Markel Group Inc. Q3 FY2025 Earnings Call

Good morning, and welcome to the Markel Group Third Quarter 2025 Conference Call. 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 may differ significantly from those suggested by these forward-looking statements. More information about the factors that could lead to differing actual results is available in our press release for the third quarter 2025 results, as well as in our most recent annual report on Form 10-K and quarterly report on Form 10-Q, particularly under the section covering Safe Harbor and Cautionary Statements and Risk Factors. We may also discuss certain non-GAAP financial measures during the call. You can find the most comparable GAAP measures and their reconciliations in the press release for our third quarter 2025 results or in our latest Form 10-Q. These documents can be accessed on our website at www.mklgroup.com in the Investor Relations section. Please note that this event is being recorded. I would now like to turn the conference over to Tom Gayner, Chief Executive Officer. Please proceed.

Good morning, Kelvin, and thank you very much. Welcome, and thank you for joining us for today's call. I'm delighted to be joined by my colleagues, Brian Costanzo, our CFO; and Simon Wilson, our CEO of Markel Insurance. We're also joined by Mike Heaton, our COO, for the question-and-answer portion of the call. At Markel Group, we're committed to relentlessly compounding your capital and building shareholder value. I'm happy to report that so far in 2025, we continue to do exactly that. I'm particularly pleased that throughout the first 9 months of 2025, every reportable segment made positive contributions to the value of the Markel Group. They also did so in a capital-efficient way, generating significant cash flows that helped fund our ongoing share repurchases and buildup of liquidity. The first 9 months of 2025 stand as compelling evidence of how our differentiated model works. Brian will provide more on our detailed financial performance in a minute, and Simon will speak about our ongoing improvements in our insurance business. But before I turn the call over to them, I would like to say a bit more about our progress this year. First, as you know, our Board and management have been intensely focused on improving our core insurance business. We've taken many decisive actions over the last few years, including exiting underperforming businesses, most notably reinsurance; making key leadership changes, including appointing a new insurance company CEO with a proven track record of success; and implementing key organizational and structural changes to improve accountability, including shifting most of our overhead directly into the businesses. I'm pleased to report that these actions are beginning to translate into results as we achieved a combined ratio of 93% within Markel Insurance in the third quarter compared to 97% in the comparable period. While this was aided by light catastrophe activity this year, looking underneath some of the lines we exited, the improvement in our core insurance business is becoming clearer. We believe this is just the beginning. The improvements in insurance profitability so far provide evidence that our actions are starting to drive better results. I think it's also worthwhile to point out that we have reported favorable reserve development on an annual basis each year for more than 2 decades now. This reflects our inherent conservatism and commitment to financial integrity. Simon will provide more comments on our insurance business, but the headlines are that we're doing more of what works and less of what does not. We are simplifying the business, increasing accountability to front lines and setting the stage for renewed growth and improved profitability. In all of the businesses we own and oversee, our CEOs have continued to run their businesses with professionalism, long-term focus and extreme skill, navigating through volatile and uncertain economic conditions to deliver strong returns on capital and profitability. The Markel Group system also continues to generate significant cash flow, offering further evidence of the strength of our model. Over the trailing 5 years ending September 30, 2025, our cumulative operating income was nearly $13 billion. This incoming cash gives us financial strength and offers us flexibility to pursue opportunities we understand with partners we trust while returning capital to our shareholders at the same time. Our opportunity set is significant. We can reinvest in our existing businesses or expand into new public and private businesses. Much of our growth capital has been deployed in the industrial, consumer and financial sectors, where over decades, we have developed a core set of competencies around culture, capital and leaders, each of which adds to our ability to relentlessly compound your capital. I'll also note that we've earned strong returns on those investments. In the 5-year period of 2020 to 2024, the insurance, industrial, financial and consumer segments of Markel Group paid dividends up to the holding company of approximately $2.2 billion. We invested $1.7 billion in acquisitions and additional interest in our existing businesses, primarily in the industrial and consumer sectors, all while supporting substantial growth in insurance. Regarding share repurchases, from the end of 2020 through the end of Q3 2025, we've returned approximately $1.9 billion of capital to shareholders via repurchases, again, while strengthening the balance sheet. Share count was reduced from 13.8 million to 12.6 million. In our investment operations, we continue to remain focused on preserving and protecting your capital. We earned 8.4% on our equity investments so far in 2025. The book yield on our fixed income is 3.5%, and our reinvestment yield was 4.2%. We aim to be thoughtful stewards of capital and seek to match our liabilities by investing in only the highest rated fixed income securities. This safety-first approach has served us well. We are then able to utilize the strength of our balance sheet to invest in the areas where we see the best opportunities to deploy capital. As part of our Board-led review, we also committed to improving our financial disclosures to ensure that you can better see where our earnings come from, how we allocate capital to its highest and best use and how capital has performed overall and in all parts of the Markel Group system. Last quarter, we enhanced our disclosures for the insurance operations to better align it with the business' strategy and provide more detail for investors. This quarter, as you can see from our 10-Q and the supplemental materials we provided yesterday evening, we have provided additional new disclosures, including now reporting our business results into 4 segments: insurance, industrial, financial and consumer and other. I'm sure it will take a little time for everyone to process and digest our new disclosure format, but I hope you will find it helpful in how it describes the ways our diversified set of businesses reinforce our overall financial strength and stability and how our significant reinvestment options and highly efficient and low-cost capital allocation all work together to generate steady and diverse cash flows and relentless compounding of your capital over time. We believe that a key part of our success has always been how our Board and leadership team maintain strong oversight over the company's operational, financial and value performance, always evaluating ways to improve. With that, I'd like to turn things over to Brian. I look forward to answering your questions after he and Simon provide you with an update.

