Good morning and welcome to the Markel Group fourth quarter and year-end 2024 conference call. All participants will be in listening 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 to date 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 risks. 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 for our 2024 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 a reconciliation to GAAP for these measures in the press release for our 2024 results. The press release for our 2024 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, Audra, and good morning. Tom Gaynor here. Despite it being past the Larry David Cutoff, happy new year to all. The new year is a natural time to express gratitude and say thank you. It's a time to look forward, to plan, to set priorities, to do some self-examination and recommit to important values. It's also time to share our 2024 results with you and to talk about our plan for 2025 and beyond. First, let me start by saying thank you to the special people at the Markel Group. I'm lucky to come to work with the people of the Markel Group every day. We're 22,000 beating hearts who join as one to conduct our business with humanity and do things for people, not two people. Working at Markel Group is a team sport. We focus on creating a win-win-win world where customers, associates, and shareholders all win. a world where we grow the pie together. I'm proud of and grateful for our leaders and associates. They embrace our culture and make it real. They seek to improve constantly and to serve our customers and shareholders all day, every day. Thank you all for what you do. In 2024, this team of leaders and associates achieved operating income and returns above our targets. In any given year, our results are like those of a crew boat from rower one down the line to number eight, including the coxswain. Every year, like every race, is a slightly different story when it comes to how the oars are rowing. In 2024, the public equity portfolio was our boat's stern pair, setting the pace with strong returns. In the middle of the boat for this run, we saw mixed results from our insurance business. Many areas performed well, including international, state national, and much of the U.S. specialty. Underrated income and reinsurance, as well as some areas within U.S. specialty, were below our expectations. Finally, our ventures businesses continued to generate strong profitability and exceeded our target returns, driven by strong performance in our consumer and building products businesses, ventures found a strong, steady pace in 2024 from the bow. Together, our rowers produced an outstanding year of returns in 2024, which is part of the beauty of the design. But there's still the opportunity for better operating performance and for every ore to drive to its full potential and in unison with every stroke. Later, we will share more about what we were doing to get there. But first, some context is important. The insurance underperformance has not been a one-year thing. Some of these seeds were sown during a transitional period that began when Markel passed the baton to his next generation of leaders, which began formally in 2016. By 2022, it became clear that the initial structure put in on the front end, which included a co-CEO approach, was causing challenges in terms of focus and accountability. At that time, and with that realization, we implemented a series of actions to drive improved performance at the company, including, one, defining the purpose and function of the Markel Group, two, organizing around that purpose, including appointing a sole CEO and making additional key changes in leadership, three, creating a clearer decision framework with respect to capital allocation, and four, placing greater emphasis on profitability and returns. The combination of these changes has helped restore greater accountability and focus. Much has already been accomplished from making these changes, in particular within our insurance business. There, we began to address underperforming products through specific portfolio actions, exiting several unprofitable lines, re-underwriting others, and growing in areas of strength. Jeremy will provide an update on these actions shortly. Looking back from where we stand today, we have much to be proud of. Markel is earning good returns. We remain committed to our customers. We see these green shoots in our insurance business from the steps we have taken there. The Markel style continues to guide us. Overall, the Markel Group system is stronger, and much of the groundwork for the road ahead has been laid. But our aspiration is not just to be a good company or even a great company, but to be one of the world's great companies. That means more consistent excellence across all our operations, all the time is required. Charting such a course requires continuous self-examination and a never-ending zealous pursuit of excellence. In 2025 and beyond, we will continue to improve the foundation of our business. yesterday we announced a board-led review that will include evaluating where we can continue to improve our insurance organization as part of the review we will consider ways to simplify our structure find greater efficiency optimize our approach to capital allocation and enhance our disclosures external consultants and advisors will assist with the review we look forward to updating our shareholders when that work is completed Before moving forward, I want to mention that we will not be taking questions in the board-led review at this time, and we'll focus on questions relating to our business. Our pursuit of becoming one of the world's great companies in Markel has always come from providing an atmosphere in which people can reach their potential. We want to ensure that our associates are invigorated and empowered. We want to reward the best-performing crew members and hold every crew member in the boat accountable. Your feedback will be incorporated into our work. As the author Ken Blanchard once said, feedback is the breakfast of champions. One theme that emerged from our recent conversations with shareholders is that you see early progress in insurance, but also would like more information on what success looks like, path to get there, and signposts to track along the way. In a similar vein, investors also asked for increased clarity with respect to certain aspects of ventures performance, as it doesn't seem to be fully appreciated. We will do better to provide you with this information. Beyond all that I just mentioned, on the capital allocation front, we have been repurchasing more shares over the last two years. In 2022, I believe the trend in our stock price started to significantly diverge from that of Markel Group's intrinsic value. In 2022, we repurchased $291 million of our shares. This was when I began speaking more openly about the business's intrinsic value growth. It's my duty to explain to our shareholders why we're using more of their capital for share repurchases. We repurchased more shares in 2023 and 2024, totaling $445 million and $573 million, respectively. In 24, our board authorized an additional $2 billion in share repurchases. Several board members, managers, and I have also bought shares personally. But what will ultimately close the gap between our stock price and intrinsic value as we see it? We will continue to focus on everything within our control. We will run our businesses at the highest levels and invest behind our winners. Where we are falling short, we will learn. We will also strive to communicate more clearly. As the great Dr. Seuss once said, sometimes the questions are complicated and the answers are simple. To that end, we simplified our intrinsic value calculation. At last year's annual letter to shareholders, I discussed the building blocks of Markel Group's intrinsic value. The framework we provided in our press release this morning takes those principles and simplifies them further. We provide this not as a fixed number, but to show how we begin to think about the intrinsic value growth of Markel Group. It's a starting point. I'd also encourage placing less stock in the precise number and more in the rate of change you can see over time when you calculate this consistently year after year. The record will show that the number has compounded at high rates over the last five years and since our IPO in 1986. Our recent growth benefited from a period of above-average returns in our equity portfolio. We must improve our insurance results to reach our full potential in the next five years. We must also live our values, serve our customers, and communicate with our long-term partners who trust us with their capital. I am confident we will do just that. Just as the coxswain calls out when it's time for the rowers to give it everything they've got, We know that it's time for us to make those hands fly. Before I turn it over to Brian, I would like to welcome some new team members. In 2024, we welcomed two new businesses and their leaders, Valor and EPI, to our team. Valor Environmental joined the family in June. Valor, founded by J.J. Mondato and Kirk Foster, offers erosion control and stormwater management services. These are required for anyone moving dirt and water in the U.S. With JJ and Kirk, we found common ground in our shared values and focus on customers. We also welcomed Debra Martin and her team at EPI to the family in September. However, we could not formally and publicly welcome them at that time to the pending nature of certain final regulatory approvals that were just recently received. We were happy to make things official in January. After a career as an educator, Deborah founded EPI, which sponsors an exchange visitor program for teachers. It serves school districts in the Southeast and Mid-Atlantic U.S. states. Welcome to Valor and EPI. With that, I'll turn the call over to Brian, who will go through some of our financial numbers from 2024. You will then turn it over to Jeremy, who will talk about performance in the insurance bills.

