Markel Group Inc.

Welcome and thank you for joining us for today's call. I'm delighted to be joined by my colleagues, Brian Costanzo, our CFO, and Simon Wilson, our CEO of Markel Insurance. We're also joined by Mike Heaton, our COO, for the question and answer portion of the call. At Markel Group, we're committed to relentlessly compounding your capital and building shareholder value. I'm happy to report that so far in 2025, we continue to do exactly that. I'm particularly pleased that throughout the first nine months of 2025, every reportable segment made positive contributions to the value of the Markel Group. They also did so in a capital efficient way, generating significant cash flows that helped fund our ongoing share repurchases and build up of liquidity. The first nine months of 2025 stand as compelling evidence of how our differentiated model works. Brian will provide more on our detailed financial performance in a minute, and Simon will speak about our ongoing improvements in our insurance business. But before I turn the call over to them, I would like to say a bit more about our progress this year. First, as you know, our board and management have been intensely focused on improving our core insurance business. We've taken many decisive actions over the last few years, including one, exiting underperforming businesses, most notably reinsurance, two, making key leadership changes, including appointing a new insurance company CEO with a proven track record of success, and three, implementing key organizational and structural changes to improve accountability, including shifting most of our overhead directly into the businesses. I'm pleased to report that these actions are beginning to translate into results as we achieved a combined ratio of 93% within Markel Insurance in the third quarter, compared to 97% in the comparable period. While this was aided by light CAT activity this year, looking underneath some of the lines we exited, the improvement in our core insurance business is becoming clearer. We believe this is just the beginning. The improvements in insurance profitability so far provide evidence that our actions are starting to drive better results. I think it's also worthwhile to point out that we have reported favorable reserve development on an annual basis each year for more than two decades now. This reflects our inherent conservatism and commitment to financial integrity. Simon will provide more comments on our insurance business, but the headlines are that we're doing more of what works and less of what does not. We are simplifying the business, increasing accountability at the front lines, and setting the stage for renewed growth and improved profitability. In all of the businesses we own and oversee, our CEOs have continued to run their businesses with professionalism, long-term focus, and extreme skill, navigating through volatile and uncertain economic conditions to deliver strong returns on capital and profitability. The Markel Group system also continues to generate significant cash flow, offering further evidence of the strength of our model. Over the trailing five years ending September 30th, 2025, Our cumulative operating income was nearly $13 billion. This incoming cash gives us financial strength and offers us flexibility to pursue opportunities we understand with partners we trust while returning capital to our shareholders at the same time. Our opportunity set is significant. We can reinvest in our existing businesses or expand into new public and private businesses. Much of our growth capital has been deployed in the industrial consumer and other and financial sectors, where over decades we have developed a core set of competencies around culture, capital, and leaders, each of which adds to our ability to relentlessly compound your capital. I've also noted that we've earned strong returns on those investments. In the five-year period of 2020 to 2024, the insurance, industrial, financial, and consumer, and other segments of Markel Group, pay dividends up to the holding company of approximately $2.2 billion. We invested $1.7 billion in acquisitions and additional interest in our existing businesses, primarily in the industrial and consumer sectors, all while supporting substantial growth in insurance. Regarding share repurchases, from the end of 2020 through the end of Q3 2025, we've returned approximately $1.9 billion of capital to shareholders via repurchases Again, while strengthening the balance sheet. Share calendars reduced from 13.8 million to 12.6 million. In our investment operations, we continue to remain focused on preserving and protecting your capital. We earned 8.4% on our equity investments so far in 2025. The book yield on our fixed income is 3.5% and our reinvestment yield was 4.2%. We aim to be thoughtful stewards of capital and seek to match our liabilities by investing in only the highest rated fixed income securities. The safety first approach has served us well. We're then able to utilize the strength of our balance sheet to invest in the areas where we see the best opportunities to deploy capital. As part of our board led review, we also committed to improving our financial disclosures to ensure that you can better see where our earnings come from, how we allocate capital to its highest and best use, and how capital has performed overall and in all parts of the Martell Group system. Last quarter, we enhanced our disclosures for the insurance operations to better align it with the business's strategy and provide more detail for investors. This quarter, as you can see from our 10-Q and the supplemental materials we provided yesterday evening, we have provided additional new disclosures, including now reporting our business results into four segments, insurance, industrial, financial, and consumer other. I'm sure it will take a little time for everyone to process and digest our new disclosure format, but I hope you will find it helpful in how it describes the ways our diversified set of businesses reinforce our overall financial strength and stability, and how our significant reinvestment options and highly efficient and low-cost capital allocation all work together to generate steady and diverse cash flows and relentless compounding of your capital over time. We believe that a key part of our success has always been how our board and leadership team maintain strong oversight over the company's operational, financial, and value performance, always evaluating ways to improve. With that, I'd like to turn things over to Brian. I look forward to answering your questions after he and Simon provide you with an update. Brian?

