MKL - Earnings call transcript Q1 2020

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Operator

Good morning, and welcome to the Markel Corporation First Quarter 2020 Conference Call. [Operator Instructions].

During the call today, 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.

and that projected actual is recent in the Risk factors materially to included annual about Cautionary Form captions those and XX-Q. XX-K from the Factors report report information on could our and results cause differ under Statement Form Additional in Harbor quarterly most on Safe forward-looking statements

We call today. may also discuss certain non-GAAP financial measures in the

and reconciliation Form directly Investor to the this which www.markel.com can most comparable our GAAP recorded. press and at in find is event found release for GAAP Relations be a XX-Q, these can note, website on measures You measures being section. our Please the in

now Co-Chief to would I Please the to Tom Executive conference Gayner, over go like turn Officer. ahead.

Thomas Gayner

to Call. joined Quarter Good Noble. Markel the Richie morning, my and My Jeremy is I'm and Corporation and Conference thank today Gayner, by Whitt; Tom Co-CEO, welcome and CFO, name First our you,

doing be to chains financial, take front headlines utilities this lives. While want of to manning this opportunity the want other start the in want may on who our do our people thank is the our of elements keep essential products by but countless so. and for of supply essential I the people are hospitals, thank I that grocery nature lines. thank of Markel those of, speak want working. the I and not cases, stores, the many many In the to people and provide services them I call to our I thanking to

year market a Those a holdings, securities a near-term publicly XX% $X.X fixed of diversified shareholders' that insurance, by marked time. that a of equity excellent with $X.X equity. at billion at had cost equity and we of capitalization conservative We billion our balance beginning income investment traded debt entered portfolio basis in stood At and maturities sheet, operations. year, the of momentum started the and no with ventures the high-quality operational

In Since changed is suddenly dramatically. COVID-XX-driven every to and take the no place. time, shutdowns Markel that has life, about mid-March, exception. come of to and of just conditions COVID-XX aspect economy started dominate

been said, long must time, We're best Our informed we continuous historic conditions will to decisions be our be over That making progress we term. as so. has and navigate on continue through the you current daily Markel do addressed. building and focus and to keep of our as do we'll this

our will on our numbers. During comments with today's conditions about update you return discuss will call, Jeremy investments Richie Then operations. ventures our and operations. will I in insurance

will Following questions. our attempt brief comments, we your to answer

that, With Jeremy?

Jeremy Noble

and a everyone. courageously sentiments to employees you, tirelessly first to these are taking of care Thank are remiss they customers, and and I of equally Tom, I'm during of grateful public times. medical their other the around good workers Tom's our care servants and taking didn't globe. impressed our distribution if who thanks I've take been communities. and and moment each how be frontline morning, appreciation, partners unprecedented families, I'd professionals, echo at

you. thank So again,

by saw can assets insurance sheet, and our liabilities of sides the heavily our and the both had and in Tom from our balance heard quarterly announcement, effects was the performance of seen COVID-XX investment on you As influenced earnings the our impact which results in it consolidated adverse and be engines.

liability professional quarter increased segment, results. and writings XXXX, is to underwriting almost premiums within in liability of $X.X an gross increase for primarily general reported billion product the the to compared of to written growth an premiums $X.X This is related billion, our XX% XXXX insurance This our Gross lines. which compared Looking period. were our to entirely increase increase XX%. of billion at due $X.X written

at line just in reduce product as million. segment, our effectively XXXX, capital retention period our reinsurance our we from within premiums Retention to manage premiums from gross resulting written around of written lower Gross over of were on within by decreased seek purchases XX% volatility property catastrophe protection and the to $XXX XXXX driven exposures. outwards segment reinsurance with XX% consistent additional

increased in due volume insurance XX% premiums premium in higher to Earned written to our billion $X.X segment. XXXX

consolidated ratio in XXX% XXXX Our combined was XX% for compared XXXX. to

of we see begin where liability sheet. to side of the Here's effects the COVID-XX balance our on

$XXX we million losses During our ratio of XX pretax by These and COVID-XX expenses adjustment net best our estimate the increased for consolidated recognized quarter, combined losses loss COVID-XX. points. of

identified of was as So policy prior well to if were a COVID-XX math, reserves established These ratio you do after the the as consolidated XX%. the detailed reviews combined simple effects review loss, level our we in-force In those in where established of the proximate quarter the COVID-XX of instances contracts. cause inwards XXXX. of and we first loss has reinsurance reserves outwards

and business COVID-XX international for from associated specific business where no and losses losses primarily and Our exist. insurance primarily our within written pandemic are cancellation with coverages to attributed interruption exclusions the are policies event operations

to the reinsurance and that variability. coverages, wide among as duration factors Due range the related economic impacts continue the inherent of our to a mitigation be may with include liability, protection, assumptions to loss estimates to around which, associated assumptions fact evolve, of our things, COVID-XX the uncertainty well pandemic other as subject

and loss our higher our higher attritional current of year-over-year ratios Excluding both segments. loss accident was COVID-XX, year due to ratio insurance reinsurance in slightly the effects

have rate to We reflect increases achieving. yet meaningful we've from been benefit

$XX by X prior development, loss with the in XXXX. the loss With prior year compared reserving prior favorable of reserve to quarter in consistent loss current development regards developed our year months favorably reserves to $XXX first million philosophy, of million year

are on in our - of results included ILS of operations, operations sorry, which and other of both operations. services program results touch I'll Next,

unfavorable from onetime premium in-force the our National to policies the by State cancellation large large XX% of X written program operations services to year, premium adjustment. another of of resulted an gross volume down runoff the Our was program which book driven related prior program, in and

were last year written from a ceded. fee all due As almost this revenues in growth X% during XXXX. to volumes of program premium gross reminder, Ceding the up premium is