Thank you, Tom. Good morning, everyone. I will first review key metrics at the Markel group level. Then I will share performance numbers for our insurance and ventures businesses, plus our investment results. At the group level, let me begin by talking in a bit more detail about the intrinsic value that Tom mentioned. Before getting into the specific numbers, I'll offer you a Surgeon General's warning for our simple approach. As Tom suggested, we intentionally left our calculation at the 100 course level, simple and easy to follow, designed for ease of use and interpretation. It should be used with an awareness of its limitations, such as determining an appropriate multiple involves considering many factors, including the nature of the various cash flow streams. We just picked one that seemed reasonably conservative. 12 times is not the multiple we would pay for a business, nor would we consider buying a business for less than 12 times to be automatically accreted to intrinsic value. Items that are one-time in nature have not been adjusted for, such as disposal gains or losses. All good things for an analyst to consider. The value of equities is a snapshot in time as of the end of each year, and the world is dynamic. Like commercials that you would see for medications. Using this formula as a precise measure could cause dizziness, headaches, tunnel vision, or other side effects. You get the point, and I could go on and on with those like they tend to at the end of those commercials and actually spend more time with that than what the purpose of the calculation is. But I think that makes the illustration. Recognizing these limitations of the approach, we believe that our simplified method provides an annual insight into how we think about value creation when viewed over longer time periods. Details of our intrinsic value calculation can be found in the back of this morning's press release. Using our intrinsic value calculation and taking a five-year view, Markel Group's intrinsic value compounded at 18.3% over the last five years. This is compared to total shareholder return over the same period, growing at 8.6%, highlighting the gap that Tom mentioned previously. Beginning at the beginning of 2024, we began reporting our operating income for investments, ventures, insurance, and on a consolidated basis. Operating income is a key driver of intrinsic basic value, and our long-term incentives. If you must pick one metric for our scorecard, operating income is a good place to start. Markel Group's operating income was $3.7 billion in 2024, up from $2.9 billion in 2023. As Tom noted, the largest contributor to operating income was unrealized gains in our equity portfolio. Breaking down our operating income by engine. Insurance operating income was $601 million for the year and $143 million in the fourth quarter. Insurance operating income includes our global underwriting profits along with fee-based income from Nafila and State National. Investments operating income was $2.8 billion for the year and $367 million in the fourth quarter. Our annual investment operating income further breaks down as $913 million of recurring net investment income, $1.8 billion of net investment gains, largely from the mark on our equity portfolio, and $52 million of earnings from equity method investments. Ventures operating income across our 21 businesses was $520 million for the year and $132 million in the fourth quarter. The beauty of the Martell Group system lies in the fact that these diversified streams produce a river of cash flow. Operating income is generally convertible into cash that can be redeployed. Growth in insurance premiums and the time lag of paying reserves also generates cash, further fueling reinvestment. This growth generates future operating cash flows all in a cost and tax-efficient manner. Our total cash flows from operating activities in 2024 totaled $2.6 billion, driven largely by our insurance engine. Moving to our insurance operations. In insurance, we serve our customers through specialized underwriting, building lasting partnerships with our distribution partners, focusing on the long term, our strong balance sheet, and maximizing our people-powered culture. Just a comment about the natural catastrophe losses. During 2024, we incurred $71 million, or just under one point, of losses related to Hurricane Helene and Hurricane Milton. These losses have come down from our original estimates and are well within our expectations for events of this size. Further, while it is still early days for the California wildfires, we disclosed an estimated $90 million to $130 million impact on our first quarter 2025 results. This estimate is inclusive of losses and reinstatement premiums across our global underwriting operations this range includes no provision for potential salvage and subrogation recoveries and we have minimal premiums subject to the california fair plant while several of our first party product lines will have losses our largest impact is in our international fine arts and specie book overall our underwriting teams have done an excellent job of minimizing our exposure to wildfire losses. Moving to our segment results, starting with our insurance segment, which largely represents our specialty and international divisions. Gross written premium was $9.4 billion and net earned premium was $7.4 billion in 2024, each representing a 2% increase from a year ago. Insurance premiums grew despite numerous portfolio actions that reduced premiums in our U.S. casualty and risk-managed professional lines taken to improve the balance of the portfolio. The