Good morning, and welcome to the Markel Group Second Quarter 2024 Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. During the call today, we may make forward-looking statements that are based on current assumptions and opinions about various known and unknown risks. Actual results could differ significantly from those indicated in these forward-looking statements. More information about factors that might cause actual results to differ is included in the press release for our second quarter 2024 results and in our latest annual report on Form 10-K and quarterly report on Form 10-Q, particularly under the sections labeled Safe Harbor and Cautionary Statements and Risk Factors. We might also discuss certain non-GAAP financial measures during today’s call. You can find the most comparable GAAP measures and a reconciliation to GAAP for these measures in our second quarter 2024 results press release or in our most recent Form 10-Q. The press release and our Form 10-K and Form 10-Q are available on our website at www.mklgroup.com in the Investor Relations section. Please note this event is being recorded. I would like to now turn the conference over to Tom Gayner, Chief Executive Officer. Please go ahead.

Thank you, and good morning. Welcome to the Markel Group second quarter conference call. My name is Tom Gayner, and I serve as your CEO. I'm joined today by our CFO, Brian Costanzo; and the President of our Insurance Operations, Jeremy Noble. I'll make a few opening remarks and then turn things over to Brian and Jeremy to update you on our financial results and some comments on our Insurance engine. We always appreciate the chance to spend time with our partners. We cannot build the Markel Group without long-term owners who share our goals. As such, we welcome your long-term questions, thoughts and comments as fellow owners of the business. First off, we've got some good results to share with you. Brian will follow the conventions of financial reporting and share our most recent quarterly and year-to-date financial results. I will speak to some longer-term numbers. Those results will show positive contributions from each of our three engines. Our insurance engine continued to grow in the first half of 2024. Underwriting profitability improved sequentially from the first quarter. Our ongoing accounting conservatism and integrity can also be seen by ongoing favorable reserve development. We continue to produce improved underwriting results so far in 2024 despite ongoing industry-wide pressures of inflation and loss costs across almost every class of business. I am proud of our insurance teammates and their ongoing dedication to continuing to improve our underwriting performance. In our Ventures operations, we set new records in sales and earnings. I think it's accurate to say that we achieved these results against a backdrop of increasingly competitive and challenging external positions. I would also describe the overall economic environment as returning to some sense of normality after the last few years of disrupted overall conditions, supply chain challenges emerging and being dealt with, dramatic interest rate movements in both directions and other volatility creating surprises at a snapping speed. Markel Ventures continues to perform very well amidst these conditions, and I couldn't be prouder of the team's efforts and their results. One other point on Ventures is that for the last several years, we've been talking about how high transaction prices were in buying and selling businesses. As such, we acted with discipline and did not add any new companies to our family in 2022 or 2023. I'm pleased to report that so far in 2024, our partners at VSC and Costa Farms have acquired businesses that complement their existing offerings and footprint. We also added a new Markel Ventures company at the end of the second quarter with the purchase of a majority interest in Valor Environmental. Valor is a leading provider of erosion control, storm water management and regulatory-driven site services, and we are delighted to welcome them to the family. Valor in each of VSC and Costa transactions met our long-standing four-part tasks we use to guide us in selecting investments both public and private. Those four parts are: one, we look for businesses with good returns on capital that don't use too much debt. Second, we look for management teams with equal measures of talent and integrity; Third, we look for businesses with reinvestment opportunities and capital discipline, and four, we look for all of those first three attributes at a fair price. As to Valor and the additions of Costa VSC, check-check-check and check. It's worth noting that beyond being an attractive buyer and home to sellers of long-term, multi-generation family businesses, at certain times, we can be an attractive buyer for financial backers such as family offices and private equity firms. Until recently, we did not consummate any deals for those types of sellers. Higher interest rates and changing business conditions are starting to shake a few things loose from some different trees these days. We are productively engaged in way