Markel Group Inc.

Good morning and welcome to the Markle Group fourth quarter and year-end 2025 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 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 risk. 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 from our 2025 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 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 reconciliation to GAAP for these measures in the press release for our 2025 results. The press release for our 2025 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, Rebecca, and good morning and welcome. Thank you for joining us all on today's call. I'm delighted to be here with my colleagues, Brian Costanzo, our CFO, Simon Wilson, CFO of Markel Insurance, as well as Mike Keaton, our COO, who will be available for the Q&A session. At Markel Group, our purpose is to be a long-term home for exceptional leaders and businesses and to relentlessly compound your capital at attractive rates of return over decades, all while staying true to our culture as we describe it in the Markel style. 2025 was a year that reinforced the power of that model. Every reportable segment made a positive contribution, and the company advanced both quantitatively and qualitatively. Let me begin with Markel Insurance, where we took a series of decisive long-term actions this year. These were not easy, but they were necessary. And I want to thank the entire team for a year marked by tough decisions and genuine progress. In 2025, we exited underperforming businesses, most notably reinsurance, made key leadership changes, including appointing Simon Wilson as the new CEO of Markel Insurance, and we made structural improvements to simplify the business and reinforce accountability. The full impact of these changes will play out over years, as is the case with all long-term compounding. Last quarter, I described the results as a green shoot. This quarter, I'll adjust it to the plural. We are now seeing green shoots. In the fourth quarter, Markell Insurance generated a 92.9% combined ratio and contributed $399 million of adjusted operating income. For the full year, the segment delivered $1.4 billion in adjusted operating income, up from $1.2 billion in the prior year. And 2025 marked the 21st consecutive year of favorable reserve development, a testament to our conservative posture and financial integrity. Within Markell Insurance, the headline is simple. We're doing more of what works and less of what doesn't. with a focus on simplification, better execution, and improved returns on equity. As Simon will discuss later, we believe the foundation is now set on its early days. Importantly, Markel Insurance is only one part of a broader, more diverse ecosystem of high-quality cash flows, which are central to the Markel Group story. Our financial, industrial, and consumer and other segments also delivered positive results in 2025. each benefiting from the autonomy and accountability we give leaders to make the best long-term decisions for their businesses. The financial segment, which includes state, national, and the FILA, had a tremendous year, generating $327 million in adjusted operating income, up 25% from 2024. The industrial segment earned $343 million, slightly below last year's level. This was a strong result given the softening in certain dead markets And it reflects the skills of the amazing leaders of those businesses and the room and space we give them to serve their customers with a long-term mindset. Consumer & Other delivered $175 million of adjusted operating income, up from $145 million last year, with our acquisition of EPI driving most of the increase. Our public equity portfolio returned 10.5%, generating $156 million in dividend income and ending the year with a market value of $13 billion, with an unrealized gain of $8.9 billion. These equity holdings, diversified, high quality, and held with a long-term mindset, remain an important driver of compounding. All of our streams of adjusted operating income convert well into cash, producing durable, resilient, and diverse inflows that give us the flexibility to allocate capital to its highest and best use wherever that may be across the group. To that end, cash flow from our operations grew to $2.8 billion in 2025. And we put that cash to work with discipline. To give you a sense of that, we deployed some of that cash to $1.4 billion in fixed maturity net purchases, $207 million in new property and equipment, about $143 million in net public equity securities, and invested $170 million in bolt-on acquisitions and increases in our ownership stakes in our existing majority-owned businesses. We also redeemed 600 million in preferred shares and repurchased 430 million of our own common shares, all while weighing every dollar invested against its next best alternative. Even with all that investment and return of cash to shareholders, our cash balance increased by 411 million and we paid down a little bit of our long-term debt. That combination, high-quality cash inflows, with a 360-degree set of opportunities to deploy it, continues to fuel what we often describe as a perpetual motion machine of shareholder value creation. In any given year, results can and will be volatile. But over five-year periods and beyond, the trend has been up and to the right. That's the power of long-term compounding. It is a joy to serve you alongside such a great team. We are energized for the year to come, and we thank you for your ongoing engagement and support. With that, I'll turn it over to Brian.

