Heat. Heat.
Great things can happen at any moment, at any time. They happen when people show up, put in the work, when they push harder, when they believe. At Lancing, belief fuels our drive, our precision, our promise to make each day better. We know our customers, not just orders, people with challenges, deadlines, and goals that become ours. These are the relationships that we build to last. The future won't be defined by one big win. It will be defined by a thousand daily choices. At Lancing, great things don't just happen. We make them happen.
The future of baking doesn't just happen. It's built by the people who know it best. At AMF, we engineer smart solutions designed to tackle the toughest challenges in industrial baking. Through our specialized teams, we aim to deliver higher outputs and reduce downtime across your bakery's operations. Every AMF innovation empowers bakery teams to increase yield, reduce costs, and produce quality products at scale. This is the Lights Out Bakery. From mixer to marketplace, AMF is your baking partner of choice. Today, tomorrow, and beyond.
The Fusion floor by Habco has no fear from forklifts, and we have the proof. If you need a composite floor to handle the high traffic of heavy forklifts, get the floor that's backed by a 20-year industry-wide record of use. Fusion Floor by Havco, the only proven composite floor.
My name is Monica. I'm from Cali, Colombia, and I'm teaching fifth grade as a homeroom teacher. Teaching abroad was something that I had in my professional like to-do list or wish list. And I believe that teaching in the US with EPI is a great opportunity because it allows to experience and understand different cultures. Every year that I have new students, I learn something new, whether it's a fun fact from their lives or something that we discover together from reading a history passage. It also gives us the chance to learn different methodologies and share ideas with other educators.
We are Costa Farm. We're one of the largest growers in North America. We brought dozens of new varieties to market from tried-and-true favorites like Raven Zizi to the hottest new hibiscus. And we've changed how ornamental plants are sold in America by pioneering online sales. We've also made moves to become more sustainable. This year, we recycled over 1,000 tons of plastic. We're super proud of how far we've come. I'm so proud that the Costa Farm's name is synonymous with quality.
These little red trucks have seen a lot over the years. From a house on a hill in Richmond, Virginia to over 40 locations across the country. VSC Fire and Security. Founded and rooted in family integrity, responsibility, and excellence. VSC continues to stand the test of time. We're raising a glass to our heritage and our mission. As we look ahead to the future, we believe the best is yet to come. VSC, your world protected.
Every day asks us to carry a lot. We learn how to balance it all, the girl grip. Sometimes a bag says more than words. It can even ask for a rescue. Sometimes it's about carrying what matters most. Sometimes it's about privacy. And sometimes what you hold is the art. This is the art of the carry.
Just like we create a concrete product that has to be strong. It has to be able to hold up in different weather conditions, different loads, different situations, the people around there just like the concrete. They're strong. They're strong-minded and they're willing to go the extra mile to be able to hold up in adverse conditions to be able to go that long duration. And that has kept people just as myself there for a long duration of time to make sure that we're just like the concrete that we're strong. That's how we've lasted a hundred years and that's how we intend on lasting another hundred years.
Good afternoon. Good afternoon. It is absolutely wonderful to see you here for our 2026 reunion, the Markel Group annual meeting or as we say the reunion we call it. Now, none of us actually came up with that name reunion. We just heard you use the phrase pretty frequently. We do our best to listen and learn from others. Hence the reunion became the crowdsourced name. So thank you very much for the idea. Thank you. Here's our agenda for today. I'm going to share just a few thoughts and then Matt Johnson will soon present our Markel Style Award winners to associates selected by their peers for our highest honor. Following the style awards, your senior management team, including our CEO of Insurance, Simon Wilson, our President, Markel Ventures, Andrew Crowley, and our CFO, Brian Castanzo, will join me on stage to present some financial highlights and opportunities. Then, we'll be here to answer your questions. After your questions, we'll take about a 10-minute break to prepare for our formal AGM, which will be conducted by our Chairman of the Board, Steve Markel. During that break, feel free to either remain here for the formal AGM or join us outside at the reception for some hospitality in the form of food and drink and music. It'll be right out that way. Now, before we kick off the meeting, let me first welcome you all. I also want to take just a minute to thank some of the people that made today happen. A lot of work goes into preparing for the reunion and I just want to take a minute to thank some of the people who have led that effort. Unfortunately, time and space keep me from being able to thank everyone, but I do want to specifically thank a few and as many as I can. First, I want to thank Tyler Brown. Tyler, I don't know if you're here, he'll be over there shortly. He's led the effort for the last three years in making this meeting special and we would not be where we are today without his leadership in this effort. Tyler would be the first to say it's a team sport and he's right. As such, I also want to thank Caroline Paul for her partnership with Tyler. Thank you. I'll have a couple names so we won't wear out your hands too much so fast. I'd also like to thank Cynthia Green who leads events for our insurance business for her joining this effort as well as her teammates Gretchen Nerburgger who's succeeding Cynthia in that role and Cara Mountain Wilman. Thank you ladies. I'd also like to thank a couple of all-around athletes, Cynthia Federman and Christina Mati for their crucial contributions to anything and everything that comes up in all matters reunion. And finally, I'd like to thank Lynn Blevens who captains the many Markel volunteers who shepherd us through all of the aspects of this meeting from planning to helping us know where to find a bathroom, a bite to eat, or a place to park. Thank you all for the work you do for this.
In 1986, when Markel went public, Alan Kersner along with Tony and Steve Markel penned our company's credo statement of values, the Markel Style. Those 214 words will forever be the philosophical and cultural lynchpin of your company. The Markel Style establishes the foundation of how the company approaches its business and long-term decision-making. It guides how we allocate capital and serve all of our constituents. We are not perfect. We're human. But the Markel Style remains as a constant north star. That's important because Markel Group today is more than 22,000 people. We're a decentralized system of exceptional leaders and teams operating market-leading businesses across an array of industries. We believe in autonomy and accountability. Our creed, as stated in the Markel Style, keeps all of us grounded in our common values and moving forward together as one team. In its own way, the Markel Style addresses the question, what is the purpose of a company? We believe it is to serve. We work every day to serve our customers, to serve our fellow associates, and to serve our shareholders forever and right now.
