Markel Group Inc.

Good morning and welcome to Markel Group second quarter 2023 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 one again. 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, safe harbor and cautionary statement and risk factors. We may also discuss certain non-GAAP financial measures during 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. Our Form 10-K and Form 10-Q can be found on our website at www.mklgroup.com and the Investor Relations section. Please note this event is being recorded. I would now like to turn the conference over to Tom Gaynor, Chief Executive Officer. Please go ahead.

Good morning, good morning. Thank you. From Richmond, Virginia, I'd like to welcome you to the Markel Group Second Quarter Conference Call. This is indeed Tom Gaynor. I serve as your CEO, and it is my pleasure to welcome you to the call this morning. I'm joined by our Chief Financial Officer, Terry Gendron, and our President of Insurance, Jeremy Noble, to share our results with you and to answer your questions. We are very pleased with the results we're reporting to you today. Each of our three engines, insurance, Markel Ventures, and investments produced positive thrust during the first half of 2023. In our insurance operations, we enjoyed double-digit growth in earned premiums and solid underwriting profitability with a combined ratio of 93% for the first half of 2023. Importantly, We report those results with an ongoing commitment to putting up insurance reserves in a way which we believe will be more likely to prove redundant than deficient. You can see that commitment through our years of reporting favorable loss development in the vast majority of the times when we report to you each quarter's results. This quarter continues to show that same pattern of favorable development. There's unrelenting commitment at the Markell Group to our culture based on our values. The conservatism we embrace in setting reserves demonstrates our words and action. Both Terry and Jeremy will provide more details on our insurance results in their comments. Markel Ventures produced excellent results during the first half of 2023. Revenues rose to $2.5 billion compared to $2.3 billion a year ago, and EBITDA reached $317 million versus $250 in the first half of 2022. It's worth pointing out that this growth in revenues and profitability was largely organic. These are the results of the existing businesses, as there were no major acquisitions at Markel Ventures. We did get to apply some capital at a couple of our existing businesses. They added to their businesses with acquisitions of companies in their respective industries, and we love it when that happens. We also continued the ongoing process of purchasing certain non-controlling interests as originally planned in the original acquisitions. Investments also provided excellent returns. Recurring investment income rose 74 percent to $329 million versus $189 million in the first half of 2022. Our publicly traded equity portfolio produced six-month returns of 11.9 percent. While this trails the white-hot return of 17 percent posted by the S&P 500, We remain 100 basis points ahead of that index for over 30 years. We don't usually move ahead during sprints, but we do tend to outlast the competition when it comes to marathons. During the first half of 2023, we repurchased $187 million of Markel Group shares. Last year, we repurchased $126 million in the same time period. We also made net purchases of publicly traded equity securities of $155 million compared to $63 million a year ago. The tax-efficient net unrealized gain on our equity portfolio now stands at $5.4 billion compared to $4.2 billion a year ago. While we as a public company always provide you with the split times, quarterly results, we are running a marathon, not a series of sprints. The split times that we are reporting to you today looked good to me as the head coach but I think these results demonstrate that we remain on track to produce excellent marathon results as we have over long periods before. To put some actual numbers on that and quantify a bit, I remind you that we consistently use rolling five-year measurement intervals to gauge longer-term progress at the Markel Group. The last five years included some of the most difficult insurance and investment markets we've ever faced. The last five years also included the effects of some acquisitions and expansions into new businesses, which did not go as well as we would have hoped at first. Despite that, we've made meaningful progress. Please consider the following. Revenues in the first six months of 2018 were $3.6 billion. Revenues in the first six months of 2023, five years later, came in at $7.8 billion, an increase of 119%. Underwriting profits in the first six months of 2018 were $209 million. Underwriting profits in the first six months of 2023 were $264 million, an increase of 27%. Recurring investment income for the first six months of 2018 was $213 million. Recurring investment income in the first six months of 2023 was $329 million, an increase of 54%. The EBITDA of Markel Ventures in the first six months of 2018 was $82 million. The EBITDA of Markel Ventures in the first six months of 2023 was $317 million, an increase of 284%. The total number of shares of Markel outstanding five years ago was $13.9 million. The total number of shares of Markel today is $13.3 million, a decrease of 4.3%. The price per share five years ago on June 30th 2018 was $1,084. Five years later, the share price stood at $1,385, an increase of 28%. This combination of facts, along with many other factors, seems to have created a situation where many of the indicators of the economic value of Markel Group seem to have appreciated at a faster rate than that of the share price. In response to those circumstances, we've repurchased shares in recent years. Additionally, our rate of repurchases was higher in the first half of 2023 than any other period. It's also a matter of public record that in five of the last six quarters, I've personally taken money out of my pocket to purchase some Markel Group shares. Now I'll turn things over to our CFO, Terry Gendron, to provide you with some details from the quarter, and then to Jeremy Noble to discuss our insurance operations. I'll then return with just a few brief comments about our ventures and investment results And then we'll open the floor for your thoughtful questions. Terry?