Thank you, Tom. Good morning, everyone. As Tom mentioned, after a listening tour with our investors earlier this year, we decided to undertake the effort partnering with our Board and third-party advisers to further enhance our financial disclosures. Markel Group's evolution created the opportunity to take a fresh look at how we report our financial results to shareholders. We released the first part of these changes in the second quarter to align with our reorganized Markel Insurance segment. Last night, we released the remainder of our changes across Markel Group. We are excited to hear your feedback. We believe that these changes will help investors both better understand your company and provide improved insights into how both Markel Group as a whole and its family of businesses are performing. While I will reference several of these changes as I walk through our quarterly results, the primary changes to our financial disclosures include changing how we present investment gains and losses to provide investors with a better sense of recurring operating results from our businesses through: first, moving the presentation of investment gains and losses to outside of revenues; and second, introducing a new metric for adjusted operating income, which excludes investment gains and amortization expense from our operating results. We also reorganized our business results into 4 reportable segments: Markel Insurance, Industrial, Financial and Consumer and Other, and shifted to adjusted operating income as our segment performance metric for each of our reportable segments, collapsed our investments segment into the new reportable segments, introduced new consolidated and segment-level KPIs such as organic revenue growth and return on equity for Markel Insurance; and finally, updated business descriptions to help investors more fully understand our family of businesses across the variety of industries in which we operate. We also created a Reporting Changes Guide for shareholders, along with supplemental recast financial information that aligns with our new segment structure for the trailing 7 quarters. We filed both by an 8-K last night, and they are available to you now on the SEC's website and our Markel Group website. We hope these tools are helpful in navigating through the changes in our financial disclosures. With that, let's turn to the results for the period, starting with our consolidated results. Consolidated revenues were up 7% for the quarter and 4% year-to-date. Revenues in all periods are conformed based on our updated measurement, which excludes net investment gains from our total revenues. All reportable segments were up year-over-year for both the quarter and year-to-date periods. Operating income for the quarter was $1 billion versus $1.4 billion in the comparable period last year. Operating income includes net investment gains, which as historically been the case, drove most of the year-over-year variance. Net investment gains were $433 million for the quarter compared to $918 million in the comparable period last year. Our new metric of adjusted operating income totaled $621 million for the quarter, up $121 million or 24% versus the same period last year. A quick reminder that adjusted operating income excludes net investment gains and amortization expense. We believe this metric will provide better insights on the recurring operating performance of our businesses. Insurance contributed $153 million of the adjusted operating income increase for the quarter and $100 million year-to-date due to improvements in underwriting results and increases in net investment income. The other segments were relatively flat compared to last year for both periods. Operating cash flows for the first 9 months were $2.1 billion. Comprehensive income to shareholders was $793 million for the quarter and $2 billion for the first 9 months of this year. Turning now to our operating segments, starting with our Markel Insurance segment. Results from our Markel Insurance segment now include underwriting and insurance activities, along with the results from our investments that are held by Markel Insurance subsidiaries. This change to a balance sheet view lets it be clear what the after-tax returns on our insurance capital are on an annual and 5-year average basis. Due to the inclusion of equity securities within our insurance capital, we believe a 5-year average metric is a better gauge of long-term performance. The average after-tax return on equity for Markel Insurance for the 5-year period of 2020 through 2024 was 12%. Underwriting gross written premiums were up 11% year-over-year for the quarter and 4% year-to-date, driven by