more conversations with way more kinds of sellers in this environment than it has been in the case in recent years. Stay tuned for more news as time goes by. I am personally excited by what we're seeing and what we're working on these days. Our ability to productively deploy capital at good rates of return and durable businesses that meet our four-part test is exciting to me. The skills and relationships required to invest capital wisely don't spring up overnight. We've been honing these skills for decades, and the opportunities to act on them are now growing. On the investment side, we continue to consistently follow our time-tested strategy. The recurring interest and dividend income continues to increase as each maturing bond in our portfolio is replaced with a higher coupon security. Similarly, dividend income from our high-quality portfolio of equities continues to increase. While our relative equity returns this year trail the S&P 500, we remain committed to our long-term disciplined approach. The last time we trailed the S&P by this magnitude was in the late 1990s when the market seemed possessed by a singular market focus. We stuck to our guns and preserved and protected our balance sheet. That turned out to be a good thing when the market environment changed. It seems to me like we might be facing a similar phase change environment today as we did at that time. We have been and will remain committed to our successful time-tested low-cost and tax-efficient strategy. Finally, before I turn the call over to Brian to review the 2024 results, I want to provide some thoughts on a longer-term horizon measurement of our progress at the Markel Group. As we've stated repeatedly over the years, we aspire to build one of the world's great companies, and we mean to do so in an enduring fashion. As one tool to foster long-term behavior, internally, we measure our performance over five-year intervals to judge our performance and calculate incentive compensation. We do so in an effort to constantly remain focused on longer-term accomplishments rather than quarterly or annual measures. Five years ago, at June 30, 2019, we had total net investments, that is our entire investment portfolio plus cash minus debt of $17.5 billion. As of June 30, 2024, that number stands at $28.2 billion, an increase of 61%. Five years ago through June 30, 2019, we earned underwriting and insurance income of $142 million. Five years later, through June 30, 2024, we earned underwriting and insurance income of $313 million, an increase of 120%. Five years ago through June 30, 2019, we earned $133 million of operating income in our Markel Ventures operations. Through June 30, 2024, we earned $281 million of operating income, an increase of 112%. At June 30, 2019, each share of Markel sold for about $1,100. At June 30, 2024, each share of Markel sold for about $1,575, an increase of about 43%. The share price change is the lowest number on the page. In response to our own calculation of the intrinsic value per share of Markel, and the array of opportunities available to us to productively deploy capital, we've repurchased Markel shares. Five years ago, the share count stood at 13.826 million shares. At June 30, 2024, it stood at 12.962 million, a decrease of almost 1 million shares. The vast majority of these repurchases took place in the 2022 through 2024 timeframe. It seems to me that math indicates we're looking at the circumstance of more company divided by fewer shares. I think that this ought to produce excellent returns for our shareholders over time. Even more important than the numbers, is the way the numbers get achieved. The numbers are the outcome and the results of our culture and the efforts of the people of this company. As we say in the first paragraph of our culture statement, the Markel Style, we believe in hard work and zealous pursuit of excellence while keeping a sense of humor. Our creed is honesty and fairness in all of our dealings. I am proud of the people at Markel and I thank them for their ongoing efforts to build our company around such wonderful principles. With that, I'd like to turn things over to Brian. But wait, before I do, I just want to interject here, my fantastic and able assistant Cynthia Featherman actually deployed the tools of AI to take my comments and ask Microsoft Copilot to write a poem about what I just said. This will only take a second, but I can't help but share it with you. So you're good. We're glad to share some news with you about our second-quarter review. We have three engines that fuel our fire, Insurance, Ventures and Investments they inspire. Our Insurance engine showed its skill in underwriting despite some mills. Our Ventures engine soared to new heights in sales and earnings and new buys. Our Investment engine stuck to our plan of low-cost, tax-efficient and brand. We track our progress over 5 years, we see more value and fewer fears. We also bought back some of our stock to show you that we value your lock. We thank you for your trust in backing, and we hope you'll join our unpacking. So with that AI-augmented presentation, let me turn it over to you, Brian.