combined ratio was 94.3% versus 97.8% in 2023, an improvement of three and a half points, driven by higher prior accident year loss takedowns and our underwriting actions starting to earn through with more benefits from these actions expected in 2025 and beyond our current action year loss ratio was 64.4 in both 2024 and 2023 prior year loss development was 6.1 points favorable in 2024 versus 1.4 points favorable in 2023 due to actions taken in 2023 to strengthen in reserves in our casualty portfolio and higher prior-year loss takedowns this year in our international portfolio. The expense ratio was 36% in 2024 versus 35% in 2023, with the one-point increase driven by the decline in earned premiums in the U.S. from the underwriting actions and changes in our professional liability reinsurance structure and higher operating expense ratio and our international operations to support investment and growth initiatives. Our exited collateral protection insurance product line, or CPI, added 2.3 points on the insurance segment results this year versus 1.3 points last year. We expect the impact of CPI losses on our results to decrease in 2025. Jeremy will speak later about what we've done this past year and are further doing in 2025 to improve the long-term results within our U.S. specialty business. Moving to our reinsurance segment, reinsurance underwriting profit continues to trail our targets with a combined ratio of 101 for the year. Higher attritional loss ratios in our professional and general liability products drove this. We also had some large individual losses within our credit insurity products. Our prior year loss ratio was slightly favorable this year, and we had $34 million, or three points, of adverse development this year from our recently discontinued public entity product line. Turning next to our program services and ILS businesses, a.k.a. State National and Nafilla, in 2024, State National had strong, consistent performance with operating profits of $122 million, and Nafilla produced operating income of $41 million, a bit lower than last year. However, the 2023 results included $31 million in one-time fee income related to releasing capital from side pocket, turning next to our results from Markel Ventures. In Ventures, our operating businesses are autonomous and accountable. We use equity capital to acquire our family of businesses while promoting a long-term focus and our shared set of values. We seek companies with lasting competitive advantages that provide strong, steady returns on capital across economic cycles. Within certain of our businesses, cycles will and do occur. We price that into our underwriting. As to our 2024 revenues, total revenues exceeded $5 billion for the first time in our history, experiencing year-over-year growth of 3%. Our consumer and building products businesses drove the majority of venture's growth, while transportation-related businesses took a step back. As context, transportation-related demand has been very strong since the first half of 2020, providing a tailwind for our market-leading businesses in this sector the past few years. Historically, these businesses typically experience five-to-ten year cycles, with the rising need for transportation equipment and predictable replacement cycles fueling growth from one cycle to the next so while revenues have come down from the high points of the cycle these are businesses that particularly benefit from our long-term high equity capital approach additionally our construction services businesses are largest grouping by total revenues saw a deceleration in growth this year compared to last with flat year-over-year revenue growth when excluding the addition of valor in june Like transportation-related markets, demand for construction services was particularly strong post-COVID. Although elevated interest rates present a challenge for construction activity in this economic climate, we consider flat, reoccurring revenue growth to be a solid result for this group. Ventures operating income was $520 million for the year. Within both our equipment manufacturing and consumer and building products businesses, strong revenue growth drove even stronger operating income growth over the past two years. Although we noted that revenues across all of our construction services businesses were flat, excluding Valor, the construction services operating margins did decline slightly. Now moving over to our investments. Through our public equity portfolio, we own interests in many of the best businesses in the world. We seek out profitable businesses with good returns on capital, management teams with integrity and talent, and companies that have attractive reinvestment opportunities and are available at reasonable valuations. Our equity portfolio earned a 20.1% return, with $1.8 billion in net investment gains included in our 2024 operating income. The equity portfolio averaged a compound annual growth rate of 14.3% over the last five years. We don't expect these returns to be repeated in the next five years, but we're pleased with our portfolio. It has and should compound capital and attractive rates over long periods. Net investment income was $920 million in 2024 versus $735 million last year. For 2024, our fixed income book yield was 3.2%. In the fourth quarter, we continued to add new fixed income investments at higher yields, approximately 4.4% versus maturing bonds at approximately 3.6%. 98% of our bond portfolio was held in fixed income securities that are rated AA or better. Now we'll turn it over to Jeremy, who will provide more commentary on insurance.