growth in our personal lines, general liability lines and our international lines for the year and our reinsurance professional lines in the quarter. The increase in reinsurance professional lines was driven by the timing of 2 large contract renewals that occurred prior to the execution of the renewal rights deal. Premium volume for the quarter within our Wholesale and Specialty division was down 6% versus last year, due to the exit of our U.S. risk-managed professional liability lines earlier this year and down 1% excluding the 5% impact from these exited lines. Our International and Programs and Solutions divisions both had strong growth in underwriting premiums in the quarter of 25% and 12%, respectively. Earned premium was up 5% for the quarter and 2% year-to-date due to increased growth in more recent quarters. Adjusted operating income for Markel Insurance was $428 million for the quarter, up from $276 million in the same quarter last year. The combined ratio for the quarter came in at just under 93% compared to 97% last year. The 4-point improvement consisted of lower catastrophe activity, which drove 3 points of the difference with lower losses from claims contributing another point. For the year, the combined ratio stands at 95% for both periods. The results from our runoff Global Reinsurance division added 2 points to both our current year quarter-to-date and year-to-date combined ratios. Our International division continues to produce fantastic results for the year, with a year-to-date combined ratio of 84%. The quarter and year-to-date expense ratio of 36% is slightly higher than a year ago. Higher expenses were primarily driven by higher personnel costs, primarily within our international division, and increased third-party professional fees and severance costs. Prior year loss development was consistent at 6 points favorable in both the quarter and year-to-date periods in both years. For our 2025 year-to-date results, favorable development across several product classes across the globe was partially offset by adverse development in our reinsurance casualty lines and in our discontinued risk-managed professional liability lines, both of which were recognized during the first half of this year. Investment income within our insurance operations was up 10% for the quarter and 9% year-to-date due to higher interest rates and volume of investments held within our fixed income portfolio. As a reminder, 96% of our fixed income portfolio is rated AA or better. Moving next to beyond our Markel Insurance segment and starting with the Industrial segment. Revenues were $1 billion, up 5% versus the same quarter a year ago, driven by increased industrial production activity and demand in the wind energy, construction and building products industries, partially offset by softening demand in the auto industry. Adjusted operating income was $101 million for the quarter versus $112 million in the same quarter a year ago, down 9% year-over-year driven by softening demand in the auto industry and higher raw material and labor costs across several businesses. Next, within our Consumer and Other segment, revenues and adjusted operating income within the Consumer and Other segment have significant seasonal variability due to the timing of sales of ornamental plants, which are heaviest during the second quarter of the year. Revenues were $291 million, up 10% versus the same quarter a year ago. Revenue growth benefited from the acquisition of EPI and higher sales volume of ornamental plants. Adjusted operating income was $17 million for the quarter versus breakeven in the prior year. The increase year-over-year was driven primarily by the contribution of EPI and increases from operating leverage resulting from the higher sales of ornamental plants. Next, within our Financial segment. Revenues for the quarter were $162 million, up 16% year-over-year due to higher fronting fees and earned premium within our program and lender services products. Adjusted operating income was $61 million for the quarter, down 23% from the same period last year driven by favorable loss development on the runoff reinsurance contracts for Markel CATCo Re, which were recognized in the third quarter of 2024, all of which was attributable to noncontrolling interest. Excluding that impact, adjusted operating income across our other businesses was up notably in line with the revenue growth. Finally, regarding capital allocation. For the year, we repurchased shares totaling $344 million, reducing our share count to 12.6 million shares from 12.8 million at the end of last year. With that, let me pass it over to Simon to discuss more about Markel Insurance.