Thanks, Tom. It would be difficult to improve upon that. I’m glad to be here this morning to discuss our results for the first half of 2024. Each of our three segments—Insurance, Investments, and Markel Ventures—contributed significantly to our results. To start with our consolidated results, total revenues rose 5% to $8.2 billion for the first half of 2024, and total operating income increased slightly year-over-year to $1.75 billion, with the primary driver of growth being a 34% rise in our net investment income. Net income attributable to common shareholders was $1.3 billion in the first half of 2024 compared to $1.2 billion during the same period of 2023. Comprehensive income for shareholders was $1.2 billion in the first half of both years. Net cash from operating activities amounted to $1.2 billion in the first half of 2024 versus $1 billion in the same period of 2023. Our operating cash flows in 2024 showed strong contributions from each of our operating segments, particularly from our Insurance segment. In May, we issued $600 million in 30-year unsecured senior notes with a 6% interest rate, resulting in a debt-to-capital ratio of 22%. In the first half of 2024, we repurchased $260 million of Markel Group common stock under our share repurchase program, compared to $187 million in the same period last year. Now, let's discuss the performance of our three operating segments, starting with our Insurance segment. Gross written premiums from our underwriting operations grew by 6% to $5.7 billion for the first half of 2024, compared to $5.4 billion in the same period of 2023. This increase in premium volume was largely due to our International Marine and Energy Insurance and Reinsurance business, along with growth in select US lines, including personal lines and programs. However, it was partially offset by targeted premium reductions in certain classes within our US professional and general liability portfolios, where we took steps to improve profitability. Jeremy will provide further details on these actions. Our consolidated combined ratio for the first half of 2024 was 94%, up from 93% in the same period of 2023. This one-point increase was attributed to higher attritional loss ratios in our professional and general liability insurance product lines, as we cautiously added margin to classes facing challenging loss trends. Additionally, we experienced losses related to our discontinued intellectual property collateral protection insurance product. For the year-to-date 2024 consolidated combined ratio, we accounted for $96.8 million, or 2 points, of losses in our CPI product line. Prior year loss reserves developed more favorably in the first half of 2024, showing $221 million in loss adjustments compared to $139 million in 2023. The favorable development was especially noticeable in our International Professional Liability product lines. We remain cautious regarding the reduction of prior year loss reserves for our longer-tail US Professional and General Liability lines due to recent claims trends. In our Program Services and ILS operations, operating income rose 23% to $61 million, driven primarily by robust growth in our fronting businesses. Next, regarding our investment results, we reported net investment income of $441 million in the first half of 2024, compared to $329 million in the same period last year. This income reflects the recurring interest and dividends from our investment portfolio. We continue to benefit from higher interest rates, as the yield on our fixed maturity portfolio, short-term investments, and cash equivalents all increased when compared to the first half of 2023. We anticipate that, given the current interest rate landscape, the yields on fixed maturity securities will continue to incrementally rise throughout 2024 as lower-yielding securities mature and are replaced by higher-yielding ones. As of June 30, 2024, the book yield on our fixed maturity portfolio was 3.4%, an increase from just over 3% at the end of the prior year. Net investment gains of $772 million in 2024 resulted from favorable market movements, leading to an 8.9% return on our public equity portfolio for the first six months of 2024, compared to net investment gains of $857 million for the first half of 2023. As we’ve mentioned before, we prioritize long-term investment performance, recognizing variability in equity markets over time. At the end of June, the fair value of our equity portfolio included cumulative pretax unrealized gains of $6.9 billion. We had net unrealized investment losses of $152 million included in other comprehensive loss for the first half of 2024, compared to net unrealized investment gains of $30 million during the same period in 2023. Typically, we hold our fixed maturity investments until maturity and expect any unrealized holding gains and losses connected to changes in interest rates to reverse in the future as bonds mature. We maintain our commitment to investing in high-quality fixed-income securities. As of June 30, 2024, 98% of our fixed maturity portfolio was rated AA or higher, with no current or anticipated credit losses in the portfolio. Lastly, I'll discuss the results from our Markel Ventures segment. Revenues from Markel Ventures grew by 4% in the first half of 2024 compared to the same period in 2023, reflecting moderate revenue gains across many of our product businesses and contributions from an acquisition completed by one of our businesses in the first quarter of 2024. Operating income for Markel Ventures rose 7%, driven by increased revenues and improved operating margins in our consumer and building products businesses. As Tom mentioned, we completed the acquisition of Valor Environmental late in the second quarter, expanding our family of businesses within Markel Ventures. The initial allocation of the purchase price includes $108 million to goodwill and $49 million to intangible assets. Now, I will pass it over to Jeremy to provide more insights into our insurance segment.