Thank you, Tom. Good morning, everyone. As Tom mentioned, after a listening tour with our investors earlier this year, we decided to undertake the effort, partnering with our board and third-party advisors, to further enhance our financial disclosures. Markel Group's evolution created the opportunity to take a fresh look at how we report our financial results to shareholders. We released the first part of these changes in the second quarter to align with our reorganized Markel insurance segment. Last night, we released the remainder of our changes across Markel Group. We are excited to hear your feedback. We believe that these changes will help investors both better understand your company and provide improved insights into how both Markel Group as a whole and its family of businesses are performing. While I will reference several of these changes as I walk through our quarterly results, the primary changes to our financial disclosures include changing how we present investment gains and losses to provide investors with a better sense of reoccurring operating results from our businesses through, first, moving the presentation of investment gains and losses to outside of revenues, and second, introducing a new metric for adjusted operating income, which excludes investment gains and amortization expense from our operating results. We also reorganized our business results into four reportable segments, Markel Insurance, industrial financial and consumer another and shifted to adjusted operating income as our segment performance metric for each of our reportable segments collapsed our investment segment into the new reportable segments introduced new consolidated and segment level kpis such as organic revenue growth and return on equity for markel insurance and finally updated business descriptions to help investors more fulsomely understand our family of businesses across the variety of industries in which we operate. We also created a reporting changes guide for shareholders, along with supplemental recast financial information that aligns with our new segment structure for the trailing seven quarters. We filed both by an 8K last night, and they are available to you now on the SEC's website and our Markel Group website. We hope these tools are helpful in navigating through the changes in our financial disclosures. With that, let's turn to the results for the period, starting with our consolidated results. Consolidated revenues were up 7% for the quarter and 4% year to date. Revenues in all periods are conformed based on our updated measurement, which excludes net investment gains from our total revenues. All reportable segments were up year over year, for both the quarter and year-to-date periods. Operating income for the quarter was $1 billion versus $1.4 billion in the comparable period last year. Operating income includes net investment gains, which has historically been the case throughout most of the year-over-year variance. Net investment gains were $433 million for the quarter compared to $918 million in the comparable period last year. Our new metric of adjusted operating income totaled $621 million for the quarter, up $121 million, or 24%, versus the same period last year. A quick reminder that adjusted operating income excludes net investment gains and amortization expense. We believe this metric will provide better insights on the reoccurring operating performance of our businesses. Insurance contributed 153 million of the adjusted operating income increase for the quarter and 100 million year to date due to improvements in underwriting results and increases in net investment income. The other segments were relatively flat compared to last year for both periods. Operating cash flows for the first nine months were 2.1 billion. Comprehensive income to shareholders was 793 million for the quarter and $2 billion for the first nine months of this year. Turning now to our operating segments, starting with our Markel insurance segment. Results from our Markel insurance segment now include underwriting and insurance activities, along with the results from our investments that are held by Markel insurance subsidiaries. This change to a balance sheet view let it be clear what the after-tax returns on our insurance capital are on an annual and five-year average basis. Due to the inclusion of equity securities within our insurance capital, we believe a five-year average metric is a better gauge of long-term performance. The average after-tax return on equity for Markel Insurance for the five-year period of 2020 through 2024 was 12%. Underwriting gross written premiums were up 11% year-over-year for the quarter and 4% year-to-date. driven by growth in our personal lines, general liability lines, and our international lines for the year, and our reinsurance professional lines in the quarter. The increase in reinsurance professional lines was driven by the timing of two large contract renewals that occurred prior to the execution of the renewal rights deal. Premium volume for the quarter within our wholesale and specialty division was down 6% versus last year, due to the exit of our U.S. risk-managed professional liability lines earlier this year and down 1% excluding the 5% impact from these exited lines. Our international and programs and solutions divisions both had strong growth in underwriting premiums in the quarter of 25% and 12% respectively. Earned premium was up 5% for the quarter and 2% year-to-date, due to increased growth in more recent quarters. Adjusted operating income for Markel Insurance was $428 million for the quarter, up from $276 million in the same quarter last year. The combined ratio for the quarter came in at just under 93%, compared to 97% last year. The four-point improvement consisted of lower CAT activity, which drove three points of the difference, with lower