First, the Markel Group serves its customers. We pay insurance claims for storm damage, ocean shipping losses, professional liability claims, and other complex specialized risks. We also provide essential products and services such as bakery equipment, pre-cast concrete structures, concierge medical services, just to name a few. We do so day after day, week after week, month after month, year after year, serving our customers dependably and reliably over time both fulfills our purpose and builds value. There are no shortcuts. There is no finish line. The journey is the destination. Second, the Markel Group serves its associates by emphasizing culture, autonomy, decentralized decision-making, respect for expertise, and opportunities to build long-term careers. We want associates to come here and stay. We want them to tell their family, friends, and their personal networks to join us as well. We seek to create a home that attracts people with equal parts of talent and integrity. We cherish the relationships that we build throughout your company. Third, the Markel Group serves its shareholders by focusing on building the long-term value of each share you own. We want shareholders to relentlessly compound their savings and build wealth. And we have a long-term record of doing so. From 1986 to the present, our stock price compounded at roughly 15%. That compounding record puts us in the upper tiers of public companies. And it's been true for decades, not just the last few minutes. That compounding has put kids through college. It's funded retirements. It's created the ability to give and contribute to communities and create good. Now, personally, I grew up in the shadows of Philadelphia, the center of Quakerism in the US. As the old joke around Philly says, 'The Quakers came to America to do good and they did well.' So is Markel. I want to thank you as fellow shareholders for helping us continue this path which does so much good for so many. Well, that all speaks to why we exist. In a few moments, Simon and Andrew and I will tackle the question, how are we doing? and we'll review some specific financial measurement to describe that part of the answer. We'll also talk a bit about our future and the opportunities we see. As is always the case, I think it's important to remember that the numbers are the output. The input is the Markel Style and our system. Living our values, serving each of you each and every day is how the magic happens. That is the system and the process which underlies our financial performance. We run Markel with the mindset of a good farmer. A good farmer farms for the next generation, not just the current crop. We're building your company for forever and right now. I'm grateful for the chance to help build Markel. It's a joy to do so. We're going to build this forever and I thank you. Now, before I turn over things to Matt Johnson, give me just a minute to say a word or two about Matt. There's so much to say about Matt that I'm going to limit myself just to words that begin with the letter C. So, first off, here we go. I've got a picture of Matt getting ready, Mr. Backstage. First C, creative. Matt is creative in every possible way. He sees into the future and imagines possibilities ahead of the rest of us. Connector. He connects people and ideas all around the Markel Group. He's done so throughout our insurance and ventures businesses and he's done so all around the world. COVID. Matt played a critical role during the times of change and reconfiguration driven by COVID. He helped so many of us figure out how to operate in a different way and to be able to continue to productively go about our work. Consultant. Recently, Matt stepped back just a bit from his non-stop pace as a full-time associate of Markel and took on the role of consultant to remain connected and to continue to help us craft and tell the story of Markel. I'm so grateful for all that Matt has done over so many years and I look forward to continuing to maintain that relationship in the years to come. With that, please welcome Matt Johnson to the stage and enjoy this video about this year's Markel Style winners.
We've long said we're here to build one of the world's great companies. But what does that mean? You could scour annual reports, case studies, and books about companies that come before. And if you did, you would probably learn things about what other organizations have done to succeed in the long term. But what's interesting is you'll find that success is not really as much about the products those companies sell. It's about the people that drive those companies and the relationships they form. It's about the spirit of the organization and the ambition that lies deep within their hearts. A commitment to try and make each day better than the last. These are the companies that succeed. And that's why if you look at what makes a great company, you'll find that a great company is more about who you are than what you do. And so the question is for us, who are we? 214 words that reinforce our commitment to success. 214 words that help us remain honest and fair in all our dealings. 214 words that we call the Markel Style.
All right. How's everybody doing today? They didn't tell me they were going to do that and so I feel like it's payback for all the times I put these style award winners' face on the jumbotron. So, thank you very much, Tom. That means quite a lot. It is my honor to present to you this year's winners of the Markel Style Award. Every year we give this award to people who embody the values of the Markel Style with their actions and not just their words. Our winners were selected from the more than 22,000 people who are part of our family of companies. And we think it's important to celebrate them because they represent the best of who we are and what we can be. So, as I read through the names of this year's winners, I'll stop along the way to tell a few stories to illustrate the caliber and character of these individuals. So, are you ready to meet the winners of the Markel Style Award? All right, then. Let's do it. Zach Bell, Kate Gardner, Ruben Oiero, Stacy Prigmore, Alysia Ferbert Adams, and Jamie Siki. Now, over 20 years ago, Jaime worked at a daycare that shared a parking lot with Markel, and she'd been in that job for about eight years, and she was looking for more opportunity in her career. It just so happened that one of the parents at the daycare was a woman named Kimberly Lefortune. Is Kimberly here today by the way? Where's Kimberly? The astute among you will recognize that name because Kimberly won a style award last year. And she was so impressed with Jamie at the daycare that she started printing out open job positions to encourage Jaime to apply. Jaime eventually did and she got a job in the file room in 2005. She's been promoted multiple times since and she now leads a team of underwriting support specialists. The spirit of teamwork.