Turning quickly to our ILS operations.

management of XXXX. operations Our the ILS roughly of combined at end under have $XX.X March assets net billion

Markel Our as capital possible. down continuing return as work as they are quickly CATCo investor to to and wind efficiently operations

ILS to in management fees and fewer compared offset which to coming further due compared investigation operations were to year, decreases our on associated prior expenses assets CATCo. Operating in professional year, with under in our primarily from management and lower the by due increases decreased reduction Nephila to Markel flat from MGA fees from Revenues CATCo operations side-pocket from shares. prior charged ILS a being with fees management Markel is the review

results. investment our to Turning

the in long-term be COVID-XX variability losses on where focus, timing expected. asset the our side of calls, balance sheet. point, investment gains impact As prior our that in given you is and To I've here mentioned is of the to see

course Net of of reverse. but investment of equity equity of gains the $XXX capital Essentially the the of as COVID-XX unprecedented losses were decline net the the year-over-year April, net seen the for during see in to the the our value over XXXX all last investment markets continued fair declines were decrease attributable year, $X.X in equity a investment portfolio quarter period billion compared million some markets. to caused $X.X to to our in We've billion. price of volatility losses have volatility in

decline $XXX $XX XXXX the With mostly compared in the income, first to a quarter million million reported of regards to to equity ago, on net recognized investment due and was method year we investments. losses

in from investment taxes fixed declines of value $XX maturity unrealized the of quarter. an gains resulting our reflecting Net net in portfolio, increased million first during interest increase XXXX, during the fair rates

XXXX as reminder, month to Ventures an was and, million XX%. to Now I'll cover VSC last for revenues The has from lag. acquisition building a Fire increased closed increase quarter & a a the $XXX in to consumer which, an of $XXX extent, year, reported overall to the the primarily which increase of of lesser of results increase on our Markel million results XXXX its products businesses. in segment, Markel Ventures Revenues and during fourth Security, compared related X

XX%, year, of well an acquisition and Fire for VSC Security. improved one increase transportation-related of products consumer $XX results EBITDA the operating from our was compared EBITDA to XXXX as of million businesses Markel products building & million $XX within Ventures reflecting and as greater last businesses our within

rate our the for our at results the XXXX. year, consolidated for XX% first and tax was effective Looking of XXXX months X

first to of billion a quarter million year to for loss $X.X shareholders loss compared income income for to the $X.X shareholders $XXX net comprehensive a net in $XXX the reported of of also billion to comprehensive was XXXX net by loss, to ago. XXXX. We million shareholders compared Driven

Operating value flows return due in to were of segment lower at million cash premium was at claims And our $X balance large for business the flow in increase decrease unearned operating The sheet. the adverse for compared strong quarters. finally, insurance program over assets a billion a premiums company of compared insurance reflected program past strong the the settlement invested flows, fair portfolio, in March the to offsetting both to quarter Partially billion end an also XXXX was within activities on growth XXXX. as from of services arising assets our million reinsurance our we've segments. decrease collateral for impact the our again canceled few cash capital equity I'll activity Net cash to cash first Invested the COVID-XX seen was collections by provided on $XX that in several at activity period. the in effects cash reflects in end $XX a of $X.X comments year. of the for and our the in XXXX make held holding was higher company holding flows and The impacts.

we've liquidity instances across taken pausing maturity from fixed repurchases equity of the actions, Recognizing in certain focusing reductions and in and company. securities of of retaining times our the and proceeds our short-term importance on suspending the investments purchases cash of uncertainty, shares equity expense maturities, including holdings, of selling several

with AA. quality rating We continue to fixed an maturity of investment-grade credit maintain comprised portfolio average securities of high a

at end target range. XX%, with to capital total debt ratio line Our March was the of our in

months. unsecured our our in Lansing to to no capital cash the next ongoing needs, XX debt the including required well Building of acquisition believe complete We we pending have and meet positioned Products. We senior are maturing liquidity

XX. Total $X.X equity compared at billion shareholders' at March billion December the to at of $XX.X end stood

results. unprecedented the quarterly events COVID-XX certainly our summary, impacted surrounding in So

However, the this current diverse uncertainty taken from navigate organization to pandemic. actions the build over and will the help resilient through us arising we've a years

over our to With that, it talk I more about turn Richie will to businesses. insurance

Richard Whitt

Jeremy, good to morning and everyone. Thanks,

First, well partners crisis communities and the thanks during of to first Since me and the being This bad. a my XXXX, its times earned essential good Markel as all clients, no workers. reputation please has add for let responders different. there is and

associates have providing exceptional an Markel of As the thousands done outstanding situation our customers. has unfolded, service to job,

the situation. and continue spontaneity, style associates of flexibility, all we to Our Markel excellence incredibly exhibit navigate of as innovation unique the this pursuit

an future I'd on program are Now impact update current businesses. services the our of you Collectively, reinsurance, impact COVID-XX our the and operations. give insurance insurance, potential crisis like ILS on these and to

we methodology loss likely reserves that Markel a in of is the followers our Inherent desire practices laid reserving deficient. time is consistent long are will our more As than out that know, adhere in establish redundant reserving to XX-K. to