Thanks, Brian, and good morning, everyone. I'm pleased to be here with you to discuss our progress within the insurance engine over the first half of this year. Our results continued to improve this year, coming off elevated combined ratio results during the latter half of 2023 due to prior year's reserve strengthening. Our combined ratio for the second quarter improved sequentially, and our first half combined ratio is where we expected to be at this point in the year despite higher losses within our intellectual property collateral protection portfolio which is in runoff. As Brian shared, we experienced greater favorable development on prior year's reserves through six months of 2024 than a year ago, and have not seen meaningful further development in the products we addressed at year-end. Overall, our operating revenue growth and underwriting gross written premium growth in the first half of the year reflects the actions we have taken to improve profitability. Within our Insurance segment, the lines where I have previously discussed us taking significant underwriting action to improve profitability, namely our brokerage excess and umbrella and brokerage contractors books within general liability, and risk-managed professional liability classes, we decreased writings year-to-date by over 20%. The remainder of our products in our Insurance segment, where we are generally achieving good levels of profitability and are satisfied with rate adequacy have grown 8% in the aggregate. Now let me briefly take you through each of our divisions for the first half of the year. First off, within our Specialty Division, we continue to benefit from the corrective actions taken within select classes in our casualty and professional liability books, while we will also remain cautious on current accident year loss picks in these areas. This is most evident in the gross written premium reductions in select classes of our casualty and professional books that I mentioned earlier. But specifically, we continue to pursue growth in profitable product classes, including personal lines, property, inland marine, binding and small commercial, managed liability and select programs business. Many of these lines are achieving meaningful rate increases. An exception is property, where in the past few months, we have seen a contraction in rates back to low single digits but still at attractive pricing levels. The growth in these lines is improving the product mix and overall combined ratio of the division as our premium earnings mix changes. Within casualty and professional liability classes, we continue to execute on our corrective underwriting action plans within certain pockets of the portfolio, where results have not met our expectations. During the first half of the year, our recently discontinued Intellectual Property Collateral Protection product line negatively impacted our combined ratio performance due to an increase in the frequency of defaults on loans collateralized by intellectual property that became impaired. During the second quarter, we recognized additional claims expense of $56 million relating to this discontinued product line, which adversely impacted our loss ratio by 3 points. Through the first half of 2024, we have recognized $97 million in claims activity which increased our loss ratio by 2 points. Given the claims-made nature of this product, most of these losses impact our current accident year attritional loss ratio. We recognized claims expense at the point we consider them probable, which occurs when there is both a default on the loan and an impairment on the intellectual property collateralizing the loan. That said, loan defaults are trending both at a faster clip and at a meaningfully higher level than anticipated at the beginning of the year. Changes in the macroeconomic conditions have put strain on early-stage businesses, resulting in less access to capital and higher loan defaults. Valuations of the intangible assets, collateralized to loans also have not held up in the workout process. We expect the majority of loss activity on this product to resolve by the end of 2025. The impact in any future quarter is unlikely to be significantly more than what has been experienced each of the past two quarters. For context, our portfolio consists of approximately 30 individual loan transactions for which we have recorded claims expense of just under half of the loans. Overall, our Specialty division under its recently refreshed management team led by Alex Martin has done a tremendous job of quickly executing on our corrective actions and improving profitability, while attending to the needs of our trading partners. Our International division continues to produce fantastic results, achieving both significant premium growth of just over 8% and a sub-80 combined ratio for the first half of this year. We continue to push for growth both organically and through geographic expansion as well as broadening our product offerings across our existing operations. While we have seen an increase in competition and downward pressure on rates within some classes in our international book, specifically our professional liability, energy and cyber portfolios, we believe these lines are still priced at levels that meet our requirements from a rate adequacy standpoint. Our State National program services operations achieved significant premium growth of 22% for the first half while producing consistent levels of high profitability. We also continue to differentiate ourselves within the fronting market with our ability to facilitate and place complex transactions. Our team continues to be best in class and efficiently matching risk with capital, managing our exposures. Within our Nephila operations, the team has been hard at work constructing attractive portfolios and responding to heightened levels of natural catastrophe losses anticipated this year. We have both hedged risk for current capacity deployed and reduced overall premium writings, which will modestly lower our operating revenues in the short-term. However, these actions are in the long-term best interest of our investors, and we remain excited about the future prospects of our business. In our Global Reinsurance division, we remain steadfastly focused on pricing adequacy for the lines we are deploying. In the current market environment, we've lowered our required combined ratio pricing targets to reflect caution, while also being opportunistic in pockets of the book, particularly within our marine and energy class. In general, we are walking away from deals where we believe pricing is inadequate. With that, I'd like to thank our over 5,000 associates across our insurance operations for their exemplary efforts for the first half of the year, delivering improving results and serving our clients. Now I'll turn it back over to Tom.