Jess Richardson, Keith Hill, Claire Willlet, Nick Gibson, Matt Scott, and Janette Anselmo. All right, there we go. And you haven't even heard her story yet. So Janette went into healthcare to follow in the footsteps of her grandmother and when she got out of college she went to work for an anesthesia practice and she really came to like that company and culture. But a few years later that company was acquired by a private equity firm and there were layoffs and leadership changes and restructures and the company eventually became a shell of what it once was. And as this was happening, Janette was actually getting her MBA. And it was a professor in that program who connected her with what would become her dream job. She got the opportunity to lead a small concierge medical practice in Charlotte, North Carolina called Signature Healthcare. And for the next 15 years, she and the team built that to be an incredible organization. But then Janette got a call last year that she didn't necessarily want to receive. She heard from the owners of Signature that they were considering a sale to a company called PartnerMD, which was part of a large global corporation called Markel Group. And Janette feared the worst. She feared that a deal like this could kill the culture that she and the team had worked so hard to create over all those years. But it really wasn't her decision to make. So Janette took a meeting with Zach Smith, who's CEO, PartnerMD, and Zach said all of the right things. And at the end of the meeting, he promised her that PartnerMD would take care of what she and the team had built at Signature. So despite her apprehensions, Janette moved mountains to make that deal a success. And she did not lose a single person through that transaction. So you can look at this and say Zach and PartnerMD kept their promise and Janette, you kept your promise, too. And both organizations are stronger for it. The spirit of teamwork.
Alan Pilcow, Nikolai Stoyoff, Nate Wells, Jock Maro, Billy Mosby, and Isaac Dunston. Last but not least, Isaac. Now, Isaac was working as a server in various restaurants after he graduated from high school. And he did that for a few years until a family friend who worked at Markel told him that he might want to apply for a job with the customer service team. And so Isaac did and he got a job in a call center despite the fact that he actually didn't really like talking on the phone at the time. But he stuck it out with that job and he eventually led a team in that call center and now he's an underwriter in our personal lines business. And we love a story like this because one of the pillars of the Markel Style, as Tom said, is the idea that when you join one of our companies, you join a place where you can reach your full potential. But really, when you want to know what Isaac's all about, there's so much more than that story. And for that, we need to go back to 2018 because Isaac, he lives in Waukesha County, which is right outside Milwaukee there, and he was alarmed to see that more and more people were struggling financially and he wanted to help out but he only had about $200 to give and he couldn't even find an organization that was providing financial support to people in need. So Isaac decided to do something about it. He started his own nonprofit and he called it Simply Helping People and it was based on the relatively simple premise that you could pair generous donors with neighbors in need. And that's what y'all have been doing since 2018. And I have to tell you just a few stories about the work they've done. So the woman in the top left there was going through cancer treatment. She needed help covering expenses. Simply Helping People provided a grant. The family you see in the top right had a kitchen fire and they needed help getting back on their feet and Simply Helping People provided a grant. And then the car you see was a neighbor who hit a deer and they only had liability coverage and couldn't fund the repairs. Simply Helping People provided a grant. And then the last story, the woman in the lower right there, and this is a uniquely Wisconsin story, her car was hit by a snow plow and luckily she's okay, but the car was not and she needed some help covering the expenses. And so Isaac's organization provided a grant. Then a year later, Isaac gets a phone call. It's that same woman. And she says, 'Hey, Isaac, how you doing?' He says, 'Good.' And she says, 'Are you still doing that nonprofit thing?' He says, 'Yeah.' She says, 'Well, I've been saving for the last year, and I'd like to pay that money back.' And that's what she did. As Isaac is telling me these stories, and there's many more like them, I became immensely grateful that people like Isaac exist because they show us what's most important in life. Simply Helping People. That's what the spirit of teamwork is all about and that's what these people do every single day. So, please join me in congratulating this year's winners of the Markel Style Awards.
Hello. Hello. Hello. At this point, we've got some updates with some slides and Andrew and Simon and I will go through a few things to give you an update on some of the financial performance that's been going on here for the last 15 years. We're going to talk about Brian's here to answer any tough questions that none of us are prepared to do and we might just call on him anyway no matter what. First off, here is the disclosure statement that happens at the front of any financial presentation or conference call. The SEC equivalent of the Miranda warning. So, anything we say can and will be used against us, but please don't do that. And we're giving you the forward-looking disclosures to try to make sure that we don't... we had a contest where we were going to offer somebody the chance to read this to everybody. Nobody chose to participate. So, you'll just have to read it for yourself. We'll go into some of the slides. The first one and one of my colleagues noted, gosh this is a busy slide and boy there's a lot of stuff up there and he kind of wondered when I started on this to how much time are you going to spend talking about this? So in the annual report I talk about five-year buckets and we talk about being a long-term company all the time and I think five years is sort of the minimum amount of time that you can sort of tell whether people really know what they're doing or not or they're good at their job. You got to give people to do the job. Got to give time to let people do the job you've asked them to do. So on page four of the annual report in the letter there I talk about five-year buckets. This chart and these numbers are exactly from that letter and the annual report in case you want to follow along at home. And there's 10 boxes within there. So one, two, three, four, five, all the way through 10. I'm going to talk about each of them. Now, before I ask for some minutes of your time, there was one little math computation I did when I was thinking about this. And so, this is 15 years. 15 years of time of what's going on at Markel. And let's just say we have 22,000 people and they work 2,000 hours a year. 15 times 22,000 times 2,000 is 660 million man-hours of time that's being represented on this slide. So if y'all wouldn't mind just giving me about eight minutes. I deeply appreciate that out of the 660 million man-hours that are involved here. I'm going to talk about each one of them and then turn it over to Andrew and Simon. So box number one, the operating revenues. Over the years you can see that in those five-year times that we've had, you know, the revenues have gone and I'm sorry I have trouble sometimes seeing the numbers myself there but from 20 billion to 36 to 66 if I'm reading that correctly let's just say a number to a bigger number to a bigger number than that. It's accurate, it's directionally correct which is one of my hallmark phrases. That is 20 billion dollars of votes up to 56 billion dollars of votes of customers who are voting to do business with us to buy what we are selling them in terms of product and services and there's nothing we can do without starting with people starting to buy stuff from us. So that's box number one there. Box number two is where it starts to matter and that's the adjusted operating income that we've earned from those revenues and those sales we've had with the customers. And you can see it's gone from 2.6 billion to bigger number to a bigger number than that. And we'll break down that slide in a little bit. Our core legacy business is that of insurance breaking the total down a little bit to the earned premium numbers. Well, you can see the premium growth that has happened in those five-year buckets over the years. Again, same delightful pattern of big number, bigger number, even bigger number than that. Well, box number four, the underwriting profit. That's where it starts to get interesting because you can see in the first bucket of the 2011 to 15 time frame there was $700 million of underwriting profit. In the next five-year time frame, there were 600 million. That's lower despite the fact that the premiums went from 15 to 23 billion or whatever it is out there. That was the turd in the punch bowl. That was a foul period for Markel. And again, as I cited when we first talked, we are not perfect. We're human. We make mistakes. We get off track sometimes, but we're honest about that. We recognize that. We figure out what