review Having will than we completed results. policy in of situation, direct at too and of likely our simply first event. quarter we our and initial have best process be our in redundant COVID-XX more are losses estimates we to the analyze unknowns up included each this consistently are estimate be of unprecedented There prove certain While time management's as given we ongoing lines implementing specific COVID-XX our ultimate the ground our the insurance of many our that language, product deficient. nature cannot

we reflect it fully - to the insurer's taken, approaches planning exposures their As is with being that observe variety some a in other COVID-XX reporting clear second are quarter. of companies results, insurance more

world growth several seen let's That with much past started quarters. and of off rapidly kick in continuing had for We U.S. as the first year we So changed the quickly about the months, economies the talking revenues. closed. the momentum substantial X.X

a seen X over leaving past in have weeks our premiums written within business that time operation, We roughly year. our to the during flat drop-off the new submissions insurance prior

time, believe and full situation do and of holding is period COVID-XX well. very the is not yet. size, of same business obviously fully reflected a is sample the up renewal This small the shutdown we Over impact our

medium-term we by believe business to year. expect, the premium would overly As one would as small pick hit return be economies our of optimistic hardest rates expect up to saw We beginning growth been the it to predict start near- the would to has at to reopen, shutdown. a volume but the

We premium as insurance to fee generate is calculated to then volume programs on reopens. U.S. income While written our the see the program services expect income and we fee medium-term in a support. based in short that businesses income, dip fee economy would recovery

there the increase pricing, insurance to short exposures only demand the medium is that to more evidence Regarding term, provide events need while industry the reduced to insures. align in with recent rates

obtaining increases will well. and we are We for peers And rates our as rate will to push don't month-over-month yet. We our that see have continue and of continue through the end March. to increases April data in believe

and insurance way an primary for reduced. fallout Insurers the pandemic, appetite a of from the is result of companies. reinsurance. capital derisk been more capital has Reinsurance, We in form reduced demand seeing for as risk are to increase course, importantly, of and a has a

future pricing increased reinsurance. demand expect in foreseeable the We for and

provide short run, significant In new sophisticated market we low to Our not ILS class investment the disruptions, expect operations investors. investment correlation given would a to obtain subscriptions.

and longer believe which validate the events of. in an rate we once can operations over see term, again insurance ILS environment our reinsurance attractive the we current discussed, of advantage take I investments. as However, Also, previously ILS benefit

Switching to losses.

and XX-Q claims IBNR, business of Jeremy, the on it primarily to COVID-XX quarter. our call by in virtually of U.K. cancellation interruption million first we all exposures. in potential relate direct event $XXX worldwide losses discussed insured this previously As reserves and These for recorded reserves,

in received are that to so we the while increase directly On COVID-XX. an very see compensation claims workers' we related expect claims front, also to few have far,

require include disease interruption or It is also before policies all physical business of exclusion. damage and a to a noting triggered, virus that U.S. property almost all our is occur those worth coverage communicable policies of

the to Here, are not interruption expected included reserve investigating are its affirmative to those just would those quarter. COVID-XX-related our our property I'll some limited, stop and COVID-XX losses, are our - in events will coverage, be policies although policies estimates often we cover respond of Therefore, first and on say sub have included claim that merit. our for U.S. each business own of

from based a industry time, very were over by billion event. could but billion estimates $XX reserves a also that analysis, on ground-up preliminary insurance suggest, informed we're anywhere Our to industry COVID-XX loss produce $XXX

the impacting E&O, could of and financial workers' We credit, disruption of COVID-XX would expect these as also a related D&O, global result as to business types in pandemic indirectly see we that compensation, such the losses to lines economy casualty write. surety the trade These of losses include meaningful reinsurance possibility losses markets. and and the

to losses Similar over quarters. - we financial to the indirect expect would losses a that of losses crisis, the to XXXX result emerged emerge coming these these the as

to and required indirect actuaries our quantify potentially be personnels underwriters, Our claims ratios to loss will the by increases working these losses.

we it terms by litigation Where mitigate future adding particularly taking appropriate, are prices expenses to including to relates additional losses and as abroad. both we the prepared raising relates to COVID-XX, U.S. pandemic and Finally, interruption exposure are elevated for policy as conditions, business exclusions. claims in to and it steps

insurance loss car trends relationship impact of lines than is the be Hagerty losses. COVID-XX classic obvious indirect this program. direct example and partially and could is private auto, of where and other our There their through passenger decrease underwriting where our small with participation An offset

ratios lines, which too if impacted early auto, how attritional by any However, could to speculate it favorably than have their is much. loss other and

provide have in some pressure seen we of regulatory addition, areas. these In already to rebates

believe COVID-XX is in businesses are many but while is our there to the manageable. unknowns, it are of also meaningful and impact So we summary, early insurance

liquidity diverse serve position. to product partners, forward the production and look line, continuing especially capital and reopen. both insureds and business to a to geography by have We portfolio, We solid begin as world's our and insurance economies

like to turn it I'd Now back Tom. to over

Thomas Gayner

Richie. you, Thank

of quarter declined portfolio first overall the During X%. investment our XXXX,

Our equity is XXXX, biggest the quarterly portfolio XX.X%. since declined This decline 'XX.