Thank you, Brian. Good morning, everyone. It's great to be with you on the call today to discuss a solid set of results for Markel Insurance for the quarter with a combined ratio in the low 90s and gross written premium growth of 11% versus Q3 last year. This growth is mainly being driven by our high-performing international and personal lines divisions, where prior year strategic investments in new people, products and systems are paying off. Where our performance is more challenged or market conditions are less favorable, we are concentrating on improving the portfolio, and as such, growth is muted. Cycle management remains at the forefront of our minds, but we are taking advantage of areas where we have developed competitive advantage. The team at Markel Insurance couldn't be more aware that we need to demonstrate genuine progress to you. It is good to be started along that path. The coordinated set of recent actions are beginning to have an impact on the organization. Step by step, we're working towards achieving our full potential. Step 1, the first big step we began in earnest around 2 years ago when we began reshaping our portfolio with a particular focus on casualty and professional classes in the U.S. In both areas, we have made meaningful changes to tighten our risk appetite as well as improving pricing and terms. Where we were unable to achieve the required improvements in specific areas, we made the decision to exit lines. As a result, we've seen tangible benefits. Our year-to-date combined ratio within our recurring business stands in the high 80s. This factors in 2 items versus our reported combined ratio. First, excluding the 3.5-point impact from exited lines, the largest of which are U.S. and European risk-managed professional lines along with CPI; and second, a 2-point drag in the overall combined ratio from the Global Reinsurance division results. We're now seeing improved and more consistent underwriting performance in the divisions where these changes were implemented. I remain excited by the sequential improvement. It's still early days, but we believe these early outcomes validate the tough decisions we made to set a stronger foundation for future growth. Step 2, with the portfolio streamlined and greater discipline in place, our next big step began earlier this year, shifting our focus from simply pruning the portfolio and exiting unprofitable lines to actively pursuing profitable growth. Our strategy is based on a clear go-to-market structure, where we have created a series of distinct P&Ls, each headed by a leader who has full responsibility and accountability for the performance of their unit. This structure pushes decision-making closer to the customer and allows for greater speed and response time. Specific actions we have taken are as follows: We have collapsed our matrix reporting structure in the U.S. We reorganized into 4 simple and distinct divisions. We removed reporting of State National and Nephila into Markel Group. We aligned our financial reporting to the new structure so that we can clearly see where there is underperformance that needs to be addressed. We can also see where we are having success, enabling us to divert investments to these areas to continue to fuel profitable growth. We moved over 80% of the people that previously worked for the central functions into the newly created P&L. This provides transparency over costs for business owners and also ensures that the work of these individuals is fully aligned with business needs. And on our last earnings call, I announced the exit of Global Re. Every single one of these changes were designed to simplify our business model and enhance our ability to provide market-leading specialty insurance products to brokers and customers around the world. Beyond these organizational changes, we strengthened our margin of safety by increasing reserves, particularly in our Reinsurance division and our risk-managed or large-account U.S. D&O book. This continues Markel's tradition of conservative reserving, which protected our balance sheet through cycles of uncertainty. We've consistently had reserves that are more likely redundant and deficient, demonstrated through 20 consecutive years of favorable prior year loss reserve releases. Step 3, now that we've made our way through the bulk of the necessary organizational changes, we are turning our focus to execution, including developing bottom-up, customer-focused business plans by our new P&L owners for 2026 and beyond. I'm confident these plans will enhance the experience of our customers, which will in turn grow the business and ultimately increase our profitability. While we are still early in the game, the overall energy and execution I'm witnessing across the business continues to be encouraging. First, let me share a story about our U.S. personal lines business that illustrates the impact of the changes we have made. As we reorganize the business into distinct P&Ls, one business unit that stood out for the right reasons was our personal lines business based out of Wisconsin. This organization has been growing strongly over several years with excellent profitability. Jeff May runs the business and outlined a plan to overhaul the technology stack over the next 2 years. In our previous structure, this investment opportunity hasn't managed to rise sufficiently up the priority list. But now that Jeff sets the priorities for this business, the plan was very much on the table. We took the decision to go ahead with the implementation within days. And Jeff and his team are now implementing a system which will consolidate our position as the market leader in E&S homeowners business in the U.S. with expectations to grow this business to over $1 billion a year in annual gross written premium. Second is a story about how we are doing more with less in our core U.S. Wholesale and Specialty business. After taking the helm in late April this year, Wendy Houser set about reorganizing our business, Wendy reduced the total number of regions from 8 to 4, simplifying our go-to-market structure and creating the opportunity to reduce costs. Some tough decisions were made, particularly around people, but we're now operating the business at a lower salary base than before without impacting levels of service. The 4 regions have full P&L responsibility with an excellent line of sight into the financials, and so I expect this recent cost discipline to continue. Stories like this exist throughout Markel Insurance. The new structure helps bring them to the surface and enables us to do several things at once. If our business leaders have well-thought-out plans, we are ready and willing to support them. What will success look like a story like this compound? What can you, as investors, track to know that things are progressing? Early progress isn't always obvious right away in the numbers, especially in long-tail insurance. It will first show up in the way our people think, the speed at which we move and serve and the trust and credibility we're restoring with our partners and our customers. Some of the signposts or leading indicators we're monitoring include employee engagement scores, customer net promoter scores, growth in submission count, increase in our quote rate, improvement in our quote-to-bind ratio and growth in new business within our targeted areas. As these indicators start to move in the right direction, the financials should take care of themselves. At the WSIA conference in San Diego last month, Wendy Houser, the President of our Wholesale and Specialty division, said very pointedly to the press that we're back. Our leadership team is confident in the changes we've made. It will take time to show up. But with each passing day, the team is working together in new and better ways. I'm excited about our position in the marketplace, whether it's in our top quality international operations, our niche business units such as surety and personal lines, or our improving core U.S. Wholesale and Specialty division. We have plenty of runway to grow and to grow profitably. We'll continue to work hard to make that a reality. With that, I'll hand you back to Tom.