we need to do differently. And then we go about the hard business of correcting that and making it better. So, we always want to communicate very candidly with you. And I think those five-year buckets convey very important information. Our products, services, and other revenues. The Markel Ventures set, you can see an amazing growth story there from a small number to a bigger number to a much bigger number, a very rapid rate of growth. And again, it's important to go to box number six there that the products and services and other income that you see coming along, the rate of growth is even faster. And Andrew will break that down for us a little bit. Number seven, the net investment income. One of the features of the Markel Group is that as we operate the insurance business in particular and the other businesses, they produce cash and that cash gets invested and that cash is invested in high quality fixed income securities and equity securities and it produces a recurring stream of interest and dividend income. And you can see again the same pattern emerging of a big number to a bigger number to a bigger number than that. Now, box number eight there, the mark-to-market on equity securities. Tying that back to box number two, where we use the word adjusted, Andrew helps me out with a lot of due diligence issues. And whenever we see a presentation or slide that has the word adjusted to it, what he does is de-adjust and goes back to the original world. So, what were we adjusting for in that adjusted operating income? We were taking out the volatility of what happens in the equity markets on any given period. But you can see over longer periods of time frame and five years we count that as long enough we've made good money in investing in equity securities and again the same pattern a big number to a bigger number to a bigger number than that been the total returns on our equity securities. You net all of those things together you get box number nine that's the comprehensive income to the shareholders again going from a 2.4 billion to a bigger number than that to a meaningfully bigger number than that. And then that concludes in box number 10 where the market with some time delays with some volatilities from time to time generally speaking figures it out when we make more money the value per share of stock tends to recognize that with some time lags but you can see the rate of growth in the share price over time. The next slide if I may.
As I said, I do want to dive into the adjusted operating income and the point I want to make here is the degree to which the diverse collection and the array of businesses we have was really quite helpful. So you can see the insurance the lower bar the shade of beige or whatever that is from 2018 through 19, 20 was flatter down a little bit. Started going up in 21 that six-year era, we really didn't have a breakout or the up and to the right patterns that we would normally hope to see in some of our operations. And Simon will talk about that in a minute. But while that was taking place, the other businesses, the venture set of businesses, they were growing quite nicely. And not only did they contribute income and cash, what they contributed was resiliency and the ability to take long-term views of things, the ability to make the right long-term decisions, to not take shortcuts, to do things the right way. And it's easier to do that with a full bank account than an empty one. And the resilience and diversity that comes from the array of businesses that we own is seen there. Now, what you're also starting to see as we go into 24, 25, 26, I think we're back on track and Simon will talk about what's going on in the insurance business and things that have changed in his leadership, but it's certainly getting to a pretty good place there and we've had continued growth in the Markel Ventures collection of businesses as well. So, next slide, if I may. And by the way, all of those good things that are going on financially, as I said, we're about building the intrinsic value of each share of Markel stock that you own. And over the course of the last five years, we've bought back about 10% of our shares because we allocate our capital to where it has the highest and best use as best we can find it. So we are able to fund the growth of our existing businesses, be they insurance or non-insurance. We're able to make acquisitions of insurance and non-insurance businesses. We buy publicly traded securities which you saw reflected in the growth in the net investment income and the growth in the value of the portfolio. And we do the pencil out the math to see how our stock is trading relative to what we think the value is. And as you'll see actions speak louder than words. And we have repurchased about 10% of our shares at this point. So next slide.
So how did all this happen? What are the components that made this reality come to be? Well, first off, we have a set of quality businesses. These are market leaders. Simon will talk about his dream of building one of the world's premier specialty insurance companies. It's a spectacular business. The array of businesses within Markel, the leading grower of inside house plants, the leading car carrier trailer manufacturing, trailer flooring, industrial gas, are all leading businesses in the niches that they operate and it tends to be that those are businesses that just persistently serve their customers well, serve their associates well and continue to compound value over time. Secondly, we're diversified. We have an array of these businesses. At any given time, one business is going to be doing better than the other. Different economic cycles will apply to different businesses at different points in time by virtue of the fact that we have a lot of fingers in a lot of different pies. There's always plenty of pie and that's a good thing. We do so in a financially conservative way. We don't excessively lever the balance sheet. We keep the debt low and again that aids us in keeping the long-term time horizons of thinking about things in a long-term way rather than being under the gun of a current interest bill or debt maturity. We have a very efficient structure and I think this is extraordinarily important and it's one of the reasons why Markel has done so well and will continue to do well. So there are three levels of very important cost savings. Two of which you can see one of which is not immediately visible but it's real nonetheless. The first of those levels is the tax efficiency. So when we make money anywhere in the world and any business we pay the tax on that. That is the appropriate thing that we do and as would all law-abiding citizens. But if we put that money out in the form of dividends to you as a taxable shareholder, you as a shareholder would pay another layer of tax. So by keeping the capital inside the business largely what we do is we pay one level of tax. So we're able to invest after-tax proceeds as opposed to taxable shareholders who would be reinvesting after-tax after another tax proceeds. So that is a very important structural advantage to the system and the architecture of the Markel Group at large. Secondly, we cut out a lot of fees. If we distribute capital and then when we have a good idea need to get capital back from Wall Street from intermediaries, they can't and shouldn't work for free. There's a lot of fees and commissions that are attached to the moving of capital in and outside of the organization. So, as the old ads would say, we cut out the middleman and pass the savings on to you. That's an important level of cost efficiency for the business. The third point, and Andrew was the one who highlighted this and pointed this out to me, and he's exactly right. Every penny of what we spend in terms of management salaries, employee compensation, incentive compensation, everything, everything is accounted for and flows through our income statements. So, you see that number, it's explicit each and every period, each and every year. By contrast, if you were looking at a private equity-backed organization, often times some of the biggest chunks of management compensation don't come year by year by year, but they come when the business is sold. There's a payout and a bonus that's paid on exit. That would be different. Those expenses never actually flow through the financial statements of those companies. So, it's a hidden difference. But nonetheless those costs are absorbed. Those costs are real. They're absorbed by the investors. They're implicit and not explicitly stated. In the case of the Markel Group, you're getting the explicit reporting of everything it costs to run your business. And that creates a huge tailwind of efficiency for us to help compound your capital. By virtue of the fact that we've operated both in insurance and non-insurance businesses and public markets for decades, almost a century, we've developed some skills and some abilities to reinvest that money and put that money to work at good rates of return over time. Those skills are inside the organization and have proven themselves over time. And finally, I think in keeping with the Markel Style, it's truly a win-win-win system where our customers win, our employees win, and our shareholders win. With that, next slide. Let me turn it over to my partner Andrew to break things down in those five-year buckets a little bit more in the realm of ventures.