After rates to continued X%. portfolio income was return fixed expenses, as total adjusting the quarter currency a overall the foreign rose interest movements for and decline. negative Our X.X% investment during

years, portion Over to Over our other business the and level of opportunities, depended on has capital of our approximately acquisitions level a years, insurance underwriting opportunities, ranged from of comparisons of investment XX%. securities. XX allocated we've portfolio views meaningful The alternatives. to that equity XX% equity and our allocation

I we first introductory the combination As ended as the and mentioned XX% well quarter at comments, XX% decline. my started in as from overall a modest the sales year at market of

returns reinvestment fair long-standing of and integrity, businesses good and debt, does We measures with capital at discipline continue limited with opportunities good of on equity and to discipline our following with run prices. not change. management holdings for select capital by talent discipline by teams our equal That looking

environment future, to and capital businesses some previously thought circumstances we going In we each the returns With reasonable in every forward. comb we on be good believe we may mind, challenged foreseeable current and earn own. the expect the this for continue to over security that

We persist reexamine importantly, continue each happened what duration. for we has changes of would in to to some that more expect and, light holding

views the some As we adjusted accordingly. companies do so, on and outlook acted we've our for and profitability

those that the sheet our should to of expect actions We and serve both future sum improve returns. balance

fixed to same applies discipline operations. That our income

of be has Our continues market. highest-rated on income focus and the sectors the to fixed been

government-backed AA Our rated or in and securities portfolio roughly is better. XX% XX% various

operations, the our year ventures In well. started

of reported, with ago. million year X-month million include $XX our Jeremy diversified do yet $XXX compared As reported million million Products. and acquisition not EBITDA revenues lag compared businesses Building results our a of $XX $XXX to set of Those produced and of are Lansing to

members conjunction We've and new a certain with known distribution of and March, Lansing the years. CEO in retain transaction, third-generation the vast Buildings company admired of in products and Harvey the Harvey Lansing of Lansing organization process Both Lansing Lansing the Lansing transaction. majority forward. Lansing We acquired in both distribute is and successful the and needs. in Richmond. maintenance Lansing complicated Hunter will products X construction And for involved based as equity businesses and family this multi-month the was family. their combined the serve will days Harvey for the stake that early his and culmination from of repair a signed combined building firm acquired of The steps. going Lansing

and Hunter the culture performance pleased at Markel, all to with along to financial consistent and values and welcome the with Markel. are Their Lansing are We long-term we Harvey that organization. seek organization proven

we economic previous And said, acquisition our circumstances. previously related we has Lansing be time. economic during stable began to changed process. a results operated to construction. remodeling new Clearly, over enjoy circumstances the will the presence and successfully long-term They That their more repair since meaningful they offerings segment alongside - believe challenging in large contributors

We are discussions any other at on time. in this not ventures acquisitions engaged

was Turning ventures our to case the the COVID-XX conditions economic quarter. place different what current than The the to taking in of operations. balance causes first be shutdown

We businesses to are working of the in responding new operate accordingly diligently realities. and light business

to continue by many to housing provide essential fire, for transport and as protect of products do The desirable to needs make operate needed customers' and and other the equipment necessary Ventures daily Markel companies making things our Ventures to our the provide life, basic We and to and and shelter, process as food, for used businesses meet Markel for healthcare to bake to companies components goods trucking services. services. bread to trailers goods against

do for our our of of proud to customers our all and associates. what provide work We and the are companies and investment they insurance, of ventures

And our Markel yesterday To embrace and to response resiliency is Madeleine mine the Albright. operations that Secretary We a of quote State, to disaster that close, resilience. add was, diversified best of quote Corporation. the former sent of a friend me the believe good idea that from

your to Sara, forward up. look be kind to now it open so you'd answering if We questions.

Operator

[Operator Instructions].

will question from SunTrust. Hughes come first with Our Mark

Thomas Gayner

there, you Mark? Are

Richard Whitt

Why are you mute? on

Mark Hughes

Can you hear me?

Thomas Gayner

We can hear you now.

Mark Hughes

policies? are In we normal? sorry. on the to sort interruption, international those there I'm judge good. how you of do back remediation? When do And business Okay, limits what the get

Richard Whitt

result Most as require attempt damage. one. a Okay, our disease our communicable Mark, of that all physical of I'll And business policies exclude of viruses. interruption policies

suspenders belt a it's and sort of approach. So

lot First are Virus exclusions. prevalent exclusions of cases, in requires we market. and the virus damage in physical and have foremost, a U.K. then, not

not And so did include our policies virus those exclusions.

we as We where to business completely In to the a put of estimate what's are down? the down? wordings. the So an there. factors terms various that Are they is enterprise there's said, the business shutdown? lot small than I beginning, the coverage, could our medium have having said losses more to have I and It at a there our made they our in be a duration from the tends unknowns assumptions gone in we've U.K. And Are assumptions point. business affirmative And of and lot number fashion, at shut partially of be again, be believe in they U.S. obviously, to are But there. redundant make portfolio of wording, as looked through wordings. we've different typical of this there there. And of tried there's shut potentially likely deficient. of we're of that a we lot there, in

In - the my things viruses markets. of coverage like go be go as forward, forward, the normal, is to terms that's to forward. when markets, U.S. probably we going the going international assumption and related grants communicable back more in less But disease there's getting to of

Mark Hughes

$XX is And for interruption, exposure there then million provision business reinsuring the in like U.S. it the looks you're there

think I have U.S., said there are that certain the that you policies in sub limits.

direct the about side had side. the is? as bigger you Could reinsurance on You that opposed to what exposure talk

Richard Whitt

business on could that's - potentially an side, And health we identified to obviously, very reinsurance because It's on have of with and cover And the accident exposures But would their are they are. make could from reinsurance cover. some grappling that exposures handle we once them still we hear some some interruption potentially have what we tried estimate to business point reinsurance companies we a on have difficult this at interruption primary potential the estimate that. exposures what that the side.