Thank you, Jeremy, and Brian. And with that, we will open the floor for questions, if we may.

We will now begin the question-and-answer session. Your first question comes from Andrew Kligerman with TD Securities. Please go ahead.

Good morning, everyone. I have a question about the prior year reserve release of 6.9%. It appears that Markel consistently releases reserves each quarter. Why not set the loss picks lower initially? Or am I not considering this correctly?

Yeah, Andrew, this is Tom. Let me take the first pass at that, and I invite Brian and Jeremy to chime in as well. I've been at Markel for 34 years now, and have owned stocks since the IPO in 1986. And even before the IPO, the phrase that you would hear over and over again was that we set our reserves at levels that are more likely to prove redundant than deficient. That's been an unchanging value statement forever, for my lifetime for the history of this company. And I think that's hugely important. Because, it's important to be modest and humble about your ability to forecast what's really going to go on. So what we do is, we look at our book of business, we look at the risk, we look at our exposures. We take our best guess at what we think the ultimate loss costs are going to be. And then, because we know that number is likely to be wrong, we ask ourselves, do we want it to be wrong, the wrong way or wrong the right way. And wrong the right way is providing some margin of safety, some margin of error to be able to absorb surprises and yet still report to you fairly what's going on, on a day-by-day basis. The other advantage to that is there's a feedback loop, between setting reserves and underwriters making new pricing decisions on business that they're writing today and going forward. And if you get that reserve number a little skinny or tight, which you've introduced as a feedback loop and data to your underwriter, that would cause them to perhaps potentially write new business at a thinner rate than really what should happen. So that's just a matter of philosophy. I know you're relatively new to following Markel.

Yeah.

But you'll find if you go back in time, that has always been the case, and it will always be the case, because we think that's the right way to run an insurance operation.

That makes a lot of sense, Tom. That helps me understand the combined ratio better going forward. You seem genuinely excited about opportunities in Markel Ventures. I believe I heard correctly on the call that the valuation on Valor was around $200 million. What are you currently considering in terms of industries and potential price ranges as you move ahead?

Well, in terms of potential industry, sometimes when I'm in a cocktail party and somebody wants to know what Markel Group does or Markel will work? I'd say we're a holding company, we hold things that most people won't touch. So we do not have an industry vertical that we seek and desire in a strategic way. We like wonderful businesses that produce good returns on capital that don't use too much debt to do it. They have management teams with integrity and talent, have reinvestment opportunities and we can get them at a fair price. And that includes a lot of different things that you can see from the array of both the things we own in Ventures and the types of risks that we write in our Insurance operation. So we're 360 degrees open. We've talked to a lot of people. We've built a lot of relationships over the years. And as a consequence, our phone rings with interesting stuff. In fact, there was one business where somebody called me and literally his opening line was, 'This business was so weird, I thought of you immediately'. So fortunately, we've developed and earned a reputation over the years. Our phones are ringing more today than they did for the last couple of years. So that's why I'm excited and look forward to getting some things over the line.

Thank you. Your next question comes from the line of Andrew Andersen with Jefferies. Please go ahead.

Hey, good morning. You've talked about reserve studies in-depth reviews you conducted in fourth quarter 2022 and fourth quarter 2023. But could you touch on how the quarterly approach to reserve studies has changed, if at all? Or should we continue to expect a larger widespread study conducted annually in the fourth quarter?

Hey, it's Jeremy. I'll take that. So we do a comprehensive reserving study and analysis every quarter across the various years and products in each of our divisions. What stood out in the last fourth quarter period you mentioned, including the fourth quarter of this past year, was actually a more specific deeper dive in targeted areas because of some the reserving trends we have seen. So there is not to say that there is a fourth quarter annual reserve study. Our approach to reserving and that comprehensive review of the product lines is very consistent over time, but also consistent over time, is we're always looking at anything that's developing or new trends that are deviating from our actuarial expectations and what we're seeing in the data. And if there's anything that we want to do a deeper dive on, we do those sub-class studies and examinations on a very regular basis. In the first quarter and the second quarter of this year, what we've seen is that the reserve analysis and the work that we did and the selections we made at the end of the year, have held up well. And so what you're seeing coming through is favorable development sequentially higher this year to last year, and that's driven in part by some of our shorter tail lines in the U.S. space as well as across the international portfolio.

