they are thick. With that, I'll turn it over to Jeremy to give you some dimensions of the thickness.

Thank you, Tom, and good morning, everyone. Simply put, 2021 was a wonderful year for Markel, as all three engines, insurance, investments, and Markel Ventures set records and contributed meaningfully towards our efforts to build shareholder value. Total revenues were $12.8 billion, and we served more customers than we ever have before. Starting off with our underwriting operations, gross written premiums were $8.5 billion for the year. compared to $7.2 billion in 2020, an increase of 19%, and earned premiums increased 16% to $6.5 billion in 2021. 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 and both our insurance and reinsurance segments. Retention of gross written premiums was 84% in 2021, which is up one point from last year. Our consolidated combined ratio for 2021 was a 90, which included $195 million, or three points, of losses on natural catastrophes, including Hurricane Ida, the floods in Europe, and Winter Storm Yuri. This compares to a combined ratio of a 98 for 2020, which included $358 million, or six points, of losses from COVID-19, and $172 million, or three points, of losses from natural catastrophes. Excluding the loss impacts of catastrophes and COVID-19 in both years, our consolidated combined ratio for 2021 was an 87 compared to an 88 for 2020. This improvement reflects a nearly four-point improvement in our attritional loss ratio, given the benefit of a favorable pricing environment and the impact of underwriting actions taken to enhance our profitability. The impact of these improvements in the combined ratio was largely offset by less favorable prior year development on loss reserves, which totaled $480 million in 2021 compared to $606 million in 2020. Our expense ratio continues to improve given the benefit of higher net earned premiums and increased efficiency. Turning to our investment results, net investment gains included in net income were just under $2 billion in 2021 compared to $618 million in 2020 In both periods, net investment gains were primarily attributable to an increase in the fair value of our equity portfolio, driven by favorable market value movements. As I've 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 $375 million for 2021 compared to $372 million last year. Investment income continues to be impacted by the low interest rate environment we currently face. We continue to be diligent with regards to maintaining a high-quality fixed income portfolio, as demonstrated by our average portfolio rating of AAA. Net unrealized investment gains decreased $355 million net of taxes during 2021, reflecting a decline in the fair value of our fixed maturity portfolio, resulting from an increase in interest rates since the end of last year. Now I'll cover the results for our Markel Ventures segment. Revenues for Markel Ventures increased 30% to $3.6 billion for 2021, compared to $2.8 billion last year. The increase reflects a more significant contribution of revenues from Lansing Building Products, which was acquired in April 2020, and the contribution of revenues from Buckner Heavy Lift Cranes, which was acquired in August 2021. Additionally, operating revenues increased across our transportation-related businesses, and equipment manufacturing 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 our consumer building products businesses given increases in demand reflecting increases in consumer spending in 2021. Our growth in revenues had a more muted impact on the bottom line as certain of our businesses also saw cost of goods sold increase, which is a reflection of the current economic environment where supply constraints are contributing to increasing wholesale prices across many industries. With that said, EBITDA from Markel Ventures grew 10% to $403 million for 2021 from $367 million last year. The year-over-year increase was driven by the increased contribution from Lantoon. Looking at our consolidated results for the year, our effective tax rate was 22%. We reported net income to common shareholders of $2.4 billion. compared to $798 million last year. And comprehensive income to shareholders was $2.1 billion, compared to $1.2 billion in 2020. Finally, I'll make a few comments on cash flows capital in our balance sheet. Net cash provided by operating activities reached a new high at $2.3 billion for 2021, compared to $1.7 billion for 2020. Operating cash flows for 2021 reflected strong cash flows from our insurance operations, given higher premium volume in our insurance segment. Invested assets of the holding company were $5.3 billion at the end of the year, up from $4.1 billion at the end of last year. Total shareholders' equity stood at $14.7 billion at December 31, 2021, up 15% from $12.8 billion at the end of last year. During 2021, we repurchased 163,000 common shares of our stock under our Outstanding Share Repurchase Program, for approximately $200 million. Lastly, I thought I'd provide an update on our investment in Hagerty, the leading specialty insurance provider focused on the global automotive enthusiast market. In December, Hagerty was successful in its efforts to become a publicly listed company. We own 23% of Hagerty through both Class A common shares, which are listed for trading on the NYSE, as well as Class V common shares associated with our original investment in 2019 that can be converted on a one-for-one basis into Class A common shares. For accounting purposes, we are deemed to have the ability to exercise significant influence over Hagerty and therefore account for our investment in Hagerty under the equity method rather than at fair value. As of December 31st, 2021, the carrying value of our investment in Hagerty was $257 million, which was included in other assets on the consolidated balance sheet. As of December 31st, 2021, the estimated value of our investment based on the closing stock price of Hagerty's Class A common shares was was $1.1 billion. Well, I hope that gives a sense of how strong a year Markel had in 2021 by the numbers. We're even more excited about our prospects for 2022. With that, I'll turn it over to Richie to talk more about our insurance businesses.