Mark Hughes

much X impact revenue business. your you basis? program that the customers. How The then go-forward on to a - large does referred And

Richard Whitt

customer have an this while, and that a - was of One services. required rating about a had their quite and we State knew - National to longer known for upgrade them we no they received

So last the actually. gradual reduction of budgeted we X.X had over for that years, the business

planned that into So was into of it budgets sort our and everything. and

say of in quarter terms results. impact our minimal So first would I

a other ended, where was that The which one is rewrite premium. program return a ended it and canceled on the unearned you basis,

of so that in that negative think fee million million impact And And income the was had for $XX premium that returned. of forward a $X quarter to on about million we of will going the have the rest a $X year. impact

Operator

from will Our Deutsche question next come with Phil Stefano Bank.

Philip Stefano

a maybe to potential of can or thinking unanticipated about Yes. I'm like claim, think the which translate there interruption feels no you exclusion you I to that that given specific that of was business that are the reserves in the just too the that just Maybe to finally about us extent there established? losses there's environment. a was but exclusion, scenario? trying think in absence And concern how is extent understand, which is the the the parsing where kind I that pandemic segment is of unintended situation? help but - reserve words losses it was virus a there for is to Can true

Richard Whitt

to. Happy Sure.

it take let's the U.S. So in the - pieces. in

physical require belt is damage, the and and COVID-XX all suspenders would In approach, be of U.K. Let's have take it not the which a damage. the our primarily other policies we physical in where the U.S. U.S., bucket.

have In policies the disease the addition, going on that that those virus majority policies, XXXX. something those not have is on exclusions. great those been or way, And by we since - new, communicable of exclusions

that a been over in policies. has that's that, So those decade

coverage, we granted cases, some limited, affirmative $XX,XXX. usually sub it's there usually about is In or coverage

up added subset U.S. we So losses we have from we is the hospitality think those see put assessed in what often we And made potential industry. the affirmative we the for could be policies and losses for policies and of those. policies up have like those have estimate coverage where another There there. Switching. could reserves an in that

X appropriate we we up subsets. we've So suspenders and believe losses else, approach. that have on then are everything got belt those the for And

not there the the communicable or virus In damage, require exclusions. but physical U.K., been disease historically has it use does of

policies, some we look made And there think conditions, the estimates we to loss could policy through of like. have and course of think we be for what business that granted, future have into reserve. do have language, out our on coverage these level of We where gone has the shut how could kind is terms been and looked down long businesses and that our reviewed we believe into affirmative loss interruption that we subject put

Philip Stefano

it. Got

Okay.

it So X explicit seems Do limit? the like from U.S. is is an you there scenarios. sub think there a perspective, there's or exclusio

Richard Whitt

Yes. Yes.

that limit at the we've is is limit and on those think fair. is, based some I There where That fair. estimated could what that are whatever policies also looked be. it's potential not sub limited, loss limits, we've but

Philip Stefano

Understood.

there the quarter? Okay. Were Q. the see I cats in notable in didn't any any

Richard Whitt

to out. break It we usual cats, a to there all felt - things. there hail, Certainly, were those required did the rise were all tornadoes, it level not that

Philip Stefano

Got it.

side you - the complications it - launch ILS on feel some the you subscriptions. I size commented Maybe had on timing track? the the that. of the can I Lodgepine? to I largely with is around And changed? hoping - the ability mean Have mean, of expectations been give just with the on business thoughts on of this investment, new was the or Okay. how does business us

Richard Whitt

Sure.

that fairly actual we COVID-XX, tend And the losses significant exposure is to On markets. there's financial people believe, to happens, obviously side, ILS seek from minimal. been disruption liquidity. But the in whenever broader the

investors, now. right potential still people there with that, to talking deal And so our process in minds, in out as are of, the assuming and our expectation longer take markets - could we're the we've but uncertainty sort that own

Nephila path still capital, a additional would Lodgepine. what be that longer hope So in thinking And own our to and subscriptions. both getting we in to to be But at those realistic trying of we're could is. situation raise minds terms the

of assets billion under management. At stable. been at about pretty $XX Nephila, we're That's

and good We a of we if working we not see subscriptions. timing was redemptions, add seen for to are can haven't Lodgepine, lodgepine. COVID-XX lot to

to capital there. Just longer going about disruption, that talking to it's take raise

the the We Lodgepine Markel of most have on Bermuda. portfolio for written for and that's - the being year, warehoused

on portfolio the balance that And can is we written that is we raise housing seed of as capital, to Lodgepine. Markel portfolio business sheet. some So our and

Philip Stefano

Got it.

more, than the the I for few you of requeue. detail seen and out truly add to Okay. know And it. we've COVID more potential I wanted quick just note. I a got peers losses thoughts thus from that far. The a but I I'll far appreciate level is broke

So forward the look in much future. so you to thank discussing and

Operator

next question comes with from Capital Ron Our Returns. Bobman

Ronald Bobman

from the arms sort getting had for the and at a and the around early collateralized ILS are risk for up of expiration. question as about capital how indications trying capital get implications I the you we Have Thanks of the in re exposures particular on sort associated contract of tail far teams prospects thoughts with there for the given gotten BI? world, given collateralized and or locked - any as the of sort of losses. days help, sort - to sort

Richard Whitt

of to And because things. you risk is cedents will Ron, are discussed. trap about that there those capital that yes, a look tail Yes. we that belief thinking more

will I put a that So contracts that potential. amount to we you capital, certain the you are provisions of that for trap up are there have to planning that say reserves. want in if

a without and reserves to those in can't to tie they I - that want or be be able their the hope capital careful up financials in up to to ILS. will put putting just think cedents can't be reserve. up required just trap capital So really

be Nephila So it exposure And planning and are the at honestly, trapital yes, is trap known be to - COVID-XX. like lead tightening as will I they're think both But capital trapped to for to to record going collateralized able capital. result that - think will markets. and to feel And continue reinsurance it. enough there more reinsurance Lodgepine we considering to to that have and I a of the in

Ronald Bobman

have across a there. term may accidentally You come right new

Richard Whitt

Yes.