Great. Thanks, Brian, and hello, everyone. I'd like to begin by adding my thanks to the efforts of my teammates in 2024. As was As mentioned earlier, we have many areas across the business that are performing exceptionally well. This year, we saw continued strong performance in our international and state national operations. Both grew while achieving profitability levels above our targets. We are investing in these businesses to support their long-term growth. Within our specialty business are personal lines, property, marine, healthcare, environmental, programs, commercial professional liability products, and most of our small commercial offerings also exceeded our targets. We continue to drive profitable growth in these areas. These lines represented over half of our gross written premiums in 2024. As we have noted, underperformance in our U.S. casualty and risk-managed professional liability books weighed on our results, and as a result, our overall U.S. specialty business fell short of our expectations. We have taken numerous actions during 2024. First, early last year we exited several product lines including primary casualty retail, business owners policy, risk managed access construction, risk managed architects and engineers, and collateral protection insurance. These exits were accretive to our 2024 results and will be further accretive in 2025. Second, we took more than 100 underwriting actions across our portfolio, including meaningfully reducing the construction mix in our casualty portfolio, changing terms and conditions to eliminate certain exposures to subcontractors, reducing limits on excess lines, and implementing premium caps in challenging states. Achieving double-digit rate increases across the casualty portfolio while walking away from risks that were not adequately priced and terminating certain underperforming programs. In risk-managed professional liability products, non-renewing business, contracting limits, and improving portfolio mix through segmentation. In our most challenged class, U.S. Public D&O, we recently announced further actions to move to a single access point for public D&O and large financial institutions coverage based in Bermuda. In total, these actions, in addition to the exits mentioned in my first point, resulted in a reduction to gross written premiums of over $350 million in 2024, but it should be accretive to net income. Third, we bolster our reserves by increasing our overall level of conservatism on the current accident year by approximately two points, which roughly offset the benefits from our underwriting actions earned in 2024. By adding a margin of safety to our current reserves, we increased the likelihood of greater prior year redundancies in future periods. Fourth, we refreshed the leadership team. Over the past 14 months, we appointed a new president of our specialty division and added a new Divisional Chief Underwriting Officer, COO, CIO, and CFO to complement our product and field leaders. And fifth, we made progress on our multi-year effort to improve our technology. We are investing heavily to make it easier and more exciting to do business with us and improve the customer experience by enhancing our underwriting and claims processes. We will give our underwriting, claims, and actuarial teams richer data. These investments will help us make better decisions, find insights faster, and improve efficiency. As Tom alluded to earlier, what tangible signposts can you track along the way to measure our progress? And what does success look like and how long will it take? While we strive to provide perspective on these important questions as we progress, Let me say today, our combined ratio of 95.2 is still higher than it should be. We expect our actions to drive the underlying combined ratio lower in 25 and even more so Prior year takedowns in 2024 were 5.4%, a great improvement, but still not at our longer term average of 68 points. Finally, we recently announced the go-live from our Guidewire Claims Module, an important next step in the modernizing of our U.S.-based technology architecture which will significantly improve our claims handling experience and over time our operating efficiency. This is progress, but we are not stopping there. We acknowledge that we still have work to do with underwriting actions, technology investments, and operating efficiency in the instance. We are committed to long-term success. Before concluding, I'd be remiss if I didn't highlight the excellent performance of Markel International, which in 2024 delivered a sub-80 combined ratio with strong growth while making notable investments in new products and markets. Well done, team. Thank you to the entire insurance team for improving our business in 2024. While the fruits of all our labors are not yet fully manifested in our results, to that, I'd say stay tuned. We are excited by our long-term prospects and look forward to updating you on our progress in the coming quarters and years. With that, I'll pass it back to Tom. Thank you, Jeremy.