losses from CPI contributing another point. For the year, the combined ratio stands at 95% for both periods. The results from our runoff global reinsurance division added two points to both our current year quarter to date and year to date combined ratios. Our international division continues to produce fantastic results for the year with a year to date combined ratio of 84%. The quarter and year-to-date expense ratio of 36% is slightly higher than a year ago. Higher expenses were primarily driven by higher personnel costs, primarily within our international division, and increased third-party professional fees and severance costs. Prior year loss development was consistent at six points favorable in both the quarter and year-to-date periods in both years. For our 2025 year-to-date results, Favorable development across several product classes across the globe was partially offset by adverse development in our reinsurance casualty lines and in our discontinued risk-managed professional liability lines, both of which were recognized during the first half of this year. Investment income within our insurance operations was up 10% for the quarter and 9% year-to-date due to higher interest rates and volume of investments held within our fixed income portfolio. As a reminder, 96% of our fixed income portfolio is rated AA or better. Moving next to beyond our Markel insurance segment and starting with the industrial segment. Revenues were $1 billion, up 5% versus the same quarter one year ago, driven by increased industrial production activity and demand in the wind energy, construction, and building products industries, partially offset by softening demand in the auto industry. Adjusted operating income was $101 million for the quarter versus $112 million in the same quarter a year ago, down 9% year over year, driven by softening demand in the auto industry and higher raw material and labor costs across several businesses. Next, within our consumer and other segment, revenues and adjusted operating income within the consumer and other segment have a significant seasonal variability. due to the timing of sales of ornamental plants, which are heaviest during the second quarter of the year. Revenues were $291 million, up 10% versus the same quarter a year ago. Revenue growth benefited from the acquisition of EPI and higher sales volume of ornamental plants. Adjusted operating income was $17 million for the quarter versus break-even in the prior year. The increase year over year was driven primarily by the contribution of EPI and increases from operating leverage resulting from the higher sales of ornamental plants. Next, within our financial segment, revenues for the quarter were $162 million, up 16% year over year due to higher fronting fees and earned premium within our program and lender services products. Adjusted operating income was $61 million for the quarter down 23% from the same period last year, driven by favorable loss development on the runoff reinsurance contracts from Markel Catco Re, which were recognized in the third quarter of 2024, all of which was attributable to non-controlling interests. Excluding that impact, adjusted operating income across our other businesses was up notably in line with the revenue growth. Finally, regarding capital allocation, for the year, we repurchased shares totaling $344 million, reducing our share count to 12.6 million shares from 12.8 million at the end of last year. With that, let me pass it over to Simon to discuss more about Markel Insurance.

Thank you, Brian. Good morning, everyone. It's great to be with you on the call today to discuss a solid set of results for Markel Insurance for the quarter, with a combined ratio in the low 90s. and GWP growth of 11% versus Q3 last year. This growth is mainly being driven by our high-performing international and personal lines divisions, where prior year strategic investments in new people, products, and systems are paying off. Where our performance is more challenged or market conditions are less favorable, we are concentrating on improving the portfolio, and as such, growth has muted. Cycle management remains at the forefront of our minds, but we are taking advantage of areas where we have developed competitive advantage. The team at Markel Insurance couldn't be more aware that we need to demonstrate genuine progress to you. It is good to be started along that path. The coordinated set of recent actions are beginning to have an impact on the organization. Step by step, we're working towards achieving our full potential. Step one, the first big step we took began in earnest around two years ago when we began reshaping our portfolio with a particular focus on casualty and professional classes in the US. In both areas, we have made meaningful changes to tighten our risk appetite, as well as improving pricing and terms. Where we were unable to achieve the required improvements in specific areas, we made the decision to exit lines. As a result, we've seen tangible benefits. Our year-to-date combined ratio within our recurring business stands in the high 80s. This factors in two items versus our reported combined ratio. First, excluding the 3.5 point impact from exited lines, the largest of which are U.S. and European risk-managed professional lines along with CPI, and second, a two-point drag in the overall combined ratio from the global reinsurance division results. We're now seeing improved and more consistent underwriting performance in the divisions where these changes were implemented. I remain excited by the sequential improvement. It's still early days, but we believe these early outcomes validate the tough decisions we made to set a stronger foundation. for future growth. Step two. With the portfolio streamlined and greater discipline in place, our next big step began earlier this year, shifting