MARKEL GROUP INC. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Thanks and Business Overview: Tom Gayner thanked the team at Markel Group, emphasizing the team's achievement of operating income and returns above targets in 2024. The insurance business had mixed results, while ventures had strong profitability.
• Leadership Changes and Improvements: The initial structure with co - CEOs caused challenges starting in 2016. By 2022, actions were taken to improve performance, including defining purpose, organizing around it, creating a capital allocation framework, and emphasizing profitability. These changes helped restore accountability and focus.
• Stock Repurchases and Intrinsic Value: Markel Group repurchased more shares in 2022, 2023, and 2024. The company simplified its intrinsic value calculation.
• New Business Welcome: In 2024, Valor Environmental and EPI were welcomed to the team.

Segment Performance

• Insurance Segment: In 2024, gross written premium was $9.4 billion and net earned premium was $7.4 billion, each up 2% from the previous year. The combined ratio was 94.3% vs. 97.8% in 2023, an improvement of 3.5 points. Reinsurance underwriting had a combined ratio of 101. State National had operating profits of $122 million and Nasilla produced operating income of $41 million in 2024.
• Ventures Segment: Total revenues exceeded $5 billion for the first time in 2024, growing 3% year - over - year. Consumer and building products businesses drove growth while transportation - related businesses declined. Operating income was $520 million.
• Investments: The public equity portfolio earned a 20.1% return in 2024 with $1.8 billion in net investment gains. Net investment income was $920 million in 2024, up from $735 million in the previous year. The fixed income book yield was 3.2% in 2024, and 98% of the bond portfolio was rated AA or better.

Guidance

• Insurance Improvement: Continues to work on improving insurance operating performance and driving profitable growth across businesses.
• CPI Impact: Expect the impact of CPI losses on results to decrease in 2025.
• Technology Benefits: Technology investments will improve claims handling and operating efficiency over time.

Risks

• Insurance Underperformance: Insurance underperformance has been an issue, and market changes could continue to affect results.
• Reinsurance Challenges: Reinsurance underwriting profit has trailed targets, and market dynamics could impact reinsurance results.
• Ventures Economic Cycle: Ventures businesses are subject to economic cycles, which could affect their performance.

Q: How much do you feel like with the structure, it's all the different components of what you do as opposed to execution, just how successful you've been on operating in that structure?

A: Yeah, Mark. That it's really a mix of both. So I think in terms of the structure, the issue is sometimes people have suggested that they can't understand or the clarity is not what it should be. And they would like things to be presented in a different way, and more clarity. And I think the press release that we put out today in the fourth quarter result, just the whole package is our first pass in trying to address that. Secondly, in terms of execution, we've publicly said for a while now that we've had some challenges, particularly in the insurance business, and there are areas where we can and should do better. So we're continuing to that theme and continuing to do the hard work of indeed delivering and executing on those businesses, but it's a combination of both.

Q: When we think about the intrinsic value calculation for Markel Ventures, how does that compare to the carrying value?

A: Yes. In very general terms, it'll be more. So, again, part of the way in which we're playing out some of the pieces of the intrinsic value is again to address the rate of change in value that happens over time. That's not the single point estimate. It's having a methodology that you can repeat and do year after year after year after year. And because GAAP accounting has sort of different approaches of how it would recognize things that happen inside a financial business such as insurance compared to a nonfinancial business such as those that comprise ventures. This is the way that I, as a fellow owner of Markel, think about the economic progress of the Markel group over time. And we've been talking this is not new. Been talking about this in the annual report the last couple of years. So it's not about the point estimate. It's about having a consistent methodology that you do year by year by year to try to amplify and clarify what GAAP accounting might suggest in order to get the real economics of what's happening in the businesses. Also, not a buy component. Metric. It's really just taking the whole thing as a whole your question about ventures specifically, I mean, in fact, what you've got a bit of a blended multiple of many different streams of cash flows. We didn't think about it separately.

Q: When we think about offline opportunities, say, within the insurance segment, you've made a lot of progress in your underwriting. I think you had some favorable development on 2024 within some of the casualty lines, like the GL, like properly. Is it time to start growing again in 2025, or is there opportunity to grow the top line? How should we think about the outlook here?

A: Yeah. I'll let Brian comment about the specifics of the numbers there, but in terms of growth, when we execute our business well, growth seems to follow. And profitable growth is what we're emphasizing around here. That's first and foremost. And again, we think in longer - term time frames around here, five years of time is the way we calculate our incentive compensation, for instance, at the highest levels, and there hasn't been any five - year period that I'm aware of that we were doing less business than what we did with the five - year chunk before that.