Markel Group Inc.

Good morning and welcome to the Markel Group third quarter 2024 conference call. All participants will be in the 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 the star then one on your touchtone phone. To withdraw your question, please press the star then 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 the press release for our third quarter 2024 results, as well as our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including under the captions safe harbor and cautionary statements 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 this measures and the press release for our third quarter 2024 results, or our most recent Form 10-Q. The press release for our third quarter 2024 results, as well as our Form 10-K and Form 10-Q, can be found on our website at www.mklgroup.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, Chief Executive Officer. Please go ahead.

Thank you, Perla, and good morning. Thank you all for joining us. This is Tom Gaynor, your CEO. I'm joined today by Jeremy Noble, the president of our insurance operations, and Brian Costanzo, our CFO. As always, we welcome the chance to share our latest financial updates, and we look forward to your questions. I'll jump right in with the headlines. The Markov Group continues to move forward at a good clip. For the purposes of a thought exercise, I'd invite you to think of us as an aircraft. In any plane, there are several gauges and monitors to measure the conditions of the plane. The same is true for the Markel Group. I'd like to share with you some of the key gauge readings I monitor and why I contend that this plane is moving forward at a pretty good clip. I can't imagine a plane without at least four absolutely mission-critical gauges. On a complex plane like Markel Group, There are more, but these four cannot be replaced. In my layman's mind, and I don't know the first thing about being a pilot, the mission critical gauges measure speed, fuel, altitude, and direction. Without speed, no aircraft can fly. Airplanes need to travel at a certain rate of speed to achieve a lift and remain airborne. Without fuel, The energy needed to power the engines to achieve speed won't work. As a pilot, I'm pretty sure you need to know how much fuel you have and whether it is enough to get you to your destination. Without altitude and awareness of the terrain, the plane might bump into something, and that will not end well. Without knowing direction, everything might be working, but you may be headed to the wrong place. I'll offer the following analogy for those four gauges and measurements from our co-group. I'll also speak to them in the five-year measurement terms that we monitor to determine whether our craft is functioning as it should. First, as of September 30, 2024, total net investments, that is our entire publicly traded investment portfolio, plus cash minus debt, summed up to $30.3 billion. Five years ago, on September 30, 2019, that number stood at $18 billion. That's an increase of 68 percent. Second, through the first nine months of 2024, we earned underwriting and insurance-operated income of $458 million compared to $249 million in the first nine months of 2019. That's an increase of 84 percent. Third, through the first nine months of 2024, We earned $388 million of operating income in our Markov Ventures operations compared to $179 million in the first nine months of 2019. That's an increase of 117%. Fourth, in the first nine months of 2024, we earned recurring dividend and interest income of $677 million compared to $339 million in the first nine months of 2019. that's an increase of 99 percent. At September 30, 2024, each share of Markel Group sold for about $1,570. At September 30, 2019, each share of Markel Group sold for $1,180. That's an increase of 33 percent. That is the smallest percentage increase of any of those numbers. I would suggest that the gauges measuring our total net investments Our underwriting and insurance earnings, our Markel Ventures earnings, and our recurring investment earnings would be the measurements that I as your pilot and you as fellow shareholders should be monitoring. Those gauge readings are not perfect, and in some cases, they show that we fell short of what we strive for and what we expect going forward. Nonetheless, I think it's fair to assert that they describe an airworthy craft. In response to those measurements, which I believe describe genuine progress, and our sense of intrinsic value, we've responded by repurchasing Markel Group shares. Five years ago, our share count stood at 13.815 million shares. At September 30, 2024, it stood at 12.887. Most of the repurchase activity took place starting in 2022, and it continues through this day. So far, that's a decrease of about 6.7%. and outstanding shares. We think, given our valuation, capital position, and capital allocation alternatives, that repurchasing shares makes sense, and as such, we are doing so. In just a minute, Brian and Jeremy will descend from the five-year measurement timeframe to the first nine months of 2024 and provide some relevant details and comments on our overall financial position and our insurance business. I will add In the spirit of shifting to annual comparisons than in our Markel Ventures operations, we faced a tough comparison against the same period a year ago. Last year, I spoke about conditions and some of our more cyclical businesses as white hot. At this point, I would describe conditions as beige hot. That makes for tough year-over-year comparisons, but I remain very happy with the ongoing performance of the Markel Ventures collection of businesses. In our investment operations, we continue to benefit from persistent production of cash from our insurance and ventures operations, as well as increased dividend and interest income and capital appreciation. In our insurance operations, we work to respond to the catastrophes and events to help clients in their times of need. We also work to continue to improve our financial performance while building the capital it takes to help our customers when they need it most. The sum of these positive flows combined gives us the fuel to keep investing in publicly traded securities, fund acquisitions, fund growth opportunities, and repurchase stock, and we keep seeming to have more money in the kitty. To me, that seems like a healthy set of gauge readings. With that, I'll turn it over to Brian to lower the plane from the discussion about the cruising altitude of 39,000 feet towards ground level as we approach the runway of current year-to-date financial results. Following Brian, Jeremy will pick up some comments about our insurance operations, and then we will open the floor for questions. Brian?