Appreciate it. Can we hop to the next slide? I will say while we're switching over here, you know, in Tom's defense on the numbers, I've never seen such big numbers show up so small on a screen. So, in your defense in terms of not being able to read the exact things, I will offer the perspective from up here that despite seeing billions and billions, they were about this small for us up here on stage, a little bigger for you all behind us. You talked about being directionally correct. One of the things that I think we work through over time is I like to be maybe a little more magnitudinally correct. And one thing I noticed in the five-year buckets as they went across and was just kind of doing some math the first time I looked at that was at least from the middle bucket to the most recent bucket. I mean on average those are doubles more than doubles. And for those financial minds in the room you know the rule of 72 and you can start quickly saying that's mid-teens. That's mid-teens over that period. That's a really, really strong number. So adding a little magnitude to the direction there. Where are we going to spend a few minutes now? My role at Markel is predominantly oriented to the businesses we report to you through our industrial, consumer and other, and financial segments in our updated financial disclosures. And so I want to just take a few minutes and talk about some of the things I see particularly related to performance that I hope you can see in the information that we share with you. We'll look at the performance over the last five years. We'll talk a little bit about why and what are key elements to that performance and then we'll talk a little bit about why I think this is systemic, this isn't just a five-year thing, right? This is built into the DNA of Markel Group rather than a feature that popped in a contemporary time frame. So on this slide, just so you see, that's the consolidated adjusted operating income that Tom showed earlier and then the total numbers for each of those divisions. Next slide, please. So we talk a lot at Markel about relentlessly compounding your capital, our capital over time. And my early days training in finance pointed out something that I think holds true in any time frame. And that is to do so growing earnings at a rate that is at or above the rate of capital growth is a strong statement for your ability to increase returns on capital and thus shareholder returns over time. So, it's a lens that when we're underwriting a business or we're looking at our own businesses that I always want to stare at and get my arms around. So, on the screen here, you'll see an excerpt from the KPI table that we put in our most recent 10K. Thank you to the team that helped pull that project along and update our information. It was a heavy lift, but I think the valuable information is on the screen. What you see here is adjusted operating income by segment as well as total capital by segment. And in the bottom light tan, you'll see the three segments added together. Next to that, you see a five-year CAGR. And what that shows is that the earnings power of these businesses grew 16% per year on average over the last five years. The capital on the other hand grew at six. That ratio is about two and a half to one. So earnings grew at a rate two and a half times the rate of capital. Without doing a whole lot of math that tells me that we're doing better today than we were five years ago. And it's just a simple way to keep track of that over time. It won't happen every year. It may not happen to that magnitude. But it's something we're really proud of our businesses for achieving is that discipline around capital and that ability to grow earnings. So, let's talk a little bit about what drove that. Next slide. Thank you. First thing is you got to grow earnings. You can't just do that by decreasing capital. And there are a lot of ways to think about earnings growth, but one area that we've provided some information to you is around the organic growth of the businesses in our family. It's a question we get a lot. Tyler Brown and I have a healthy debate about the value of organic growth. And at the end of the day, there is some value in understanding are the businesses at Markel Group growing. And if you looked at all the numbers in that grid that was on the screen a minute ago and you took an average annual organic growth, you'd see it was 8% over the last five years. That's a big number. Now look, in any one period, you might see a segment grow 15%, you might see a segment shrink 3%. That's a natural behavior of businesses rather than artificial constraints put to hit targets. But 8% over the last 5 years from an organic growth standpoint. The next point is capital discipline and this is something that the system is designed to help our leaders maintain. We constantly talk about large capital decisions and we constantly talk about excess cash and where is excess cash and do you need it to run your operations. Every business within our family is well capitalized but they also generate a lot of cash and when that cash isn't needed in that individual business. The goal is send it up, send it to the holding company. Everything that we do about capital allocation requires the generation of cash and the ability to redeploy it. So over the last five years, businesses across these three segments generated more cash than this, but they sent 2.1 billion back up to the holding company. It's a pretty good number. Just growing earnings, just having the capital discipline still isn't enough. We still have to find ways to put that capital to work. And there are a lot of ways we could talk about it, but just one number to put out there is over the last five years, we've invested $1.3
billion into acquisitions. Just doing acquisitions isn't enough. You got to pair all three of these things together. But when you say how in the world did we grow capital at such a small fraction and earnings at such a large fraction such that it was two and a half times over the last five years. These are three key elements to that. But they're not just the last five years. And if you'll jump to the next slide, talk about what's behind that and why I think it will continue.