Thanks for that. And then just on the growth within the insurance segment, 2% in the quarter, but it sounds like you're getting some rate on GL, though still being pretty cautious. Property returns are still pretty favorable. Would you expect primary insurance growth to accelerate a bit in the second half? And then maybe just with that, the session rate has ticked higher; is kind of 2Q a good run rate?

Yeah. So there's any number of things that are happening in the portfolio. And you're exactly right, there are sort of two stories that are happening. One is about the insurance space. One is about the reshaping and re-underwriting and the actions we've taken kind of in those areas that we've been really focused and intentional on wanting to drive some different outcomes. I think, I mentioned that in those product lines were down over 20% year-over-year. The rest of the portfolio in the aggregate is growing and we see many pockets within the portfolio that feel, actually pretty confident we can grow. So we'll continue to focus on the opportunities we see in the International space, and then in the US space in Personal Lines and in Property and Binding and Small Commercial and Programs and Inland Marine, Managed Reliability, a bunch of classes that we feel pretty good about. So even in the Casualty and Professional portfolios, where we've taken some targeted actions, we're trying to reposition and reshape those portfolios. So we still see areas of opportunity for growth. So I'm not going to guide towards a top-line figure, but there certainly are pockets in the portfolio that we feel confident are profitable, are priced adequately, and that we feel that there's a good Markel value proposition, and our teams are very focused on growing in those products.

Your next question comes from the line of John Fox with Fenimore. Please go ahead.

Thank you. Good morning, everyone. In July, there was a press release regarding a reinsurance agreement between State National and James River, which wasn't discussed in the previous Q&A. Could you provide some insight on that? I understand there is some form of risk sharing related to future development. Jeremy, could you elaborate on this deal? Additionally, what are the potential downsides if developments don't proceed as anticipated?

Sure, John. This is Jeremy. Let me address that. The interest in that transaction comes from one side of the deal. This is a State National transaction, where State National Insurance Company entered into a reinsurance contract covering adverse development for a loss portfolio with the party you mentioned. The terms and conditions are clearly defined. This aligns with the role that State National plays in fronting transactions. The deal was entirely retroceded, transferring all responsibilities from that loss portfolio transfer and adverse development agreement to a reputable reinsurer. The retrocession contract includes credit risk mitigation features that reflect State National's established risk management practices. Overall, we view this agreement as a strong representation of our abilities as a leader in the fronting sector. At State National, we facilitate complex transactions, effectively match risk with capital using our top-level services and capabilities, while also incorporating the credit risk mitigation strategies typical of our long-standing approach. That's also why this isn't reflected in Markel, as it is primarily a State National transaction and resembles a fee-for-service arrangement.

Okay. So when I look at the James River's release, which says State National provides $160 million adverse development, that's been reinsured out away from Markel's balance sheet?

That's right. It's very similar to the deals that we would enter into in the fronting space with State National. There's a contract on one counterparty in the front end. There's another contract with another counterparty on the back end. We match up all those sort of terms. And that's really what that fronting model, that State National model is all about.

Okay. Great. And so staying in the weeds on reinsurance. In the Q on Page 24, it looks like there was some type of deal with Nephila, and it looks like you reinsured that out also. So could you talk about the deal between Nephila and Markel in the quarter?

Yeah. I don't have that language directly in front of me, and I don't think there was anything unique in the quarter with regards to Nephila. But however, what you may be picking up on is within our other fronting operations, we've seen an uptick in the premiums there, and we're acknowledging that those premiums are associated with the Nephila platform. That is where Nephila uses our rated balance sheet in some of its products that have enhanced fee features to support some of its investors. So again, it's leveraging some of the wider tools and capabilities that we have within the Markel platform to support some of the products and capabilities that Nephila has. But again, those arrangements would be using Markel rated paper, but ultimately would be supporting third-party capital and investors.

Yes, John, maybe I'll add real quick. When you see other fronting kind of referred to in the Q or the press release, not all of it, but the majority of that is attributed to the Nephila transactions that Jeremy just described.

Your next question comes from the line of Charlie Lederer with Citigroup. Please go ahead.

Hi, thanks. I have a few questions on the IP business that I know you discontinued, so I apologize. But can you walk us through the claims process with that product? I guess, we understand that some of these policies trigger a claim and the amount of the full collateral regardless of its value. Is that correct? And is that part of the severity here?

