Markel Group Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Kligerman - TD Cowen - Analyst : I guess the first question is around the favorable 7.2% prior year development and I think it was called out in the release, professional liability and general liability. Could you -- just given that you've taken a big charge in those areas about 5 quarters ago, could you elaborate on the accident years and maybe a little bit more on the products where you're seeing the favorable development?

Question: Andrew Kligerman - TD Cowen - Analyst : Got it. Okay. And maybe moving over to the expense ratio at 35.8%, and you cited that it was 1 point better than Q4. I've observed a number of developments. I think you talked about some time ago, put out a release on Guidewire, managing your claims, Simon, who's just talked about simplification. Any sense of where that 35 intake could go? I know a lot of your peers are under 30. Any thoughts on your objective or where that can go?

Question: Mark Hughes - Truist Securities - Analyst : Yeah, thank you very much. Good morning. What should we think about the cadence of the top line as we go through the year. I think you'd mentioned we should start to see a little bit more momentum. Just trying to get a sense of how much more kind of refinement of the book is ahead of us? Or will we start to transition to more of a growth top line?

Question: Mark Hughes - Truist Securities - Analyst : Yes. The 6% adjustment, was that the overall written premium company-wide?

Question: Mark Hughes - Truist Securities - Analyst : And then, Simon, I think you mentioned you had optimism about US wholesale and specialty. I think the new structure is part of that. Is there anything out of the market that you see that gives you optimism? Anything about casualty pricing, loss trends, driving the top line? What is the -- influencing your thoughts there?

Question: Mark Hughes - Truist Securities - Analyst : That's a pretty good dual point there, Simon. You would say if we were operating at peak efficiency, you still feel pretty optimistic about the marketplace and tailwinds, summing up some of what you said there, but you couple that with some of the changes you're making internally where, for whatever reason, we haven't necessarily had quite clarity of P&L ownership that you might want to see. And now you've got leaders who will be very, very clear and about the business that they own and the decisions that they're responsible for making. You put those two things together, it's going to be pretty interesting. Thank you very much. Appreciate.

Question: Andrew Andersen - Jefferies - Analyst : Hey, good morning. In the [queue], you had mentioned that you decreased the level of caution and loss reserves. Could you maybe talk about what drove that level of change in caution, just given that social inflation is still pretty high across the industry?

Question: Andrew Andersen - Jefferies - Analyst : And then I think you said on the insurance underlying loss ratio, you think there could be improvement year-over-year. I just want to level set what base should we be looking at for '24.

Question: Andrew Andersen - Jefferies - Analyst : Sorry. So just to be clear, if we're looking at the 63.5% insurance ex cat, ex PYD, what we should be thinking there's improvement relative to?

Question: Andrew Andersen - Jefferies - Analyst : Okay, thanks. And then just last one. I think last year, within Nephila, you made a comment that you were kind of doing some hedging and you didn't really deploy all the business just given, I think it's still kind of an active hurricane outlook according to Colorado State, and it's still obviously very early in the year. But can you maybe talk about just capital deployment on Nephila and how it could earn into other ops?

Question: Andrew Kligerman - TD Cowen - Analyst : Yes, thank you for taking my follow-up question. Simon, I'm kind of curious with the addition of Guidewire, what are you doing in terms of data and analytics and AI? And how do you see Markel's insurance operations relative to your peers in that area?

Question: Andrew Kligerman - TD Cowen - Analyst : And then just my follow-up would be around the Ventures business. It looked like revenue dropped off about 1%. And I'm just kind of curious color around -- I think on the call, you cited consumer and building products seeing a deceleration or maybe even a drop in revenue. Maybe just elaborate a little more on what you're seeing across your different ventures, businesses and what we might expect over the course of the year.

Question: Mark Hughes - Truist Securities - Analyst : Maybe just to further the point, I agree with all of that for sure. Maybe here's the way you could think about it, Andrew, if you think about each of those businesses as a car. We have different kinds of cars within that family of companies. Some of them are [Steady Eddies]. They go 55 miles an hour down the road every single day. And those are a little easier to get your hands around. We've got a really good, stable base of those. And a number of those businesses, Tom alluded to, and we've said this quarter after quarter for many years or the kind that you buy expecting to go 55 miles an hour, but sometimes they're going 65 miles, sometimes they're going 45 miles. In recent years, a number of those important cars have been going to 65 miles. And that's fantastic. I mean we'd love that and now maybe they're easing back down closer to the 55 miles. And sometimes it's hard to know if they're going to go to 50 miles before they come back to 55 miles. We don't really worry too much about that as long as over the course of years, they're going to [the speed] at which we expect them to go. And on hold, that's absolutely true. So that's some of what we're feeling, and it's a little hard to look at them and know exactly which speed on aggregate, we're going to end up on. But as Tom said, we're really thrilled with the last couple of years. And that's a good thing.

Question: Charles Lee Gold - Truist Investment Services Inc - Analyst : Thank you. Simon, congratulations. I can't wait to spend some time with you at the reunion. I appreciate the move towards simplicity and clarity. I'm not sure the clarity I see is based on recent cataract surgery or the numbers are becoming clear. But a couple of observations, and I hope you could correct my thoughts. First of all, I saw acquisitions last year, two, I believe that we're roughly $310 million in cash. The way I view that you're taking 4% dollars and putting them in 10% to 12% returns over time and compounding that. The investment income line approaching the $1 billion number. I know you don't pay full tax because some is [muni] but $800 million after taxes and 12.5 million shares comes out to a pretty big number, $60 a share that we start every year with. And I know the lines will cross again, but right now, they're still going in our favor. You've got two products that have been punishing the IP and letters of credit but they're in runoff. And the numbers are coming in a little lower than you first put up. So those look like maybe two points that will be favorable '26 versus '25 and the probabilities of that are extremely high. I never like to do the -- if we didn't count the catastrophe line, but maybe the fires are exceptional, and maybe 2% is a more realistic number. So you take the [2% and the 2%] and you're operating somewhere around [92] as we speak on a going-forward basis and a point for the expense ratio, which you say is headed down. So it looks like we have a [91] company heading into next year with half the catastrophe losses that we had this year, and we're struggling in the [96 to 8] area. So you take the $1 billion of investment income, which we should hit this year, should hit that $2.50 a quarter number and a 5-point reduction in combined ratio and a Markel Ventures division that's doing better than treading water and with the new additions should produce more revenue and EBITDA. The picture has cleared up for me. And I just want to see if I'm looking at things correctly through my new eyes.

Question: Charles Lee Gold - Truist Investment Services Inc - Analyst : As you know, that's only on my mind daily. And I've beaten you up over the years on that subject, and I applaud the actions that you're taking. You're not saying the words, you're walking the walk. So that's the right thing to do.

Question: Charles Lee Gold - Truist Investment Services Inc - Analyst : Show up at bridge sometime.