So on growing earnings, Tom mentioned this in some of his commentary around the system. Our businesses operate in durable essential markets that are growing at mid, low, upper single digits, but they're growing over time. Anytime we talk about a business in our family or we're looking at something that we might do, the first thing we ask is, does it have a structural headwind or tailwind, right? Is this something that the wind's going to be at our back or are we going to be fighting every day just to stay in the same place? And we're very blessed to have businesses operating in a whole host of markets that have tailwinds. We could talk about fire protection. We could talk about insurance. We could talk about concierge medicine. We could talk about any one of our markets and the vast majority of them really have the wind at their back over time.
Second of all, our businesses, as Tom mentioned, they're market leaders. And that's nice. You know, it's a little blue ribbon. I'm the market leader. But what does it also enable? It enables cost advantages, price advantages, innovation at scale, the ability to recruit and retain incredible talent. I think you've got to see some of those folks today. There's so many things that come with market leadership and we have a strong desire to lead the markets that we're in and our businesses do a great job and we feel like that will provide further tailwinds beyond just what the market growth is.
Lastly, I was at a university not too long ago. There's actually a student in the room from that class. I hope he doesn't mind me sharing, but we were talking about leadership. And there were takeaways from a prior class and one of the comments was Apple's such a good business it could be run by a ham sandwich. And I don't know that I would call Tim Cook a ham sandwich. I think the guy's probably one of the best five CEOs in the last 20 years and his predecessor was up there as well. Our businesses aren't run by ham sandwiches. These are incredible leaders. I mean just gosh, I get teared up. You got to see Simon earlier. You all got a lot of laughs from Ross. I wish I had Ross up here now. It'd be a lot more fun. And Kyle, and I could go on and on. We've got many leaders in the room, but these businesses are well-run by great people and this system attracts them.
Anytime that we ever have to make a change or that someone retires, we kind of hold our breath. You know, we worry about who's next. Can we keep this going? And what I can comfortably tell you is over 15 years that I've been here, every single time we do that, we get stronger. And this system is built to attract high quality leaders.
Capital discipline. Look, one measure that the financially oriented folks look at is pre-tax returns on tangible capital. That's a lot of words. What it really means is if you rip out the purchase accounting, when we buy a business, how's that business really doing with the inherent capital that's there? Over the last 5 years, that number was 25ish. I think 26 is the exact number, but let's call it 25%. That's a really strong number. So, when we reinvest capital, we're reinvesting at a high rate. We always focus on fair price. Tom always talks about our four lenses. It's the fourth lens on there. Fair price means that when you walk away from the table, one, you're excited, but you're also a little uncomfortable and so is the other side.
But to quantify that, over the last 5 years, when we've made an acquisition, it's been at less than nine times operating income. That's in a world where prices have continued to go up. We've tried to maintain our discipline, still seeking that same quality that's inherent to being a part of our system, but doing so with the discipline around price. And lastly, as I mentioned, we return $2.1 billion of cash to the holding company. We'll continue to do that over time. If it's useful in a business, let's keep it there. If it's not, let's move it up so we can reinvest it elsewhere.
The last bucket here on reinvestment, we see a lot of opportunities. It's a real privilege to have you all as aligned partners, to have the leaders of our companies, to have a few bankers that actually like us and share good ideas. Over time we might see 500 things in the course of a year and that flow is an important part of our ability to discern what's a great place to put your capital and I think we're well positioned to continue to get that flow.
Lastly, when that flow comes in the door and I'm requiring a little bit of trust in you in this, but we've been at this for 21 years on the Markel Venture side. That's not that long compared to the near century of Markel, but in the world that we traffic in, that's a reasonable amount of time. And I think we've proven to have a unique model out there. It's not for everybody. But there are leaders, there are businesses, there are advisers who look to us as a unique partner in the world. And when that's the case, we're set up for success. And I want to stay on that and continue to perpetuate our reputation in that area. It's an intangible that doesn't show up on the balance sheet. Brian won't let us capitalize it. But I do think we've got a wonderful model that'll help us keep going over time. With that, I'll hand it over to Simon.
Thanks, Andrew. And you know, it's just fantastic to be sat up here and just looking at some of those numbers and you know, a lot of the things that you guys have been doing have given me the opportunity over the last year or so to be able to make some of the changes that we're going to talk about in this next section. So, on to insurance. I can feel people on the edge of their seats in this auditorium. This is a phrase that we kicked off the year with in 2026. We call it building to win. And I like it because it really captures every decision that we've been making over the past 12, 15 months has been designed to build an organization or rebuild an organization that can go out to the marketplace and start winning again. So everything I'm going to talk about today is around those concepts of building and winning.
So if we go on to the next slide, at the very core of my job within this organization, this system that you guys speak of is to produce consistent underwriting profits. Without that kind of gold at the center of what we're doing here, the system doesn't work to the degree that it should do. And I did this in Omaha last year, but I want to be completely honest with people about where we've stood over the last what's that three years or so of underwriting. You can see that kind of boxed off. This is our combined ratio over time on a quarterly basis. And for those of you, you know, follow insurance, the lower the score, the better. And if you're over 100, you're actually making a loss.
Now, you can see in that period from Q3 '23 to Q2 '25, so that's two years, we were pretty marginal at times loss making within the insurance business. Now, there was a lot going on underneath the covers there. And it wasn't that period of time that was the problem. It was the seeds were sown long before that in many respects. And a lot of what we have had to do to get back to consistent underwriting profitability is really hard work on our portfolio management.
So just a few things that we've done on that underwriting portfolio in the casualty business in the US. We've reduced the proportion of construction risk that we're underwriting in that particular area. We've also decreased our average line size quite significantly. We've come out of our DNO, our public DNO underwriting which was a kind of 200 something million dollar line of business. So we've completely pulled out of that in the US. We came out of collateral protection insurance, CPI, which was a misstep and we've also come out of global re.