Thank you, Tom. Good morning, everyone. As a reminder, last quarter, we released significant enhancements to our financial disclosures, along with a reporting changes guide available on our IR site. We made these changes to help investors better understand the company and its performance. To review, the major changes we made were changing the presentation of investment gains and losses to be included outside of revenues, establishing new reportable segments of Markel Insurance, industrial, financial, and consumer and other, while collapsing our former investment segment results into these new segments, and reporting of new metrics, including adjusted operating income for all segments that excludes investment gains and amortization expense, and segment level KPIs, such as organic growth and return on equity for insurance. With that, let's cover the results for the period, starting with our consolidated results. Markel Group's consolidated operating revenues, which exclude net investment gains, were up 8% for the quarter and 5% for the year. Operating income for the quarter was $795 million, up from $595 million in the comparable period last year, and $3.2 billion for the year versus $3.7 billion in 2024. As a reminder, operating income includes net investment gains, which can be volatile from period to period. Net investment gains were $212 million in the quarter, compared with $117 million in the fourth quarter last year, and $1.1 billion for the year versus $1.8 billion in 2024. Adjusted operating income, which excludes net investment gains and amortization expense, totaled $626 million for the quarter, up 19% versus the same period last year. Adjusted operating income was $2.3 billion in 2025 compared to $2.1 billion in 2024, or up 10%. The increase in adjusted operating income was primarily driven by improvements in our insurance business, and strong performance within our financial segment. Operating cash flow was $2.8 billion in 2025 versus $2.6 billion in 2024, and comprehensive income to shareholders totaled $606 million in the quarter and $2.6 billion for the year. Turning now to our operating segments, starting with Markell Insurance. The return on equity for Markell Insurance for 2025 was 14%. and the trailing five-year period return on equity was 13%. We view the five-year average return on equity as our primary KPI within insurance, measuring our commitment to generating consistent profitability within both our underwriting and investment operations and remaining efficient with our use of capital. Markel Insurance underwriting gross written premiums increased 3% for the quarter and 4% for the full year, driven by personal lines in the US and growth across several product classes in our international division. At a divisional level within Markel Insurance, within our international division, gross written premium grew by 14% for the year, with the division growing in every market. Our international division continued its recent track record of fantastic results, posting an 83% combined ratio for the year. Programs and solutions gross written premium grew by 8% for the year, driven by our personal lines and delegated programs units. For our wholesale and specialty division, gross written premium declined 4% for the year. Excluding the impact from exiting our US Risk Managed Professional Liability book earlier this year, premium growth was flat across the division. In global reinsurance, which we exited in 2025, Gross written premium declined 10% for the year. Overall, underwriting gross written premium volume excluding the impact of exiting our global reinsurance and U.S. risk managed professional lines grew by 7% for the year. One additional note on premium volume relative to our 2026 reporting. Our underwriting premium volume next year will be impacted by two significant items. the exit of our $1 billion gross written premium global reinsurance business, and second, the transition effective January 1st, 2026 of our partnership with Hagerty to a pure fronting model. Hagerty premium will be included in our results going forward as fronted gross written premium versus underwriting gross written premium. This change was a natural next step in our long-term evolution of our partnership with Hagerty continuing to retain greater amounts of underwriting risk. In 2025, Markel only retained 20% of the Hagerty gross written premium volume, so the impact on our net earned premium volume will be significantly less. Together, these two changes will decrease underwriting gross written premiums for 2026 by approximately $2 billion. But we expect these changes over the long term to benefit our combined ratio adjusted operating income, and return on equity. Turning back to insurance profitability, adjusted operating income for Markel Insurance was $399 million for the quarter, up 31% from last year. The combined ratio for the quarter was 92.9% compared to 95.9% in the same quarter last year. This three-point improvement was driven by lower losses from our CPI product and within our U.S. casualty lines, partially offset by higher attritional losses in our U.S. personal umbrella product and large losses incurred in the fourth quarter within our U.S. surety line. Our surety portfolio has been highly profitable for us since our acquisition of SureTech in 2017. For the year, Markel Insurance finished with $1.4 billion in adjusted operating income and a combined ratio of 94.6%, a one-point improvement from last year. We had six points of favorable prior year loss development for both the quarter and year-to-date periods, and our balance sheet position for reserves remained strong. Turning next to our investment portfolio, our net investment income was $258 million in the quarter and $970 million for the year, up 6% for the quarter and 5% year-to-date due to higher interest rates and increased holdings in fixed income securities. Our fixed income portfolio yield was 3.6% for the fourth quarter. We reinvested new money into securities at an average yield of 4% in the quarter versus 3.1% on average across our net maturity. Within our public equity portfolio, during 2025, we made 143 million of net purchases of securities. Our public equity portfolio returned 10.5% for the year, bringing the value of our public equity portfolio at the end of the year to $13 billion, with a total unrealized gain of $8.9 billion. Over the trailing five-year period, the equity portfolio's annual return was 12% compared with 15% for the S&P 500. Our net equity purchases declined year over year, reflecting rising and less attractive valuations and better opportunities elsewhere for incremental investments. Moving to our industrial segment, revenues were $1 billion for the quarter and $3.9 billion for the full year, up 4% for both the quarter and for the year. Organic revenue growth was 2% for the year. Revenue growth for the year was impacted by our acquisition of Valor, and organic growth was driven by our equipment leasing business and our businesses that serve commercial and residential construction markets partially offset by lower revenues in our transportation products businesses. Adjusted operating income was 80 million for the quarter, down 26% from 108 million in the same period last year. Adjusted operating income was 343 million for the year, or down 6% versus 2024. Decline in adjusted operating income was driven by lower revenues in our transportation products businesses and tightening margins due to higher materials and labor costs within our other products businesses. For our consumer and other segments, revenues were $274 million in the quarter and $1.4 billion for the full year, or up 4% for both the quarter and year-to-date periods. Organic revenue growth was 1% for the year. Adjusted operating income was $23 million in the quarter, up 35% versus 17 million in the same quarter one year ago. Adjusted operating income was 175 million for 2025, or up 20% versus 2024, driven primarily by our acquisition of EPI and higher sales volume of ornamental plants. Next, within our financial segment, revenues were 224 million, or up 41% for the quarter versus the same period one year ago, and $737 million for 2025, up 24% versus 2024. Organic revenue growth was 17% for the year. The increase in revenues for the year was due primarily to increased performance fees and a higher management fee rate within ILS, along with higher premium volumes within our program services product. Year-to-date revenues were impacted by a $41 million gain on the sale of our remaining minority interest in Velocity earlier this year. The increases in revenue drove adjusted operating income up 58% to $107 million for the quarter versus the comparable period one year ago and up 25% for 2025 to $327 million. The year-to-date adjusted operating income change was also impacted by $58 million favorable loss development related to Markel Capco recognized in 2024. Finally, regarding capital allocation, for the year, we repurchased shares totaling $430 million, reducing our share count to 12.6 million shares from 12.8 million shares at the end of last year. We also redeemed our $600 million preferred stock issue earlier this year, making total capital return to shareholders over $1 billion. With that, I will pass it over to Simon to discuss Markel Insurance.