our focus from simply pruning the portfolio and exiting unprofitable lines to actively pursuing profitable growth. Our strategy is based on a clear go-to-market structure, where we have created a series of distinct P&Ls, each headed by a leader who has full responsibility and accountability for the performance of their unit. This structure pushes decision-making closer to the customer and allows for greater speed and response time. Specific actions we have taken are as follows. We have collapsed our matrix reporting structure in the US. We reorganized into four simple and distinct divisions. We removed reporting of state national and the filler into Markel Group. We aligned our financial reporting to the new structure so that we can clearly see where there is underperformance that needs to be addressed We can also see where we are having success enabling us to divert investments to these areas to continue to fuel profitable growth. We moved over 80% of the people that previously worked for the central functions into the newly created P&L. This provides transparency over costs for business owners and also ensures that the work of these individuals is fully aligned with business needs. And on our last earnings call, I announced the exit of global REIT. Every single one of these changes were designed to simplify our business model and enhance our ability to provide market leading specialty insurance products to brokers and customers around the world. Beyond these organizational changes, we strengthened our margin of safety by increasing reserves, particularly in our reinsurance division and our risk managed or large account USDNO book. This continues Markel's tradition of conservative reserving, which protected our balance sheet through cycles of uncertainty. We've consistently held reserves that are more likely redundant than deficient, demonstrated through 20 consecutive years of favorable prior year loss reserve releases. Step three. Now that we've made our way through the bulk of the necessary organizational changes, we are turning our focus to execution, including developing bottom-up, customer-focused business plans by our new P&L owners for 2026 and beyond. I'm confident these plans will enhance the experience of our customers, which will in turn grow the business ultimately increase our profitability. While we are still early in the game, the overall energy and execution I am witnessing across the business continues to be encouraging. First, let me share a story about our U.S. personal lines business that illustrates the impact of the changes we have made. As we reorganized the business into distinct P&Ls, one business unit that stood out for the right reasons was our personal lines business based out of Wisconsin. This organization has been growing strongly over several years with excellent profitability. Jeff May runs the business and outlined a plan to overhaul the technology stack over the next two years. In our previous structure, this investment opportunity hadn't managed to rise sufficiently up the priority list. But now that Jeff sets the priorities for his business, the plan was very much on the table. We took the decision to go ahead with the implementation within days, and Jeff and his team are now implementing a system which will consolidate our position as the market leader in ENS homeowners business in the US with expectations to grow this business to over $1 billion a year in annual GWP. Second is a story about how we are doing more with less in our core US wholesale and specialty business. After taking the helm in late April this year, Wendy Hauser set about reorganizing her business. Wendy reduced the total number of regions from eight to four, simplifying our go-to-market structure and creating the opportunity to reduce costs. Some tough decisions were made, particularly around people, but we're now operating the business at a lower salary base than before without impacting levels of service. The four regions have full P&L responsibility with an excellent line of sight into the financials, and so I expect this recent cost discipline to continue. Stories like this exist throughout Markel Insurance. The new structure helps bring them to the surface and enables us to do several things at once. If our business leaders have well thought out plans, we are ready and willing to support them. What will success look like as stories like this compound? What can you as investors track to know that things are progressing? Early progress isn't always obvious right away in the numbers, especially in long-tail insurance. It will first show up in the way our people think, the speed at which we move and serve, and the trust and credibility we're restoring with our partners and our customers. Some of the signposts or leading indicators we're monitoring include employee engagement scores, customer net promoter scores, growth in submission count, increase in our quote rate, improvement in our quote-to-bind ratio, and growth in new business within our targeted areas. As these indicators start to move in the right direction, the financials should take care of themselves. The WSIA conference in San Diego last month, Wendy Howser, the president of our wholesale and specialty division, said very pointedly to the press that we're back. Our leadership team is confident in the changes we've made. It will take time to show up, but with each passing day, the team is working together in new and better ways. I'm excited about our position in the marketplace. Whether it is in our top quality international operations, our niche business units such as Surety, Personal Alliance, or our improving core US wholesale and specialty division, we have plenty of runway to grow and to grow profitably. We'll continue to work hard to make that a reality. With that, I hand you back to Tom. Thank you, Simon.