Ronald Bobman

through to but going another units going it's the core that could - going a purchased. - market. some the we on Hopefully, - topic. time. sort not I bearers But suffer. suffer your dramatic which whatever, their admitted may that suffer period the economic word. appetite going not flip will that it's alleviates, sadly, world contraction. persist the you reduce risk business, to But shutdown imagine E&S for Obviously, to it's offset. And obviously, to common of Hopefully, bit are risks a is hopefully, rates all it risk of that it's going would side, to we're talked and head In of size of area It's markets of an in the E&S migrate for about will protection back the gray that decline going up, be too

you the rate of Which economic will think one exceed and is the day? admitted year, positives sort this And just of the of do too the think sort Or contraction? pluses the - you economic rules about do later contraction next and What of of and minuses. of great? appetite underwriting the declining year I'm sort sort talking

Richard Whitt

That's we was the in lot just things a Ron. What question, said. the of you saw million-dollar April

up think appetite all is risk E&S in a reduction there the of because We I a result are out there disruption. seeing pick as

So small a to would writings believe in that of hard COVID-XX to and yet. areas COVID-XX. are our of substantially decreases all that you got and haven't seen In rates on up from be offset certain a I book delay. tad April, we've are the by we saw the Insurance - did bit our where business impact business a we of comes on substantially. up hit got expect places in

So for businesses, on right, how that eye in against it. coverage that But less in risk I just that's float trying to be there's offset and second and as side. decrease that the we're question. the an things extremely will those other? plan each in the quarter, But and see We're you're How absolutely positives, will increase more keeping rate businesses going million-dollar our of to think close primary that on we'll seeking fact such appetite.

see side, Appetite pricing more the and On going down, hard to reinsurance demand coverage you're and up for market. people is going accordingly. looking it's is a up,

Operator

Our Jeff next William Blair. with Schmitt question comes from

Jeffrey Schmitt

is The COVID-XX million. $XXX loss

haven't for of type the But for many your losses sounds should level expecting those we mainly I IBNR. event that. claims, of interruption, there of of next so cancellation Just trying year? understand make sure the like this estimates to quarters? are it's been It Or couple business really be

Richard Whitt

That and is the year. remainder the interruption our assumptions is baked of through of lot losses best business of our losses best But estimate cancellation event Obviously, a into estimate. that. that

to wedding Wimbledon. for our cancellation event event goes cancellation, of, Olympics and the cancellation terms example, In from book

runs And the it it out exposure terms could the we've tried rest gamut. what that we to be, the of the of year first have to is in tried we potential in for book - So and the look quarter. think

the the that several just thing losses XXXX, for or to the secondary indirect brokers. the is That losses. around number that's be here is like or like And potential bankruptcies this not with, D&O The we're dealing for things going E&O next in quarters. over after represented

Jeffrey Schmitt

business piece, of the - component I And could be workers' cancellation workers' there means? the expectation event fairly comp guess, on your doesn't What's Yes. theoretically that that the large. like Okay. was comp outside just other interruption mean, I small. seem

Richard Whitt

Our weighted a on into first there, would of When you book got our That's very small the But that workers, comp restaurants, more workers' get part towards work there. claims obviously, actually not bucket. depending we've retail, maybe book. we how rules expect like is in essential probably a responders. little

claims. would expect we So see to

the when because to up workers' in addition, change goes Workers' comp, up. the go claims see claims of unemployment comp you're going in economy. In

to going - into trying as So go our to we're be factor forward. we are that we picks

Jeffrey Schmitt

over could I few potentially? quite the line? touched manufacturing now guess, there I there obviously, of Markel mean, I you And on type are bottom a in Okay. Ventures. mean, seeing revenue you few a top last there. on just the quarters, in and businesses had But impact contraction what then be growth

Thomas Gayner

think business given are that shut I them nature report of the operating, it's businesses shut down. X our would orders shutdown. of economic are all fulfilling would over When the the of But down, the is or that reflect next constraints moment, care the will spirit of Markel plus public and of law that. economic operating take employees. activity obviously, and our But complying we they following you surprise is quarter health to don't our economy and anything Yes. and within being the the every said, all spirit have, that letter of with the the diminished businesses protocols at clearly,

Operator

Fenimore. next with question Our Fox John from comes

John Fox

just uncertain good I lot situation, complete. just appreciate wasn't us My I had a you And of is, very that. it's so to though, were information, I thought of add I couple comments a Richie, your an gave clear. and opening want question I Richie, questions. totally

talked basically about losses all now. are the You which IBNR right

Are losses - business comp mentioned $XXX is in You workers' an workers million the that addition? number? Or expected event. that interruption

Richard Whitt

in in little were if know I right expect we workers' don't we I that yet comp. in comp we the think now, that don't forward - as number, very any we would establishing any John. as there's go workers' but number had claims claims

is start ongoing a that's I very up Usually, your this is everybody event. so ongoing. And that. it's mean, say and exposure. to adding - one this over have and don't strange a this is event, hurricane But something you I or you an have But that. and knows

sick, gotten for people point. there who those who losses will have claim come sick yet and that not who comp, will are get workers' in will at So

