Markel’s AI Push and Portfolio Gains Fuel 25% Financial Segment Jump

Date of Call: Feb 5, 2026

Financials Results

• Revenue: Consolidated operating revenues up 8% for the quarter and 5% for the year (excluding net investment gains).

Business Commentary:

Insurance Performance and Strategic Shifts:

• Markel Insurance achieved a combined ratio of 92.9% in Q4 2025, a 3 percentage point improvement from the same quarter in 2024.
• This improvement was driven by decisive long-term actions, including exiting underperforming businesses like reinsurance and appointing new leadership.

Financial Segment Growth:

• The Financial segment reported $327 million in adjusted operating income, marking a 25% increase from 2024.
• Growth was attributed to increased performance fees and a higher management fee rate within ILS, alongside higher premium volumes.

Investment Portfolio Returns:

• Markel's public equity portfolio returned 10.5% in 2025, with a market value of $13 billion and unrealized gains of $8.9 billion.
• The return was driven by strategic investments and a long-term mindset in managing a diversified portfolio.

Operational Efficiency and AI Deployment:

• The company emphasized the strategic use of AI to enhance operational efficiency, particularly in data ingestion and analysis.
• This focus aims to improve decision-making speed and responsiveness across business units, particularly in high-growth areas like personal lines and international operations.

Capital Allocation and Cash Flow:

• Markel Group reported cash flow from operations of $2.8 billion in 2025, with significant investments in fixed maturities and acquisitions.
• This reflects a disciplined approach to capital deployment, balancing investment, growth, and shareholder returns.

Sentiment Analysis:

Overall Tone: Positive

• "2025 was a year that reinforced the power of that model. Every reportable segment made a positive contribution..." "We are now seeing green shoots." "The foundation is now set..." "We look forward to connecting back with you next quarter."

Q&A:

• Question from Andrew Kligerman (TD Cowen): Regarding the property casualty segment, can you sustain a 93% combined ratio? What drove the 101.9% in Program and Solutions? What's driving the terrific 80.5% in International?
  Response: Targeting a low 90s combined ratio is the ambition; diversification gives confidence. Program & Solutions was impacted by a spike in personal umbrella claims and three large surety losses. International's strong performance is due to strategic portfolio investments over the past 5-6 years.

• Question from Andrew Kligerman (TD Cowen): How is the Industrial and Consumer segments likely to trend? Color on equipment leasing and ornamental plants?
  Response: The businesses are well-run with good returns; individual quarterly volatility is expected, but overall performance is satisfactory and anticipated to continue.

• Question from Andrew Andersen (Jefferies): How is the insurance pricing environment into '26? Differences between U.S. Wholesale and International?
  Response: U.S. property is soft with significant competition; casualty is firming. Internationally, London markets are competitive, while non-London regional business remains stable with less price pressure.

• Question from Andrew Andersen (Jefferies): Where is AI being deployed within insurance? Examples and focus areas for '26/'27?
  Response: AI is used for data synthesis (e.g., transaction liability) and data ingestion to improve efficiency and lower expense ratios. Strategic deployment is beginning and expected to have a material impact in the next 6-12 months.

• Question from Mark Hughes (Truist): In the Financial segment, how much of the strong earnings was due to the light cat season? Should that carry forward into 2026?
  Response: The light cat environment contributed, but State National's consistent growth is a primary driver. The impact of cat seasons crystallizes in Q4, and the business has been on a growth trajectory.

• Question from Mark Hughes (Truist): How are you looking at AI-related volatility in your equity portfolio?
  Response: The portfolio's performance was influenced by broader market sentiment; the long-term disciplined approach to equity selection remains unchanged.

• Question from Mark Hughes (Truist): What underwriting actions have you taken in personal umbrella after putting up strong reserves?
  Response: Significant rate increases in several states and a decision to stop underwriting second homes in Florida, along with raising the attachment point to $0.5 million.

Contradiction Point 1

Outlook and Drivers for Programs & Solutions Segment Performance

Contradiction on whether growth is driven by broad portfolio strength or specific, selective opportunities.