Thank you, Simon. And with that, Kelvin, we'll open the floor for your questions.

Your first question comes from the line of Andrew Kligerman of TD Cowen.

And I'd like to start in the insurance division with the expense ratio at 36%, which is relatively high versus specialty peers. And then kind of contrast it with what you're doing in technology spend and how to make the company more efficient. Could you talk on the interaction of those two dynamics and where the expense ratio could go over the next few years?

Thank you, Andrew. I'll ask Brian to start off addressing that.

Sure. Let me say a couple of things there. First of all, like where we are this year, we're kind of right where we thought we would be for this year. If you mix in the fact that we've had some product exits, some contraction in a few spots where we needed to shore up the overall underwriting results, that does carry a little bit of a burden on the expense ratio. The other piece I would say is where we are growing. If you think about those classes, international lines in Europe, expansion in Asia, U.S. surety, those lines are very, very profitable for us, but they do shift the mix between the loss ratio and the expense ratio that are added to the overall expense ratio. From an investment standpoint, Simon mentioned the investment in the personal line space. Now that we have individual businesses, we have an investment portfolio that's out there. We're looking to make the investments that we need to shore up our results overall. While we're focused on expenses and managing those and we expect to bring those down over time, we're really focused on the combined ratio and the overall profitability of the business and our return on equity, the new metric that we put out there and that overall kind of capital return and the returns that we produce inside of insurance. Maybe the last thing I'll mention there is we talked about the exit of Global Re in that division. And while that division has poorly performed from a combined ratio perspective and been a drag on the results, 2 points kind of in the quarter and year-to-date, that division does have a lower than kind of normalized expense ratio for us. So as that premium burns off, at around a 28% expense ratio, that will be a little bit of a drag on the overall reported expense ratio as the earned premium remixes back to the insurance side.