To conclude, in 2024, Markel Group exceeded our return targets with strong returns from our public equity portfolio, continued growth in ventures, and notable performance in many areas of our insurance business, all while staying true to our values and striving for excellence. Over the past two years, Markel Group has made significant strides. As we continue to build on this progress, we are committed to enhancing our insurance operating performance and driving profitable growth across our family of businesses. We are excited for 2025 and to work ahead and to continue winning for shareholders, customers, and associates. We'll open up for questions and answers. Mike Heaton, the COO of Markel Group, will also join me. Jeremy and Brian in the room to take your- Thank you.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 1 again.

At this time, we'll pause momentarily to assemble our roster. we'll take our first question from mark hughes at truus yeah thank you good morning um this may venture into uh forbidden territory but i'm just sort of curious on the feedback you received on the uh business how much do you feel like with the structure just the uh all the different components of what you do as opposed to execution just how successful you've been on uh on operating in that structure?

Yeah, Mark, 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 and the fourth quarter result, just the The whole package is our first pass at trying to address that. Secondly, in terms of execution, we have 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 that theme and continuing to do the hard work of delivering and executing on those businesses. But it's a combination of both.

So when we think about the intrinsic value calculation for Markel Ventures, how does that compare to the carrying value? And I apologize if I could pull it out of the release, but I'm just curious whether you can give a sense of that.

Yes, in very general terms, it would be more. So again, part of the way in which we're laying out some of the pieces of the intrinsic value is, again, to address the rate of change in value that happens over time. So it'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 non-financial 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. We've 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 gap accounting might suggest in order to get the real economics of what's happening in the businesses.

Also not a bi-component metric. It's really just taking the whole thing as a whole. So your question about ventures specifically, I mean, in fact, what you've got is a bit of a blended multiple of many different streams of cash flow. So we didn't think about it separately.

And then when we think about top line 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, maybe GL, if I thought 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? 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 timeframes around here, five years at a 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 the five year chunk before that.

Yeah, it's Jeremy. I'll add to that just to say the key for us, as Tom was alluding to is just getting on the other side of those corrective actions. As we kind of mentioned in some of the prepared remarks, we have been seeing and we are growing across a number of product areas, both in the U.S. and internationally. The good news is we've managed to offset all of the reductions in premium volume that we experienced over the year. Those continued reductions where we're taking underwriting actions, that'll continue to play out a little bit in 25, And we should get to more normalized growth levels over time once we get on the other side of that corrective action.

Thank you.

We'll go next to Andrew Kligerman at TD Securities.

Hey, good morning. Kind of curious, you know, you had 5.2 percentage points of favorable prior year development. Could you share with us the geography of that prior year development? And I'm most interested in the casualty side, because I know that's been a rough line for you. Could you talk about whether that piece, casualty, was favorable or unfavorable, and to what degree and what underwriting years?

I'll let Brian and Jeremy chime in on the specific way to answer that question. But I do want to reiterate, getting back to the fundamental principles and the fundamental values of the Markel Group. We have, from day one, always wanted our reserves to be more likely to be redundant than deficient. And I think you could just randomly ask any person in this building, in any Markel office, anywhere in the world, and they would tell you that almost word for word. That is drilled into our culture. So we're glad to be back this year reporting something that has way more redundancy than it did last year and is getting back to our historical level of conservatism and reserve development in a positive way.

