Markel Group Q1 Earnings Call Highlights

Key Points

• Markel reported adjusted operating income of $498 million (up 4% year‑over‑year) but a reported operating loss of $273 million and a comprehensive loss of $340 million driven largely by $728 million of net unrealized investment losses.
• The insurance business saw underwriting improvement with the combined ratio improving to 93% (from 96%), while management’s exit of Global Re and the Hagerty fronting shift will cut roughly $2 billion of 2026 gross written premium but are expected to boost long‑term profitability and returns; excluding those moves, premiums rose about 10% year‑over‑year.
• Capital allocation favors share repurchases (multi‑year buybacks totaling $1.448 billion from 2023–2025 and $134 million so far in 2026) alongside a high‑quality, liability‑matched fixed‑income portfolio, plus ongoing organizational and AI investments to speed underwriting and decision‑making.

Markel Group NYSE: MKL executives said the company is “continu[ing] to do more of what’s working and less of what’s not” as they reviewed first-quarter 2026 results that featured improved insurance underwriting profitability, offset by sizable unrealized investment losses and mixed performance across non-insurance operations.

Leadership highlights focus on underwriting, disciplined investing, and buybacks

Chief Executive Officer Tom Gayner framed the quarter around operational improvements and a capital allocation approach that currently favors share repurchases. Gayner said the company is emphasizing balance sheet strength and liquidity while seeing “cyclical pressures and softness in some end markets,” including certain property-related insurance coverages and industrial markets tied to transportation equipment and residential construction.

Gayner also detailed Markel’s share repurchase activity over multiple years. He said the company repurchased $445 million of stock in 2023, $573 million in 2024, and $430 million in 2025, and also redeemed $600 million of preferred stock in 2025. “So far in 2026, we’ve repurchased $134 million of our own shares,” he said, adding that Markel has reduced its share count by roughly 10% from a peak near 14 million shares and expects it may take less than five years to buy back the next 10% at current prices.

On investments, Gayner said Markel’s fixed income portfolio remains matched in currency and duration to insurance liabilities and described its credit quality as “high quality and pristine.” He said there were no credit losses in the fixed income portfolio during the quarter. He also noted that the public equity portfolio declined 5.2% in the first quarter, compared with a 4.4% decline in the S&P 500, emphasizing that the approach is designed to withstand volatility.

Financial results: adjusted operating income rises while reported results pressured by unrealized losses

Chief Financial Officer Brian Costanzo said Markel’s operating revenues (excluding net investment gains) were $3.6 billion, flat versus the prior-year quarter. Adjusted operating income totaled $498 million, up 4% year over year, which Costanzo attributed primarily to improved underwriting performance in Markel Insurance, partially offset by the non-recurrence of a gain related to Markel’s minority investment in Velocity in the prior-year quarter and “to a lesser extent, lower margins in the industrial segment.”

Reported operating income (which includes unrealized gains and losses) was a loss of $273 million, compared with income of $283 million a year ago. Costanzo said net investment losses were $728 million versus $149 million in the prior-year quarter, and comprehensive loss to shareholders was $340 million versus comprehensive income of $348 million last year, “driven largely by unrealized movements in our investment portfolio.”

Operating cash flow was $16 million compared with $376 million in the first quarter of 2025. Costanzo said the quarter’s cash flows included $108 million of payments “made to reinsure our exposures on our Hagerty business as part of the transition of that business to full fronting,” as well as lower premium collections tied to the runoff of Global Reinsurance and higher income tax payments.

Insurance: combined ratio improves as Markel exits Global Re and shifts Hagerty to fronting

Markel Insurance produced adjusted operating income of $369 million in the first quarter of 2026, up from $282 million a year earlier. Underwriting gross written premiums were $2.2 billion, down 21%, which Costanzo said reflected “the expected impact from our exit of Global Re and the transition of our Hagerty program to a fronting model.” Together, those items represented $797 million of underwriting premiums in the first quarter of 2025 versus $23 million in the latest quarter.

Costanzo reiterated that the Global Re exit and Hagerty transition are expected to reduce underwriting gross written premiums by approximately $2 billion for full-year 2026, but said the changes should improve the combined ratio, adjusted operating income, and returns on equity over time. Excluding those items, adjusted underwriting gross written premiums increased 10% year over year.

The insurance segment’s combined ratio improved to 93% from 96% in the prior-year quarter. Costanzo attributed the improvement to a better current accident year loss ratio, including lower catastrophe losses and better attritional losses. Catastrophe losses included $35 million (two points) related to the Middle East conflict, versus $66 million (three points) related to California wildfires in the first quarter of 2025. Costanzo also cited a four-point improvement in the attritional loss ratio driven by no losses on the CPI product line, lower loss ratios in the international division and in U.S. property and general liability lines, and the prior-year exit of a risk-managed D&O book within wholesale and specialty.