Maybe, Brian, I might just add a couple of points on this, Andrew, as well. It's Simon. Look, I'm obsessed with the combined ratio. That's the most important metric that we have overall. Brian talked about the mix between some of our business units, which have been performing incredibly well the last few years. And the odd thing is there that mainly they've had a high expense ratio. Now what I wouldn't say is that a high expense ratio leads to a great combined ratio. That's not the point here. But what we do need to be very conscious of is as we look to the expense ratio and we look to reduce it, and we very much are focused on that as a strategic imperative, we need to do that in areas where we're actually cutting costs out of the business that are frictional costs. There are some costs here where there are genuine investments, like the personal lines thing, it will probably heighten the expense ratio for a couple of years in that area. But in the long term, that creates a heck of a lot of scale potential within a business like personal lines. Where I'm really looking for the rubber to hit the road is in these individual P&Ls and looking at individuals who want to invest in the business. That case has to be rock solid because anything which is just sort of fat within the organization, I think that's going to get highlighted a lot more than it has been in previous years now, and we're going to go after that. We're going to go after it hard. So the point I'll make is we have got a focus on the expense ratio. It is in the context of the most important metric that we have, which is the combined ratio, but we're looking to get rid of expenses that aren't additive to the business. But we're not going to stop investing in areas that I think have great potential to build the franchise over a period of time. So it might be a bit bumpy over '26, and Brian spoke about Global Re there, but believe me we will be focused on that metric as we go through '26 and into '27. It's an area where we do need to improve.

Very helpful. And then maybe just thinking about gross written premium, which was strong at 11%. And I mean international has been just a really bright spot. But looking at U.S. Wholesale and Specialty, I think Brian said the exit of the risk-managed business, the U.S. risk-managed business, it was up about 5%, and then in Programs and Solutions, we saw a 17% increase. Could you give a little color on where you're seeing the successes in programs and U.S. Wholesale and Specialty, respectively?

Yes. Maybe I'll start, Andrew. On the Wholesale and Specialty, so the reported result was down 6. 5 of that 6 points we were down was the impact of the risk-managed product line exit. So down 1, excluding that, relatively flat. What I would say there is if you think about the 3 products we write there, professional, casualty, property, casualty is up while we're being very selective, but we're getting good rate on that business, low double-digit rate on primary, and higher than that on more excess lines. So the growth is not growth in exposure. It's growth driven by rate. Property, we are trying to grow, but there's a little bit of challenge in the rate environment there. Professional has been relatively holding flat. We've been growing a little bit in our management liability lines and some of the commercial professional. But that is an area both in the property and the professional space where growth in the future is where we're targeting.

Yes. Let's discuss Wholesale and Specialty first. We need to address the loss ratio situation in that business, as that's been a significant challenge for us. This is why we've decided to exit certain lines in various areas. Currently, casualty is a tough segment where getting the pricing right is difficult. We have to be selective with our risk appetite and make appropriate pricing decisions. Combining these strategies should lead us to a combined ratio that suits us. However, we are cautious in the casualty area despite some attractive pricing opportunities, as the exposure there can be complicated. In other aspects of Wholesale and Specialty, we are facing competition in professional and property lines. We believe we have effective strategies to attract business to Markel in these areas, and the clarity of our new structure seems to benefit our partnerships with brokers. This should help us draw more business that aligns with our appetite and pricing. There will still be market headwinds in these two areas. Programs and Solutions are healthy segments for us, and we see potential in personal lines with strong interaction in that space. Growth opportunities are also emerging in the program sector managed by Jeff Lamb, where significant investments from large wholesale brokers are providing us with prospects. We are very discerning in that space, but the influx of new opportunities is contributing to our growth. Moreover, our workers' compensation and surety businesses continue to perform well. We've recognized these areas more prominently, and the dedicated leadership allows them to focus on customer needs and product delivery. This autonomy is fostering their growth and is expected to continue. In summary, while the market conditions present challenges, we believe the new structure will benefit our Programs and Solutions. In Wholesale and Specialty, we are focused on improving the loss ratio alongside the combined ratio. As we stabilize these areas and move into next year, we anticipate our market position will help us achieve continued growth in profitable segments.

Maybe on the international side, I'll add. That's a place where we've been consciously investing in people, and some of the driver of the elevated expense ratio is the personnel costs in that division. You're starting to see the fruits of that coming through the top line with growth in kind of expanded territories in Asia and Europe, along with product expansion where we've been rolling out casualty products to more geographic regions. We've invested in people in both of those spaces, seeing that start to come through the top line growth more pronounced this quarter.

Some good favorable reserve development overall. If I were to maybe just pick at one thing and a question here is I think you called out some adverse on international professional liability. Can you maybe just expand on that, maybe what accident years? And the reason I ask is I think you were releasing from international professional liability in '23 and '24.