Yeah, I'd say generally speaking, you know, last year we hit the casualty really hard. So if you look at year over year, adverse development in casualty this year fairly flat in the casualty on a net basis. So those actions have largely held up throughout the year on a net basis. Within professional, it's kind of a mixed story. On the international side, we had takedowns here. That business is a lot different than the business we were talking about in the U.S. So that was a catalyst of takedowns this year. We did have some adverse development on the U.S. D&O line, the risk managed lines that we were talking about earlier. But overall, the five points, like Jeremy said, that's closer to our normal run rate with kind of the way in which we do reserving. So we have kind of a natural embedded kind of takedown in the way we do our reserving. And that's kind of what you're seeing come through the results this year.

Got it. And any of the casualty, any of the negative adverse casualty in recent underwriting years?

Yeah, so what I would say there is we've kept a close eye on that. We have been increasing slightly there on a gross basis. We have a reinsurance program that kind of limits the downside on a net basis there. So overall, it's relatively flat.

Got it. That's super helpful. And it is kind of interesting how you're kind of, you know, it seems like you're moving your mix more to short-care lines. So, last year, for net earned premium, general liability was 29%, and professional, and last year meaning 2023, and professional was 25%. Has that mix changed? Is it materially more short-tail? Has GL and professional come down a fair amount for 2024?

Hey, Andrews, Jeremy. I mean, I would not say the mix has changed materially. We, as you pointed to, we've historically been more concentrated in longer tail lines. And even with taking some corrective actions in areas like our U.S. general liability and professional liability spaces, we're still weighted more in that space. So, look, we're trying with each of our over 100 major product lines to write in the market that's most attractive where we feel we can deploy capital and earn appropriate returns. And we don't sort of necessarily think about, you know, just long tail versus shorter tail. So, it's a little bit of a mixed story in that space, but nothing material.

Got it. I'll hop back into the queue so others can ask questions.

We'll move next to Andrew Anderson at Jeffries.

Hey, good morning. Sounds like some pretty strong results on the international side of the house. Can you just remind us what percentage of the insurance segment is that? And I guess the reason I'm asking is if we look at some, you know, large account skewed surveys, it seems to indicate international pricing is kind of going negative. Perhaps you could talk about what you're seeing in your international business in terms of rate.

Yeah, and it's just Jeremy. So international rough, rough, call it a third, and two-thirds would be sort of the U.S. insurance. You're right in pointing out that in the international space, and again, if you think about that, we've got a large London market wholesale business where we run a lot of specialty lines, and then we really have our regional presence, Canada, U.K., across continental Europe, Asia Pacific. So trends and dynamics in those local markets can change a little bit. In the London market space, to your point, it's been a little bit of a transitioning market. Prices are coming off of where they've been, and in some places, they're modestly flat to down or only up slightly. However, that's off a very attractive level, I think, of rate adequacy. So we're monitoring that, but that business is performing very strong, to your point, in recent years.

Thanks. And maybe just keeping on pricing, I think I heard you say double-digit rate increases across casualty portfolio. I'm assuming that's U.S. casualty. But maybe you could just give us some more color on what the U.S. portion is seeing in terms of rate and whether that's above loss trend.

Yeah, sure. And again, it's Jeremy. And you're right. So casualty pricing has been one of the stronger areas in the portfolio. And really, we saw the pricing being pretty strong over the course of 24. That continued to be the case in the fourth quarter. That's across the portfolio. And there's a number of classes in line. But across the portfolio, double-digit rate increases, that would be staying slightly ahead of trend. And I don't see any reason why that pricing environment shouldn't persist as we go into 25. We talked about, and obviously it's pretty widely understood across the industry, given inflationary drivers, elevated loss costs, market dynamics, I would expect to continue to see pricing momentum in that space.

Thank you.

Yes.

Next, we'll move to John Fox at Fenimore Asset Management.

Yeah. Good morning, everyone. I have two questions. First, Tom, you mentioned more disclosure in the formatting, which I noticed in this release, and I appreciate it. So, that's a nice job. First question, Tom, you mentioned in the first sentence of this release about your targets, which were exceeded this year, and then maybe not longer term in the conference call. So can you express, you know, what are those targets that you're thinking about?

Well, the main ones that would have the most tangible impact on yours truly, as well as the people sitting around the table, is the compensation calculations that you find in the proxy statement. And a double-digit rates of return in operating income and market price per share, you know, we start getting paid nice incentives. So, you can start there and work backwards.

Okay, great. And then I just have a question on how you think about the intrinsic value per share. Looking at the table, I think you're using gross equity securities to $11.78 billion and some amount of gross investments, but there's an offsetting liability. You owe your policy holders, $26 billion, which of course will be paid out over time. So probably, you know, present value less than that. But how do you think about using gross investments in the intrinsic value with a lot, there is a liability that, you know, those investments are going to go out the door at some point. So just how do you think about that? Thank you.