Now a lot of those decisions that we made at the time were good economic ones but if you go talk to brokers about the things that you're now stepping away from that they kind of relied on you to underwrite that is not a popular thing to do. It's hard yards to go and do those things. But this is not a popularity contest. It's a profitability contest. And that's really really important for our guys to understand. And as we've seen the improvement in the later quarters rather the last three quarters, it's actually slightly sub 93 in each of those quarters. We can see the green shoots emerging of those difficult decisions that we had to make over the course of the last 18 months.
It's hard yard. So, those of you that are in the insurance side of the business in the audience, that work was worth it and it will continue to be worth it. But we've got to keep going at producing these types of results for another three quarters and another three quarters after that. I think we'll get our halo effect that Tom talks about quite a lot back if we continue to produce results like this.
Now, here's the thing. You can do some good portfolio management by cutting things and often that's required. It's like pruning in a garden. But you cannot cut to greatness. You have to do things to rejuvenate growth in an organization and to become market leading again. So if we move to the next slide, last year I stood on stage or sat on stage and I talked a lot of talk, you know, I was saying these are the things that we're going to do and I talked about P&Ls and reorganizing and getting rid of matrix structures and all the rest of it.
Over the last 12 months, I think the team has really walked the walk and I picked the big six things that really happened. The dreadful four-dimensional matrix structure in the US, which meant every decision we were making on the underwriting side had to be done by committee, is gone. Now, very detailed clarity on who is responsible for what. We reorganized the business into three divisions: wholesale and specialty, programs and solutions, and our international business. Each of them led by a terrific leader in Wendy Hower, Alex Martin, and Andrew McMillan.
Under those three divisions, we've got 14 business units and every single one of those 14 business units has their own P&L and a leader that sits on top of those P&Ls. All of our financial reporting and our management information, thanks to Brian and your team, massive efforts, and now aligned to that new structure and so is the compensation of the leaders that drive that new structure as well.
We stepped away from the loss-making business which was global re, $1.2 billion worth of gross written premium, most of that net earned premium and revenue to us as well, and 80% of the 2,200 people that work for the central part of our organization have now become part of individual businesses. So those 14 business units. So they are close to the business, close to the customers and every day going to work with winning on mind. So a massive amount of organizational change on top of the portfolio changes that we made which I think sets us up fantastically for 2026 and beyond.
So if we move to the next slide going to talk about a few concepts, a few of the pillars that are really going to drive our success over the next three and five years and it all begins in my book with strategy. And in strategy there's just two questions that you need to care about. The first is where to play and the second is how to win. For a long time in the insurance business we were fiddling around with lots of different things and where we wanted to play. But our heartland where we built this business is in specialty insurance. That is a 700 to 800 billion dollar marketplace globally. We write $9.5 billion of that. There is ample road to run in the space where we can make a difference and we should be confident in attacking that space.
And by the way, it tends to grow every year as well. So it's not just, you know, a zero sum game where that doesn't grow. It's plenty big enough. The grass is not greener. So once you become comfortable in where you're playing, the question then is how do you win at that game and I feel passionately there are four things above all others that differentiate a winner against the also-rans. The four things: customer focus, complete obsession over customers. If we can't out compete the standard marketplace business will never come to the specialty marketplace. We have to offer things to our customers that others do not.
That comes from market-leading expertise. We need to put together teams of people who are absolutely focused on their specific area of our industry and they're complete experts in it and we create these kind of Navy Seal teams that come around it because people in this industry buy expertise and they rely on it. Thirdly, speed is utterly critical. The ability to make decisions at ground level close to customer at speed will win you business nine times out of ten in this industry. So you have to get better at getting rid of bureaucracy. So the decision-making autonomy which we've pushed down into the divisions as a result of the new structure and critically technology are what will drive that speed to market.
And finally this is a trust game. People are buying a piece of paper that tells them that we will be good for our claim in the event of the worst happening. Consistently doing the right thing in both claims and the way that we act with our customers is absolutely tantamount to success in this industry. You do those four things well within specialty insurance, you've got a heck of a good chance of building an incredible business within it. So strategy is one thing. The question we ask on the next slide is, well, how do we structure ourselves? And I've alluded to this a little bit so far, but it's simple in my mind. I talk about building and really what I'm talking about there is building blocks. So what is it? This ground up mentality that Tom talked about earlier.
We've got Markel Insurance roughly nine or so billion split a third, a third, a third into our three major divisions. But underneath that you've got the 14 P&Ls which are the white words here. So in programs and solutions in the middle there you can see Bermuda, our small commercial workers comp business, personal lines etc etc. Well, within those 14 P&Ls, those 14 business units, actually, the business gets broken up even further by those business units leaders. And there probably are P&Ls that sit within those. That's how they run them. And every single one of those blocks that you see in front of you have people, products, technology, and customers sitting around them. And those leaders, the people who sit in those blocks, that's where the magic really, really happens in this specialty business that we've created.
And there's one picture of one individual there, guy called Esteban Manzano, a man we sent out to Madrid back in 2005 to go build a business. The wonderful thing, my favorite meeting of the whole of 2025 was when Tony Markel and I got on a plane and went around Europe. And Tony had never been, I think, never been to Spain, certainly never been to Madrid. And Tony was able to walk into our office with his name above it. He looked quite pleased about that, Tony, I think, and see 80 Markel Associates in a $65 million business operating at a combined ratio of a sub 90. And Tony had never even been there. The guy that drove that was Esteban and the team that he's built around us.
And if you took any one of the blocks that you see in front of them, there's a story equivalent to Esteban's within each and every one of them. So it is a wonderful story of being able to build a business piece by piece and if we decide to add a block in here, it works within the system and the structure that we've created. We move on to the next slide. I am certain that we're going to have a ton of questions about technology and AI. So I'll keep my comments very very brief at this stage and hopefully in the Q&A we'll talk to them. But there are three levels in a business of that breadth both globally and in the product suite. There are three levels of bets that you need to make on AI and technology.