Thank you, Tom. And good morning, everyone. As Tom mentioned, each of our three engines produced a solid quarter. Strong revenue growth within our insurance operations, higher profitability within Markel Ventures, and excellent returns from our investment engine showed the benefits of our diversified three-engine architecture. Starting off with our underwriting operations. Gross written premiums grew 7% to $5.4 billion for the first half of 2023, compared to $5 billion in 2022. Our increased premium volume reflects new business and more favorable rates across many of the product lines within our insurance segment. The most notable growth came from our personal lines, marine and energy, property, and general liability product lines, while we saw lower premium volume within our professional liability product lines. Our consolidated combined ratio for the first half of 2023 was a 93% compared to a 90% for the first half of last year. The increase was driven by a higher attritional loss ratio and expense ratio in 2023 within our insurance segment. Prior year loss reserves developed favorably by $139 million in the first half of 2023 compared to $123 million in the first half of 2022. We experienced favorable loss reserve development across multiple product lines in 2023, most notably across our international professional liability product lines. The favorable development in 2023 was partially offset by adverse development on our general liability product lines due to an increased frequency of large claims over the past several quarters on our excess and umbrella product. Turning to our investment results. Net investment gains of $857 million in the first half of 2023 were driven by favorable market value movements. This compares to net investment losses of $1.9 billion for the first half of 2022 driven by unfavorable market value movements. As you've heard us say many times before, we focus on long-term investment performance, expecting variability in the equity markets, and the timing of investment gains and losses from period to period. As Tom noted, we'll continue to measure investment returns over longer periods of time. With regard to net investment income, we reported $329 million in the first half of 2023 compared to $189 million in the same period last year. The increase is largely attributable to higher interest income from our money market and short-term investments due to higher short-term interest rates in 2023. Additionally, interest income on our fixed maturity securities increased reflecting a higher yield and higher average holdings compared to last year. During the first half of 2023, we recognized net unrealized gains on our available for sale investments of 30 million within other comprehensive income, primarily related to the positive impacts of net foreign exchange movements on our fixed maturity portfolio. This compares to net unrealized losses of 882 million for the same period last year, corresponding to the impact of increases in interest rates on our fixed maturity portfolio. Recall that we typically hold our fixed maturities until they mature and would generally expect unrealized holding gains and losses attributable to changes in interest rates to reverse in future periods as bonds mature. Our fixed maturity portfolio had an average rating of AAA as of June 30th, and there are no current or expected credit losses within the portfolio. Now we'll cover the results of our Markel Ventures segment. Revenues from Markel Ventures increased 8% to $2.5 billion in the first half of 2023, up from $2.3 billion for the first half of last year. The increase reflects organic growth and improved pricing across several of our businesses. EBITDA from Markel Ventures increased 27% to $317 million for the first half of 2023, from $250 million during the same period last year. The increase was driven by our products businesses, which had higher margins in 2023 compared to 2022 as we saw material and freight costs stabilize. Looking at our consolidated results, our effective tax rate for the first half of 2023 was 21% compared to 22% in the same period last year. We reported net income to common shareholders of $1.2 billion for the first half of 2023, compared to a net loss to common shareholders of $986 million in the same period a year ago, with the change largely attributed to the year-over-year swing in our public equity portfolio valuation. Comprehensive income to shareholders for the first half of 2023 was $1.2 billion, compared to comprehensive loss to shareholders of $1.7 billion in the first half of 2022, with swings in both fixed maturity and public equity valuations as the largest drivers. Turning to cash flows, net cash provided by operating activities was $1 billion for the first half of 2023 compared to $921 million for the same period last year. Operating cash flows in the first half of 2023 reflected strong cash flows from each of our operating engines with the most notable year-over-year increase coming from our Markel Ventures operations. Within our underwriting operations, operating cash flows in 2023 were net of a $125 million payment made in the first quarter to complete a retroactive reinsurance transaction to seed our runoff book of UK motor casualty business. Total shareholders' equity stood at $14.2 billion at the end of June compared to $13.2 billion at the end of the year. Overall, we're very pleased with our performance during the first two quarters of 2023 and remain confident in our ability to continue building long-term shareholder value. With that, I'll turn it over to Jeremy to talk more about our insurance engine.