Sure. And I invite you to think about it however you want to. And I can assure you that there were road-bottom discussions and points of view that had some differences from the people in this room. And the real point is you can do it any way you want, but do it consistently. So one extreme way of thinking about the question you've asked, and Buffett really deserves the credit for being the first person who realized this, built his business around it, is that if you have insurance liabilities and you make an underwriting profit on them and they don't go down over time, I mean, the net present value of that liability is zero. That yields a rather extreme answer, which my colleagues caution me away from. Okay, so we've applied some haircuts, some conservativism, but that is theoretically within the realm of possibility. So you can get a pretty big dispersion of numbers depending on your method. The thing that really is worthy and doesn't have much dispersion to it is the rate of change over time. And the longer the time frame you use, the tighter the dispersion, no matter what your method, and the more accurate it becomes. And that's the way we think about intrinsic value per share.

Okay, thank you.

Again, if you would like to ask a question, please press star, then one. We'll take our next question from Scott Helniak at RBC Capital Markets.

Yeah, good morning. Is there anything notable to share at the January 1 renewals, both on your reinsurance book and just from a buyer reinsurance standpoint, anything you can talk to there? And the secondary question on the reinsurance side is the exit of public entity. Can you remind me when that happened? Is that pretty much close to being anniversary?

Yes, Scott, it's Jeremy. I'll take the second one first. So with regards to the exit of public entity, we announced that right at the beginning of the fourth quarter, so I think we touched upon that a quarter ago, that really went into effect this past fourth quarter, and public entity probably contributed about four points to the reinsurance combined ratio in the year. So we're off risk now, but that happened in the fourth quarter, and the benefit of that will earn over the course of the next several quarters. With regards to 1-1, let me talk first to your point about our outwards reinsurance, where we buy reinsurance. Overall, pretty pleased. I mean, I would call the market orderly in some pockets, such as property and, say, our marine and energy out of London. Favorable terms, favorable pricing, good support, and it's certainly a good outcome. That's improvement year over year. A professional, which we placed late in the year, was kind of flat on pricing. We kept the structure the same casually, probably no surprise there, a little bit of an uptick in pricing. But all in all, good result, good support, pleased with the structures we have in place. Not a lot of change year over year. As far as the overall pricing conditions and marketplace going into the year, You know, we're not massive necessarily on one, and obviously we have a more modest total sort of reinsurance book. I would say most of the pricing trends that either I touched upon earlier or that you've generally heard across the marketplace played true for us as well.

Okay, no, that's really good detail. And then just you referenced the increase in IT spending in the fourth quarter, and you mentioned as well in the third quarter. Or is there any more detail that you can share on those investments? And do you expect that kind of run rate to continue in 2025, or do you feel like a lot of the heavy lifting is done? I know IT spending is never done, but just because you had mentioned it the last couple quarters, any context you can give on any of that?

Yeah, sure, sure. Good question. I mean, really, we've been pretty hard at work, I would say, making incremental investments in our technology modernization initiatives, both in our U.S. and international insurance businesses, let's call it over the last couple of years, but really accelerating this past year and more so this coming year. I won't specifically quantify the level of investment, but it is incrementally adding at least a half a point to the expense ratio, and those benefits will start to come over time. So I gave an example with regards to claims modernization in the U.S., and here pretty shortly we'll be transacting new claims on a new cloud-based modernized platform that will drive productivity and efficiency over time. But we've got a number of initiatives taking place both in the U.S. and internationally.

Okay, great. That's helpful. And just the last one, just on U.S. professional liability, do you know that's been a more competitive market? You've seen softening pricing just market-wide, and I know that's an area where you guys had started to pull back probably a year or more. Are you seeing stabilization in that? Do you expect to return to growth in that for 2025, or is it still highly competitive and you still may not want to grow in that, given what's happening now?

Yeah, it's Jeremy again, and the latter, I would say, is the case. It continues to be a very challenging sector. Pricing is not, I think, at levels of rate adequacy. We have scaled back this past year, and that will continue to be the case as we go into 25. It's just it's not an area of emphasis for us right now because the marketplace is not supportive.

Great. Appreciate all the answers.

We'll go to a follow-up from Andrew Kligerman at TD Securities.

Great. Thanks for the follow-up. Just following up on the expense ratio. So it was at 37.1%, about 170 basis points above last year's, and you just pointed out 50 basis points from investments in technology and seeing improvements over time. And, of course, earlier you mentioned scale as an issue as you've decreased earned premium a little bit, changes in reinsurance. But as I think about it, where would you like to see this expense ratio maybe three, five years from now? Are there any initiatives to get that down? I mean, will it just be the efficiencies from your technology investing right now? Could there be more initiatives? Maybe a little color on what else is occurring and where you'd like to see it maybe three to five years from now.