Global Re, now in runoff, reported a combined ratio of 114% and reduced the overall insurance segment combined ratio by two points, Costanzo said. Prior year reserve releases were five points versus seven points a year ago.

In divisional results:

• International: Gross written premium rose 28% to $861 million, driven by growth including professional liability cyber. Combined ratio was 90% versus 89% a year ago.
• Wholesale and Specialty: Gross written premium declined 9% to $673 million amid a softer property and marine rate environment and decreases in binding contractors and casualty. Combined ratio improved to 93% from 100%.
• Programs and Solutions: Gross written premium fell 19% to $656 million due to the Hagerty shift to full fronting (a $220 million reduction). Excluding Hagerty, premiums rose 12%, driven by personal lines property programs and growth in Bermuda. Combined ratio improved to 91% from 97%.

Strategy, structure, and technology: Markel Insurance “business of businesses” and AI investment

Insurance Chief Executive Officer and Executive Vice President Simon Wilson said Markel Insurance is focused on “sustaining underwriting profitability and maximizing our return on equity,” calling the exit from Global Re a clear example of prioritizing profitability over premium volume. He said that excluding Global Re and Hagerty, gross written premiums grew 10% in the quarter.

Wilson described organizational changes over the past year, including a “business of businesses” structure with 14 distinct business units, each led by a single P&L owner whose compensation is “aligned to the long-term profitability.” He also said Markel shifted “most resources from the corporate center to the business units themselves,” aiming to simplify decision-making and increase accountability.

Wilson also outlined Markel’s approach to technology and AI, saying each business unit has a strategic plan tailored to its markets that can include core system modernization, enhanced data and analytics, and AI deployment. He said the insurer has deployed Harvey AI into its London market warranties and indemnities business and extended it to U.S. financial institutions and environmental lines in the first quarter. He also said Markel partnered with Cytora to build a data ingestion system for U.S. wholesale and specialty to accelerate underwriting analysis and speed to quote.

Rate environment, casualty re-underwriting, and collateral discussion at State National

During Q&A, management addressed market pricing and underwriting actions. Costanzo said property rates across the portfolio were down “high single digits,” with larger accounts seeing more pressure than smaller SME business. In casualty, he said rates remained “in the double-digits” but had weakened from the low-teens a year ago to the “lower double-digits range.” He described personal lines property rates as “more flattish compared to the broader property market,” noting the business is written on an E&S basis with customized coverage.

Wilson provided additional detail on U.S. general liability actions, saying Markel has reduced average limits “quite significantly, probably north of 20%,” and reduced construction-related exposure from roughly 40%-45% of that book to around 20% or slightly below. He said these moves can depress premium volume but are intended to improve profitability amid claims severity trends often described as “social inflation.” Wilson also said Markel “will not follow a casualty market down” if competition intensifies.

Costanzo also discussed a “recent story regarding State National’s fronting operations and potential credit exposure to a capacity provider.” He said Markel acknowledges “a current shortfall in collateral against our total exposure,” and that management is pursuing contractual recourse options to obtain additional collateral. He added the company does not believe the situation will be material to earnings or capital. Later, Costanzo said the shortfall emerged after Markel increased the loss ratio estimate in the first quarter in response to incurred claims trends and that the company has engaged an outside actuarial firm for an independent review.

In non-insurance operations, Costanzo said industrial segment revenue rose 6% to $883 million (including 4% organic growth), while adjusted operating income declined 16% to $49 million due to a lower operating margin from business mix changes. Executive Vice President Andrew Crowley cited weak demand in transportation equipment, noting dry van shipments have declined “from all-time highs a few years ago to multi-decade lows today,” influenced by factors including post-COVID oversupply, weakened freight rates, higher financing costs, and temporarily elevated fuel costs.

In the financial segment, revenues declined 9% to $162 million due largely to the prior-year Velocity-related gain, while organic revenue growth was 10%. Adjusted operating income fell to $36 million from $80 million, reflecting the Velocity comparison and a $14 million impairment of an equity method investment in an asset management firm.

Gayner closed by inviting shareholders to the company’s annual meeting, known as the “Reunion,” on May 20 in Richmond.

About Markel Group NYSE: MKL

Markel Group NYSE: MKL is a diversified insurance holding company best known for underwriting specialty insurance products. Founded in 1930 and headquartered in Richmond, Virginia, the company provides a wide range of commercial property and casualty coverages tailored to niche and hard-to-place risks. Its underwriting operations focus on specialty lines across multiple industries, delivering customized policy structures, program administration, and claims management services for complex exposures.

In addition to primary specialty insurance, Markel operates reinsurance and alternative risk-transfer activities and manages invested assets derived from underwriting float.

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