Yes, hey, Charlie, it's Jeremy. So you're right. I mean the product does have a sort of a dual trigger. So really, there needs to be a default on the loan, and that loan is backed by the IP. And then you also have to have the impairment in the collateral that secures loan, so that is the intellectual property itself. So when we recognize claims or loss activity, we're reacting both to a default on the loan as well as to the impairment and the intellectual property of that entity that secured the loan.

Got it. And I guess how long of a process is that to determine the value of the IP or the collateral?

Yes, it varies from one contract to another, but generally, following a trigger for default, we expect a period of around six to nine months to actively assess what the next steps will be. There are many possibilities that could arise involving emerging or early-stage companies, which can impact the situation. If no resolution is reached within that six to nine-month timeframe, it would then result in an official default and the potential need to settle the claim.

Your next question comes from the line of Andrew Kligerman with TD Securities. Please go ahead.

Hey, thanks for taking me back in the queue. Just on the intellectual property item. You mentioned, I believe, on this call and in the 10-Q that there's a possibility that you could see similar loss levels in the subsequent two quarters. Why not take reserve charge right now just to kind of capture that if you think there's a good chance that that will occur?

Yes. This is Brian. It’s a tricky product. Reflecting on Tom's discussion about our reserving philosophy, if this weren't a unique product, we would likely take a different approach. The claims-made nature of the product introduced a different timing for recognizing claim expenses. As Jeremy mentioned, we need to assess when there is a probable loss under that dual trigger mechanism. This involves a default on the loan and an impairment of the intellectual property collateral backing it. This situation arises well before the workouts are finalized and before any ultimate payment of the loss, but it doesn't mean we are front-loading all expenses upfront. A good analogy is a mortgage product, where you don't expect all defaults to happen on the first day; instead, they spread out over the term of the mortgage loans.

I see. So given that it's a claims-made product, does that imply that these policies are probably not going to last through the balance of the year? So, by the end of this year, the claims that come in will be done and over with? Is that a fair way to think about it as well?

The loans are typically four or five-year terms. So the policy is written over the duration of the loan. So the coverage lasts for the entirety of that loan, including to the ultimate repayment of the loan at the end. And so, you're monitoring each of these deals throughout the duration of the loan and measure it against that criteria on a quarterly basis that I laid out.

Your next question comes from the line of John Fox with Fenimore. Please go ahead.

Hi. I guess I was getting limited to two questions. So I just want to confirm, I didn't see any cat losses disclosed in the Q. Is that correct?

Hey John, it's Jeremy. That's correct. We generally see a small increase in incidents related to catastrophes. We typically record those in attritional unless something really stands out.

Your next question comes from the line of Charlie Lederer with Citigroup. Please go ahead.

Hi. Thanks. Sorry, to harp on the IP stuff a little bit more. But last year, I think in 3Q and 4Q, you called out some losses that I think were credit losses related to the collateral not being what it was purported to be. Were there losses on top of those figures last year? I just want to make sure I kind of understand the trend.

Yes, it's Jeremy. The specifics are documented in our disclosures, including last year's third quarter 10-Q and the most recent 10-K. Last year, total losses on the CPI product were just over 1 point on our consolidated combined rate ratio. About 60% of that was linked to the two fraudulent letters of credit we mentioned. We also highlighted in the third and fourth quarters that there were underlying losses from some defaults. We've tracked that activity through the first two quarters of this year and discussed potential future impacts, which we believe will not exceed current quarter experiences. We expect to wrap this up by the end of 2025 at the latest and have provided insights into the portfolio size and the number of defaults that have occurred. We've outlined as much information as possible regarding CPI to ensure transparency and allow for independent assessments. It's important to note that clarifying CPI losses helps highlight ongoing improvements in our core insurance portfolios. We've made significant efforts to adapt to current market conditions, take necessary actions, and grow in diverse lines of business where profitability is attractive. Our specialty team has been focused on putting CPI in runoff. While we've learned some tough lessons, we've moved forward and are confident in our position in our Specialty Insurance operations.

Thank you. I can definitely appreciate it and understood. I guess just a different question, given the growth in property, can you just give us a sense of, I guess, your cat exposure in the insurance segment heading into wind season?