Can you sustain a ~93% combined ratio in the property casualty segment with current pricing and loss trends, and what factors caused the 101.9% ratio in the Programs & Solutions segment and how can it be improved? - Andrew Kligerman (TD Cowen)

2025Q4: The **Programs & Solutions** poor ratio was driven by two specific quarters events: 1) A spike in claims trends in a personal umbrella program... 2) Three discrete large losses in the surety business. - Simon Wilson(CEO of Markel Insurance)

Beyond international growth, what are the key drivers behind the 5% increase in U.S. wholesale & specialty (excluding exited risk-managed business) and 17% growth in Programs & Solutions? - Andrew Kligerman (TD Cowen)

20251030-2025 Q3: In **Programs & Solutions**, growth is driven by specific opportunities in personal lines, program business... and solid performers like workers' compensation and surety. The business is **highly selective.** - Simon Wilson(CEO of Markel Insurance)

Contradiction Point 2

Drivers of International Segment's Strong Combined Ratio

Contradiction on whether strength is due to strategic long-term decisions or a natural focus on small/micro-businesses.

What factors are driving the combined ratios in each segment, and how sustainable are they? - Andrew Kligerman (TD Cowen)

2025Q4: The **International** division's strong performance is the result of strategic, long-term portfolio decisions made 5-6 years ago (exiting unprofitable areas) and focused investment in high-growth regions... - Simon Wilson(CEO of Markel Insurance)

Is the combined ratio opportunity better internationally than in the U.S. due to a more favorable loss environment? - Mark Hughes (Truist)

20251030-2025 Q3: The **International division has a strategic focus on small and micro-businesses**, which typically have a lower loss ratio but a higher expense ratio. This is a deliberate trade-off for consistent performance. - Simon Wilson(CEO of Markel Insurance)

Contradiction Point 3

Reserve Action Rationale and Follow-up

Contradiction on whether reserve actions are proactive or reactive, and if they lead to strategic changes.

How sustainable are the current combined ratios across the property casualty, Programs & Solutions, and International segments, and what factors are driving performance in each? - Andrew Kligerman (TD Cowen)

2025Q4: The Programs & Solutions poor ratio was driven by... a spike in claims trends... prompting a proactive reserve increase. - Simon Wilson(CEO)

Was there a third-party review of the insurance book this year, like the prior review linked to reinsurance adverse development? - Andrea Anderson (Jefferies)

2025Q2: The reserve action for reinsurance followed a similar pattern: raising reserves to the actuarial recommendation and then adding extra prudence from management... The third-party review... had already raised reserves to the high end of the range. - Brian Costanzo(CFO)

Contradiction Point 4

Growth Outlook for Programs & Solutions Segment

Contradiction on the strategic growth expectations for the segment's delegated underwriting (MGA) business.

How sustainable is the ~93% combined ratio in the property casualty segment with current pricing and loss cost trends? What drove the 101.9% ratio in Programs & Solutions and how can it improve? What factors are behind the 80.5% ratio in International, and will trends push it higher? - Andrew Kligerman (TD Cowen)

2025Q4: The Programs & Solutions poor ratio was driven by... Three discrete large losses in the surety business. - Simon Wilson(CEO)

What is the volume of business written by MGAs in the "Programs and Solutions" segment, and what are the key areas? - Andrew Kligerman (TD Cowen)

2025Q2: The company is selective, filtering opportunities rigorously for profitability and long-term partnerships. This sector is expected to grow in the U.S. specialty market. - Simon Wilson(CEO)

Contradiction Point 5

Casualty Pricing Environment

Contradiction on the direction and firmness of casualty insurance pricing trends.

What's your outlook for the insurance pricing environment through 2026, and are rate increases still being observed, particularly in U.S. Wholesale versus International markets? - Andrew Andersen (Jefferies)

2025Q4: Casualty is firming, especially in auto, habitation, and construction, but underwriting skill is needed. - Simon Wilson(CEO of Markel Insurance)

What is driving optimism for the U.S. wholesale, specialty, and broader markets, including casualty pricing and loss trends? - Mark Hughes (Truist Securities)

2025Q1: On the casualty side, rates increased 13% in Q1 2025 (following ~10% in 2024), which is a positive development needed to offset rising claims trends. - Simon Wilson(CEO of Markel Insurance)