Yes, that's correct. We experienced a few significant claims, specifically in the range of 5 to 10 million from a net perspective. Although we faced some adverse development, it's not comparable to the issues we've discussed in recent years, so it's a relatively modest amount. It just happened to be the main factor for this period. Overall, we feel positive about that book and its profitability. Regarding the timing, the issues are more related to a couple of years prior rather than the current year or those further in the tail.

And then just thinking about capital management. Buyback has been maybe a little bit lighter in the last 2 quarters than I would have otherwise thought. So I would love to just hear your thoughts, Tom, on kind of capital deployment priorities, whether it's buyback. And I think there might have been an article earlier this quarter just about insurance M&A perhaps being back on the table. And maybe that was misconstrued, and it was more a comment around teams and technology for insurance M&A, but I would just love to hear your overall thoughts there.

Well, I think you answered the second part of the question, when you asked it. So I think it was misconstrued. We have successfully added teams and talent over the years, and we look to continue to do that. The first important principle is actions speak louder than words. The number one use of capital and capital deployment we've had for the last couple of years has been buying back our own shares. We're price sensitive when we do so. Unfortunately, the market seems to be acknowledging and understanding and appreciating a bit the changes we've made here. And you look year-over-year, the stock price was up at any given point in time, 15% to 20% compared to what it had been last year. So we respond to that. We're sensitive to that. We continue to buy stock through our program daily. And you can expect us to continue to do that, and you can expect us to be very rational and buy more if the price is low, and buy less as the price moves up, and our largest single capital allocation choice has been to repurchase shares. In rough, rough numbers, over the course of the last 5 years, the share count at Markel at its highest was just a bit shy of 14 million shares. It's now down to 12.6 million. In rough numbers, that's 10% of the shares that have been repurchased. The next 10% reduction, I don't think that will take 5 years, especially at these kind of prices. So that might happen in 3 to 5 years. So a 10% tranche is done, another 10% tranche underway. So we'll be buying back stock.

When we think about international versus the U.S., you talked about some of the expense versus loss ratio dynamics. Is the combined ratio opportunity better internationally? Is there just a better loss environment?

Before Simon answers that question, you're talking about international and the U.S., the first thing I thought about was the Ryder Cup. And the U.S. needs to do better. So we're working on that.

I've been thinking a lot about the Ryder Cup lately, although not in a deep way. Thank you for that reference, Tom. There are many attractive places in the U.S. from a loss ratio perspective, often in lower exposed areas and those with lower premiums, mainly small, micro businesses. Internationally, we’ve been developing this segment of our business for about 10 to 12 years. Back in 2016 and 2017, the loss ratio in international wasn't impressive, but as we've expanded our retail operations in regions like Europe, Canada, the U.K., and increasingly in Asia Pacific, the smaller micro business segment has significantly grown. This has led to a consistent decrease in the loss ratio. Much of the business we are backing out comes from our London operations, which are often seen as high-risk and volatile. However, a large portion of our London business is actually delegated authority, where the ultimate customers are small and micro businesses. Our international focus is heavily geared towards these smaller risks, which typically have a lower loss ratio, although they come with a higher expense ratio. I’m willing to invest a bit more in servicing business that reliably performs at a lower loss ratio. This balance is healthy for our business. We do have larger risks to consider, like in energy and marine sectors, but overall, our international operations are centered on small and micro businesses, and we’re quite satisfied with that. Recently, our U.S. portfolio has lacked that focus. We’ve been more in the mid-market, yet our core results in larger risk segments, such as U.S. large ticket D&O, show promise. Moving forward, I aim to enhance our focus on technology, and the new teams we’re bringing in for our programs and solutions will target small and micro businesses in the U.S. This should gradually lower the loss ratio, even if it doesn't completely align with international standards. Nevertheless, I see plenty of opportunities in the U.S. that we haven't fully tapped yet, but they will be a priority for our future initiatives and investments.

At the risk of addressing a different question, my colleagues often remind me that this isn't going to improve your modeling or provide a quantitative insight. However, it's a qualitative point that truly influences results over time. Simon and I discussed this topic at length last year when we walked 130 miles from Pittsburgh to Cumberland on the Great Allegheny Passage. One key aspect we talked about is that in the insurance business, perfection is unattainable, and losses are inevitable. We examined what a loss looks like, its implications, fair compensation for the magnitude of losses, and how to build an overall profile that allows for understanding and absorbing these losses, which are inherent to this business. Efforts in this area have been ongoing, with thoughtful analysis on our positioning. You are beginning to see early signs of progress this quarter, and we anticipate further positive developments in the future. A significant amount of reflection and diligence has shaped our approach to the business.