John Fox

Okay.

any be So to IBNR. wanted I there whether in the just clear was

a largest are the we muni about For Tom. All in bailouts, bonds. that income stress, with bailouts. you virus. live the lot states talk in Tom, fixed allocation financially, is under can to your side, about the no There's press on the

you talk risk assessing about how can So portfolio? you're in muni the your

Thomas Gayner

the always to bidding, Well, we're the actually are XX% underwriting review fixed following portfolio. about we of Sure. Munis, sort have. same of the income

limits. always position Now operated with we've

of just a portfolio those state even bond, and And certain spread of state portfolio. localities buy within there jurisdictions a given any So can be within we state. don't would that limits, than and the purchased percentage be no more a

of of we or of essential sewer, stadium GO Then buy and services and next layer stuff. the like do underwriting any we is don't kind financing typically water that

So in there's spread the portfolio. always whole kept an mind with we've epic that

how we're to do top the So to as everything possible. in at we credit as tippy be know pristine quality of

conditions, finance general as in Now those systemic. of of, terms the you're municipal described reports that I've speaking being

So order the financial be won't. me presence modern it's work. the municipal It that of to that those finance the to not Law, entire the that of will within be municipal things for one of if can't unique at things is structure Markel. like definitional you system in Stein's And look and things structure, it's finance has must work to to

continue what the to or and it we're is tippy be central going political to the end see, banks not believe will what of to and We'll lower spectrum. buy will leaders or bankers too too or very I speculate to of And That the cute be line the at the won't you try curve use at top be has because the And it the of phrase close central takes. buy. the as whatever that is happening. happen So to.

John Fox

a stock, market. and moment. pension treasury investment a which is, funds Okay. a But ask correlated And ILS need point, or would of stock earn it's volatility be the not phenomenal it X% XX-year to bond question whatever further then optimistic the looks out, with the year and XX me to for for probably too a I basis let that would the think

this optimistic the down mean, a the I ILS? Or is given opportunity a So of is too view road real environment? potentially for that

Richard Whitt

John, on very, the rest the is our to view to again is about exactly. situation low - has medium short the very levels. why that's of We term, everything the in correlation proves just recognize the market. valuable. But many ILS this It does so it investment or negative

Operator

RBC. with next from Our comes question Dwelle Mark

Mark Dwelle

for very all other you Yes. disclosure. comments, was thank thorough the It I and mature. very the like

is, commented detail equity to about what charge investments. Q $XX were more million within produced in I a Can the and the question the accounted that that there to wanted related was bit the that little you ask opening a income charge? just it's investment remarks was First it and circumstances the provide in

Thomas Gayner

the way value The time. had years the We've the of firm some is of a of this but normally, we way from of that million of Tom. that that but the firms and that overrides believe has a years. some couple itself of basis, the Mark, And I over a itself we years done Sure. doing firm is in charge, $XX economics we they first that got of firm them some that over itself, couple done so. giving money Limited The rough that manage. quarter. The over portfolio particular to ago. - works economics in up the in a number gone we've seeded of there's given terms of had

all of So chart. that as the shows that fair decline quarter happened market specific up first the during

just that labeled were that firm. earned that the quarter of Now last course still was. years this profits first isolated whereas have with overall never investment individually, we're It's the the in we decline over profitable the that several in being said, and mark-to-market

we've to money that but that be time, the investment So made case. drove what that's on over

Mark Dwelle

I see.

Okay. That's helpful.

on elaborate And the are, the there losses business. Q, there? again, you're within the - about increase workers' within in attritional on some in Within maybe insurance comp was comp the Can what side? a comment particularly seeing and of property you an workers' just drivers the what

Richard Whitt

second. reinsurance? one just on Hold On

Mark Dwelle

segment, my are confused. but maybe notes it thought was I insurance in the

Richard Whitt

It try And more was seeing are in in the we're we're that social Q. well. struggling we our a inflation. side than find But of seeing reinsurance of what Obviously, takes a little longer of on certainly signs I'll maybe that get Well, reference to to insurance Mark. bit side. the it it's It's generally probably, on interesting, as numbers some there's the been Yes. to on lot reinsurance. because a discussion less

business to there. some reinsurance of business those So would would and our entity I some workers' our been have been our related there casualty our business professional of and comments have reinsurance compensation think - around

us reinsurance activity again very to early on seen the we the days, much. some we're and on social So claim nowhere of near it have but inflation Also, And side, interesting - the seeing down. our side. impact is insurance as

situation. attritional by the the weeks Only were of of XXXX. impacted Our those is down a in activity couple COVID-XX quarter first to claim compared XXXX

bit. still - that a helps that. little assessing hopefully, you So out we're that But

Jeremy Noble

bit between attritionals mix towards we're part Mark, the they it's And workers' it's and more another can comp property workers Jeremy. shares where weighted attritional. just to loss quota contracts, to slightly different comp, or of our writing I little there. add, in of excess regards a actually, portfolio would have with

that into much to with that comp too the ratio read attritional wouldn't reinsurance standpoint. regards a loss workers' comment I from moving So

Mark Dwelle

probably your Okay. contracts, of about And Or everything. for being remarks, various then particularly Has - your Rich, that type to that is in loss last or before that and just QX? expense I question the for the but selected been in probability you BI, alluded you defending something had litigation was in making reflected development awaiting you is on the reflected an that that picks that adjustment? that in of you're still higher

Richard Whitt

done we Yes. I up. reality. and the economics People much so numbers - at of coverage that implicit if put - by mean mean, to their to mean, the have granted. But this that the incentive been are here's that even damages large. attempt I more have I was are have we would terms in say situation recover explicit I than it's very that economic just the stake, not

the economic size to the be of damage, litigation. there's we political the the emotion going given So simply backdrop, expect, involved, more just

And so we implicit are to preparing for the that. is numbers. That

go explicit numbers. As to more we it'll forward, probably the be

Operator

Instructions]. [Operator

follow-up with a Phil is from question next Our Stefano Deutsche Bank.