Yeah, sure. Thanks for that question, Charlie. So we've actively managed our property aggregates over some period of time. We would have talked about in recent years reducing and removing some of the volatility within our book. Obviously, the consolidation of our property reinsurance capabilities through Nephila, was an example of that. Exiting a number of years ago open market property in the international space as an example of that. Now, our property writings are really sort of the core aspect of our portfolio. We've continued to opportunistically grow in that space. But in terms of across the portfolio, in terms of an average annual loss or in terms of sort of if you take out modeling out on a capital event to one or 250 or something like that, as a percentage of sort of shareholders' equity, those amounts have actually come down over time. So opportunistically taking advantage of the market, but also benefiting from a larger, more well-diversified portfolio and a larger balance sheet.

Your next question comes from the line of Andrew Kligerman with TD Securities. Please go ahead.

This is my record and a long career of being on queue. This is my third round, very exciting. Last question for you is around Ventures. You did 5% revenue growth. And I'm kind of curious, is this a good trend line to think about going forward? And within Ventures, what businesses are really knocking the ball out of the park, and which businesses do you feel might be a little slow at this time?

Well, thanks, Andrew. And for your gold medal round of questioning let me tackle this in Olympic Spirit. So the rate of growth in Ventures as we sit right now is slowing a bit, and I would basically attribute that to just what you see in the overall economy. So if we think about the last three or four years, I think four factors; one, labor. We were short of labor. We were trying to hire people every day, and just trying to get people in the door. Factor two, we were short inventory. We couldn't build stuff fast enough. We couldn't get fast enough, inventory conditions were short. Three, we have long order books. And that meant for orders that we had, our orders were great, and there were long lead times in getting stuff out the door because of all the things that I talked about. And there were long lag times in getting inputs and getting things in. And then fourth, we were operating in an environment of zero-ish percent interest rates. So the world was just funding anybody who had some idea that thought they could make positive returns. As we look at conditions right now, I would say, on each of those four points, labor markets are softening a little bit. So they're not there's not an unemployment crisis, but labor markets are a little softer than what they were. Two, inventory in a lot of places is building up a little bit, and this is more things we see rather than in our own internal operations. But we see cars on lots and we see warehouses with some stuff in it that we didn't see over the course of the last three years. Order books are a little softer. And four, interest rates exist to people's behaviors are more cautious on the hurdle rates to do anything are going up. In that kind of environment, I fully expect the top-line growth in the external conditions we operate in to be a little bit tougher. But that said, I love the team that's on the field. And I love the things that are being shaken loose by an environment like this, which when we start talking about these five-year numbers are things that add to the good. So I don't really have any current market commentary or specific businesses to point to other than what I would say about the group in aggregate.

Thanks so much.

Your next question comes from the line of Andrew Andersen with Jefferies. Please go ahead.

Sorry for another guidance type question, but hopefully I'll get a pass on this one. The Reinsurance segment premium growth has really bounced around here. Can you kind of help us think about ideal size here? And is like a mid-90s combined ratio still the target in Reinsurance?

Thank you for that. There are a couple of points to discuss. In the recent quarter, premiums increased significantly, which I believe is partly due to favorable timing and changes in inception dates on some larger deals. Additionally, we selectively increased participation on a few favorable renewals and saw some modest new business opportunities across various product lines. However, this was somewhat offset by non-renewals of deals that didn't meet our profitability criteria. Overall, I still see some modest growth opportunities based on our current portfolio. Regarding the combined ratio, it has remained relatively steady over the past several quarters. This stability follows our decision several years ago to consolidate our property reinsurance capabilities under one umbrella with Nephila, allowing us to focus on a long-tail oriented casualty professional and specialty approach. We feel optimistic about our portfolio in the current underwriting years. However, because our focus is on long-tail business, it will take time to observe the underlying trends before we can claim improvements in the portfolio. The fluctuations in the combined ratio during any period largely reflect prior year developments. In many cases, we are responding to diverse deals across different underwriting years and product lines, including those we no longer support, which contributes to the noise. Therefore, in the foreseeable future, I expect to see the combined ratio in the range we've reported in recent quarters.

Thank you.

This concludes our question-and-answer session. I would now like to turn the conference back over to Tom Gayner for any closing remarks.

Thank you very much for joining us, and we look forward to reporting back to you again in another 90 days. Be well.

The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.