Thank you, Tom, and good morning, everyone. Through the first nine months of this year, we saw terrific returns on our equity portfolio, adding $1.7 billion to operating income, which is the headline change in almost any consolidated metric. However, it's also important to note the aggregate growth in operating income from our underlying businesses, insurance and ventures, along with our recurring interest and dividends, which grew by double digits in both the quarter-to-date and year-to-date periods. With that, let's go through the results. Starting off with our consolidated results, total revenues increased 15% to $12.8 billion for the first nine months of 2024, and total operating income increased significantly year over year to $3.1 billion, with the largest driver being the market value movements on our equity portfolio. Net income to common shareholders was $2.2 billion in the first nine months of 2024, compared to $1.2 billion in the same period of 2023. Comprehensive income to shareholders in the first nine months of 2024 was $2.5 billion, compared to $1.1 billion in the same period of 2023. Net cash from operating activities was $2.1 billion in the first nine months of 2024 compared to $2 billion in the same period last year. Operating cash flows in 2024 reflected strong cash flows from each of our operating engines with the most significant contribution coming from insurance. In the first nine months of 2024, we repurchased $389 million of Markel Group common stock under our outstanding share repurchase program compared to $270 million in the same period last year. Now I'll move to the performance of each of our three operating engines, starting off with our insurance engine. Gross written premiums within our underwriting operations grew by 4% to $8.2 billion for the first nine months of 2024, compared to $7.9 billion in the same period last year. Our premium growth was driven by select U.S. lines of business, most notably our personal lines and our international marine and energy insurance and reinsurance products. This was partially offset by targeted premium contraction in select classes within our U.S. professional liability and general liability portfolios, where we took underwriting actions to improve profitability. Our consolidated combined ratio for the first nine months of both 2024 and 2023 was 95%. Both periods included one point of catastrophe losses. Our 2024 combined ratio included 62 million of net losses attributed to Hurricane Helene, while our 2023 combined ratio included 46 million of net losses attributed to the Hawaiian wildfires and Hurricane Adelia. In addition, we disclosed in our third quarter 10Q as a subsequent event our preliminary estimated range for Hurricane Milton of between $40 million and $80 million in losses that will be recorded in the fourth quarter. These losses from catastrophe events are within our expectations for events of this size. In 2024, the combined ratio benefited from more favorable development on prior accident year loss reserves compared to 2023. the impact of which was mostly offset by higher attritional losses, including those on our intellectual property collateral protection insurance, or CPI, product line. Our year-to-date 2024 consolidated combined ratio included 139 million, or two points, of losses from CPI, while our year-to-date 2023 consolidated combined ratio included 68 million, or one point, of losses from CPI. Prior year loss reserves development improved over the first nine months of 2024 to $344 million in loss takedowns versus $170 million in 2023. Favorable development in the first nine months of 2024 was most notable within our international professional liability product lines. We remain cautious in our approach to both reducing prior year loss reserves and in our current accident year attritional loss ratio on our longer-tail U.S. professional liability and general liability product lines, given recent claims trends. Within our program services and ILS operations, operating income totaled $101 million, primarily driven by strong growth and performance from our fronting operations, both at State National and in support of NIFILA. Turning next to our investment results. Net investment income for the first nine months of 2024 was $677 million compared to $520 million in the same period last year. We continue to benefit from higher interest rates compared to the first nine months of 2023. We expect, based on the current interest rate environment, that the yield on fixed maturity securities will continue to increase slightly throughout 2024 as lower yielding securities mature and are replaced by higher yielding securities. Net investment gains of $1.7 billion in 2024 reflect favorable market value movements, resulting in an 18.5% return on our public equity portfolio in the first nine months of 2024. This compares to net investment gains of $591 million in the first nine months of 2023. As you've heard us say many times before, we focus on long-term investment performance, expecting variability in the equity markets from period to period. At the end of September, the fair value of our equity portfolio included cumulative pre-tax unrealized gains of $7.8 billion. Net unrealized investment gains included in other comprehensive income in the first nine months of 2024 were $283 million net of taxes compared to net unrealized investment losses of $135 million net of taxes last year. At the end of September, the cumulative pre-tax unrealized loss on our fixed maturity portfolio was $198 million. We typically hold our fixed maturity investments until they mature and would generally expect unrealized holding gains and losses attributed to changes in interest rates to reverse in future periods as bonds mature. We continue our longstanding precedent of investing in the highest quality of fixed income securities. As of September 30th, 2024, 98% of our fixed maturity portfolio was rated AA or better, and there are no current or expected credit losses within the portfolio. Finally, I'll cover the results from our Markel Ventures engine. Revenues from Markel Ventures increased 3% in the first nine months of 2024 versus the same period of 2023, driven by our consumer and building products businesses as well as the contribution from our June 2024 acquisition of Valor. Markel Ventures' operating income decreased 1% due to the impact of lower revenues and operating margins at our construction services and transportation-related businesses. This was largely offset by the impact of higher revenues and margins at our consumer and building products businesses. While our growth metrics are down slightly, many of our Markel Ventures companies are performing very well. But as Tom mentioned earlier, certain of our businesses, in particular our transportation businesses, are benchmarked against peak performance metrics from a year ago. With that, I'll turn it over to Jeremy to talk more about our insurance engine.