Appreciate that perspective. Curious to get your thoughts if it looks like storm season, at least domestically, is going to end up being pretty quiet. What do you think that means for property in 2026?

Well, as the old saying goes, what you see depends on where you stand. And there are some people in various parts of the world right now that would not think that this was a benign storm season. So our thoughts and prayers are with them. That's real damage. And one of the things we hang our hat on and we're proud of in this business is we help people get back on their feet when they've experienced either sudden and dramatic loss or gradual losses over time. Clearly, again, I think you've answered your own question to some degree, the overall aggregate catastrophe losses were lower this year than what had been expected. And that tends to put pressure on rates. The good news about Markel writ large is spread of business. So we are not a catastrophe-dependent or exclusively or even majority property-oriented company. So this is a normal course of business.

Yes. And I'll pick up at an exact point there, Thomas. If I look at the portfolio overall, property plays a relatively small part of our overall offering. We're more of a casualty professional lines and then sort of nuanced specialties that go alongside it. So probably relatively small. I do think you've seen insurance cycles before. If you look at the specific cycle within property, there's going to be pressure on reinsurance. As a buyer of reinsurance, that should probably benefit us going into next season, but that will have a knock on in the primary markets where, particularly in the U.S. brokerage property space, I think that's going to come under even more pressure next year than it has done this year. And it definitely is a competitive part of the market at present. What we're doing in that is very much focused on price adequacy. If it works within the portfolio, the price is adequate, then we'll continue to compete in that area. Once you go over the line and it's not adequate anymore, we don't need to chase that market down. I think the other thing that benefits us a little bit is we also say that our international portfolio is typically small, micro. I do think the majority of our U.S. risks are probably medium, small. In that part of the market, it's slightly less competitive in property than it is in the large ticket risk where you've got kind of structured and layered programs, which really are in very much in the competitive space at the moment. So I think we're pretty well placed. One by virtue of not being overly dependent on the property market. But secondly, the part of the property market that we do play in, I think it's a little bit more sheltered from this level of competition in other areas. So expect to see more competition, but I like our position in the market overall because of the balance of the portfolio that we've created over time.

And one final point to pick up on that and extend it. The good news is we don't have to chase it down because we have other things to do. And that's not just within the realm of insurance. We do have an investment portfolio, which has been collapsed into the segments, but it still exists. And it's a pretty big number of recurring dividend and interest income that flows in here. We have a set of industrial, commercial and financial consumer businesses that generate pretty nice returns, too. So the good news is we have the ability to remain rational in ways that people without our structure would not enjoy.

And then finally, any observations on mix shift to and from the E&S market and what that might mean for you all?

Yes, the market is very dynamic right now. Regarding the previous property question, that’s likely the area with the most movement between excess and surplus (E&S) and retail markets. Currently, there's significant pressure in the E&S sector, especially in property, which may lead to a shift back into the retail market. We also saw some movement in professional lines returning to retail instead of wholesale a bit earlier. There are certainly nuances between E&S and the admitted market. Conversely, the casualty market is currently a challenging environment for valid reasons, presenting more opportunities within the E&S space. Over the years, the wholesale market has notably evolved compared to where it was five and even ten years ago. We expect that much of the business that has transitioned to the wholesale marketplace will stay there, even if some areas see slightly more competitive rates. At this point, we estimate that the wholesale market constitutes nearly 25% of the U.S. commercial lines sector, possibly more if we count the Lloyd's market. I believe this level will be maintained and could even increase slightly due to the growing sophistication of wholesale and retail brokers entering that market. I appreciate our involvement in E&S as it allows us to adjust rates and modify terms as necessary. Additionally, the strength of the wholesale marketplace is significantly different now compared to a decade ago, creating a pull factor into that space.

In the spirit of the Ryder Cup, I was trying to think of some way to heckle you all, but facts up today. So I guess I'll just not do that. So I appreciate the good answers. Have a great day.

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

Thank you all for joining us. That concludes my closing remarks. See you next quarter. Thank you.

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