Yeah, thanks, Andrew. A couple things there. So first off, I think with regards to fourth quarter and that expense ratio being elevated, That is really because of a spike in the period that will not recur. It was associated with catching up on recognizing some contingent commissions in both our international and specialty divisions on profitable lines of business where we have been growing. So, first, I'd say think of our sort of full-year expense ratio maybe as a better indicator of where we are. The second point that you're acknowledging is we would acknowledge that expense ratio is elevated to where our longer-term objectives would be, and we are taking actions. I would tell you, if you thought of our expense ratio for the full year, in the U.S., that expense ratio is up about half a point. In our international operations, it's up about two and a half points. And that is really because, as I mentioned, sub-80 combined, higher profit sharing costs. We're actually investing significantly in the business. So we've been growing geographically, opening new offices and locations in new countries. Australia is a good example of that, but making investments across Asia Pacific and the continental Europe. We've added product capabilities. So we're writing international casualties. We've added power to our sustainable energy platform. So we're investing in that business, and that's having a bigger impact on the expense ratio, but wonderful results in that business. In the U.S., the HAPA point is impacted by the portfolio corrective actions we've taken and then also the investments we're making in technology. So as we stabilize, get on the other side of corrective actions, get back to more normalized levels of growth, and as we start to receive the benefits of investments we're making in product growth and geographic expansion internationally, as well as the technology modernization, we're going to see that come down. What does that look like? There's certainly over, you said three to five years, so I can be a little bit more open there. I mean, a couple points of improvement is certainly something that would be an objective of ours.

Yeah, that's very helpful. Thanks for that detail. I guess one more, you know, on the intrinsic value and, you know, the preface of dizziness and headache. I have to say I got a little bit of that. And, you know, Tom, you mentioned incentive comp, and I'd like a little more clarity on how that's measured. is it over a five-year period? Because as I looked at the chart that you provided in the second page of your release, you started with 2020 for your intrinsic value, which is the COVID year. And, you know, you earned about $1.3 million in operating income versus 2021, which was $3.2 million or 3.3. And then if I look back even at 2019, you earned $2.5 billion. And then if I look at the insurance ops, if I look at 2021, you earned $718 million, and this year it was $601. So I guess my key question is around incentive comp. Is it a five-year basis so that if you had that COVID year in 2020, is that going to generate a lot of compensation when there are really some, you know, difficult circumstances in that year?

Yeah, this is Tom. It is over a five-year rolling average, so all those years get added in to come up with the five-year number. I might remind you that 2020 subtracted from our conversation for a couple of years, though. It does roll off and mature and there's some smiles around the faces as we do get past the pre-COVID to post. I would refer you to our proxy statement. We try to lay it out as clear as we possibly can. We've been consistent in the calculation method for many years and in our 38-year history as a public company, we've made very few changes. I mean, every number of years that there might be some update into the calculation and the hurdle rates that are involved, but the basic structure and the basic theory of pay for performance and making sure that our shareholders get paid first, that's been and will be going forward.

That sounds very fair. Okay, thanks a lot.

And next, we'll move to John Fox at Fenimore Asset Management.

Hey, good morning. I have a follow-up for Jeremy. I was a little bit surprised to see the gross and net written premium volume growth in reinsurance, given that it's been a poor underwriting record over time. So could you just maybe talk about why that was growing?

Sure, John. It's Jeremy. Ultimately, it's a little bit about sort of mix within the portfolio. So where we have seen a little bit of growth year over year is in places like our marine and energy offerings out of the London market, places like workers comp, maybe transactional liability, which kind of came back a little bit stronger as far as premium volume in the overall marketplace in 24 versus 23, where we've been more challenged to additional areas of professional liability like D&O or in the casualty, we've been contracting in those spaces. So, some of that growth would come from how we might increase our participation or see growth in exposure or be taking advantage of maybe some new business in lines that we believe are performing and have performed better, but they're smaller aspects of the overall course.

Okay.

So, I mean, the implication would be better combined ratio in the future. we are we are sure sure are working hard at that okay the the combined ratio and reinsurance is not it has not been an acceptable level so it's got to be better right absolutely okay we'll keep an eye on that thank you thank you and this concludes our question and answer session i would like to turn the conference back over to tom gainer for any closing remarks thank you thank you for joining us.

Thank you for your support. We look forward to reporting our progress to you as the year goes by. Have a great day.

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