Philip Stefano

viewing rating potentially maybe the ratios, the earnings equity, cash how help depressed you of and Yes. I about us tangible the outlook forward? just think could was levels hoping about for think context agencies debt current moving as we the in especially are

Jeremy Noble

the as I'm generally board. range with. rating a in leverage within looking typically comfortable as and are certainly rating going that's and standpoint debt XX% I what the mean the our release level at preview events. well discussions for quarter our within But are and in would agency not are significant the certainly with across to to Markel. come we target agencies specific certainly Won't a Jeremy. We to surprise. earnings Yes. maybe how a well ratio, from it speak It's

of been we've rating speaking to So the agencies. each

of shareholders' and end over what streams goodwill and range while qualitative would time, equity. acquisitive at been the level lot they But as of and that underlying say I have look a look look cash again, out kind to the will we to they those we're earnings varying point the Because higher that at business they you're right businesses. the degrees at of at, intangibles of when flow there's go of well, from that considerations the to into

So that's specifically that right I nothing note. now, think, on front, of

Philip Stefano

process maybe Q intangible us impairment, you moving the thoughts impairment. they a that give susceptible as businesses noticed the works about, to we in around impact how no environment think goodwill some of I And some about there and or that Maybe conversation forward. form ventures just just be most feel that as business, though was could economic Okay. the of particularly may the in

Jeremy Noble

Yes. Sure. Again, Jeremy.

Q, think of that trying I have off, a respond the cautionary levels seen language that there's to I you the First we and uncertainty could into lot the relative to and clear will observed, exist. mean, we're of of things put very that be

years. our more more have the each than not period, value amount units. goodwill not over likely was of the or of the reporting We and in our fair that we not that's it than for carrying likely it all a also, sorry, units that the value was meaningful of exceeded because fair - that value the and reporting we been acquisitive looked determined Specifically at we've

there like kind triggering yet was feel of didn't the at we really Now that March of end a event.

analysis, looking various of of units. done the that of amount comfortable pretty And last at relied there's this the at felt and We significantly sort fact we on considerations qualitative uncertainty. flagged So valuations reporting we we the tremendous had time sensitivity stage. a

since possibility over economic the think be impactful be we would into prepared a period the most because sustained would that did on, the to say, at there at less the mean, time acquisitions point valuations we businesses. will conducted because we'll carefully, there's more It's prepared at are in be recently. over number longer places businesses. a look - been to is That's valuations could I look time. I we've that some part, those the that be that that we would reasonable that to of question. called our So the original of shutdown very those carefully, goes something those

and in bit in those that of how assumptions will Q accounting those out of we key a quite of considerations disclosure think about lay some there's requirements. kind And the

Operator

from Our next of Fargo. Rob question Wells comes Hauff

Robert Hauff

up Just on question. the goodwill to follow and intangible

I of answer think an here. reviewed this, the the admitted insurance the or just looking asset but for goodwill being intangibles know companies? I None confirmation as with are held to

Jeremy Noble

That's correct.

Robert Hauff

or the these there mandated sort insurance increased the of into those business? regulatory internally insurance of much Okay. Great. Q And the help industries. Could that get time. within then the businesses also the remind And board look seeing mentioned that you on quarter? the other the companies have much this companies how loaned since across lend Have ventures the through various limits ventures We're are borrowings potentially us how to could balances period any increase certainly entities? again end of into can to

Thomas Gayner

being part would placed working But might the they debt. things. in. relatively that of themselves some point avail view, of normal But in the companies of those to the the was Jeremy some given all. bottom-up let there from array low banks add have it normal in They I'll businesses given chime work of Yes. flows that themselves, they their debt at that business. that appropriate of just uncertainty and but out capital operate Qs levels with they language basically, was with the the of no There's marketplace, of those lines tend the with, were would language options to the credit the have to

yet, of not. As have they

Jeremy Noble

the has end And meaningfully Yes. amount subs the moved of with the year. debt not since of insurance the

in number footnotes that our in think is sort out XX-K. actually the of I disclosed

each that figure of there And from place. domestic to of we've in our I don't have with of to say, internally with limits both in regards agreed insurance want But then place, So quote to state rule I conjunction and a sort now. sort with companies. limits regards right what then to - in and are

that sense and regulatory makes are So economic limits of good to complies there sort requirement. when to the

Robert Hauff

then the much And for the mark me, Did helpful. of has Tom, That's Tom. portfolio one changed how the you mention, last end quarter? equity on the since for

Thomas Gayner

April, but obviously, We've so going not been out, number up. has far put that in price

Operator

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

Thomas Gayner

next you forward us. you. well. much you very Thank Be look We connecting quarter. to Thank for joining with

Operator

The for attending conference has now presentation. today's concluded. Thank you

now may You disconnect.

Markel (MKL) 29 Apr 202020 Q1 Earnings call transcript