The first is on transformational bets. So I believe we can build brand new businesses from scratch within Markel Insurance in the next and we'll be doing this in the next few weeks that can transform the way that we provide services and business in certain aspects of the specialty market. So we can go ground up from scratch and create a completely new business. We can reimagine the business divisions that we already have. So in areas like financial institutions in the US and transactional liability over in London, we have completely reimagined how we provide our insurance business with the use of AI using building that from the ground up. And finally, there are hundreds and hundreds of things that you can do just to improve your business 1% every single day in these quick wins. And I'd just like to turn over to a video so the people that are making these quick wins happen can talk directly to you and give you a flavor of what's happening in AI in Markel Insurance. Ron VT.
It's an exciting time at Markel. We're really thinking about AI as a capability and how that can help us serve our customers better. So we've set up two AI centers of enablement. One for international led by Moren Tomlinson and one for the US and Bermuda led by Richie Henry.
The center of enablement is designed to do just that to enable our people with access to tools and capabilities. We want to democratize AI across Markel.
We're taking the approach from a grassroots from the bottom up. And why is that important? Because it's going to bring out the more innovative approaches, use cases because we're going to those individuals that are closer to the work.
We've created an AI accelerator fund. I think it's really important that you hear directly from the people who've been involved with these AI accelerator use cases. So, you're going to hear from them now.
Imagine someone browsing a horse listing online. That listing already includes things like age, breed, location, and price. Our AI uses that information to instantly provide a rate indication. The customer will see three coverage options in a good, better, best format, similar to what they're used to with home and auto insurance. It answers early pricing questions upfront and lets our team focus on more complex, nuanced risks.
Fun fact, Harvey AI was named after Harvey Specter, which was a fictional attorney in this show called Suits. So Harvey was designed by lawyers for legal research and actions. Fast forward underwriting. We review a lot of documents and we have to make decisions, some legal binding decisions and so Harvey AI is a perfect tool to analyze dense texts in order to figure out if we should or should not be on a risk. We're probably saving 7 to 10x as far as time goes on underwriting accounts. The underwriters love it. The book is growing. We'll probably add to staff based on size of the book and the complexity of accounts that are coming through, but AI is helping us be a market leader and turnaround time as far as getting the quotes out the door.
My AI accelerator idea focuses on automating manual underwriting and audit review processes particularly within personal lines and delegated authority business. The goal is to allow AI to review more submissions and transactions than we could ever do manually, flagging risks, patterns, and exceptions and then escalating those to what truly needs human attention.
My idea is Windsight. We went to Captech with a very high level idea. How do we take hundreds or thousands of account level data and filter it down to just a few accounts that we know we can compete on and really want to write based on our guidelines. What this allows us to do instead of going to the broker with hundreds of accounts, we're able to go to them with a very select number of accounts that we want to write and we know we're going to be a great partner on.
So, Markel, we're celebrating how successful we've been with artificial intelligence. We're seeing fantastic adoption rates, 97% co-pilot users over the last 6 months. That's well above benchmarks. We've done that by empowering the individuals in our business who are close to the customer and allowing them to make sure that they're doing the things that they can to serve those customers better.
All right, so there's a lot going on around AI. That's just a flavor. I'm sure we'll touch on it later. The final final pillar that's really been transformational in the last 12 months is around culture. What we're trying to do is we're trying to take an organization which have become a little bit middle-aged. It become we stopped doing things and really grinding out new products and we've really tried to instill what we call a founders mentality across the organization.
There are three bits of founders mentality that are important. The first is insurgency. The idea that what we are doing is just going to be better than everybody else in the marketplace. A complete passion to deliver something which is way better for our customers. And the second is that customer obsession. The fact that we obsess and we understand our customers and meet them where they are at every single day. And the third is an owner mindset. We've heard that a couple of times. So every dollar that we spend on these businesses feels like it's our money and we're proud of the businesses that we're building.
The second is just beginning to win. Again, the idea that we come to work to win rather than just do work is a really critical part of the culture that is instilled in people across the organization. Bureaucracy is the thing more than anything that kills once brilliant organizations. Our job is to stamp bureaucracy out wherever we find it. And that is a cultural aspect of how we run this business. And finally, pure joy and enjoyment. I hear laughter in the air more than I have done in a long period of time. And I hear ambition in every corridor that we walk down.
So you put the strategy alongside the structure, the use of new technology, people really really wanting to be part of this organization and you put some laughter in and amongst that. I think we've got a we found ourselves in a position now where we can really take this organization to the next place and put ourselves back as the preeminent specialty insurer on the planet. Thank you. With that to Tom.
Simon, thank you. Thank you all. Thank you all. This is a delightful time when we get to share the progress that we've made and I hope you can feel the sensation of the joy that we're finding in the progress that we're making and getting things on the right track. Time for Q&A. We've got three spots from which to take questions. Zone one, zone two, and our own Tyler Brown over there with questions. You're more than welcome to ask any question that you would like. We'd love to hear from you. We'd love to have a discussion as much as possible. If you would be so kind as to tell us when you are recognized who you are, perhaps how long you've owned Markel Shares. And then proceed with your question. So, with that, zone one.
Thank you, Tom. My name is Jeff Stacy. I'm from Toronto, a longtime Markel shareholder. I just want to start by thanking you and your colleagues for putting on such a terrific reunion. It's just an amazing forum to learn more about our company. So, congratulations and well done. My question is about the recent letter from Jana Partners to the Markel board. I read the letter very carefully and it strikes me that because Jana is so public in stating their views that it's easy to get the impression that they represent the majority of Markel shareholders. And I think the reality of this situation is much different. And I'll only speak for myself as a longtime shareholder. I think it would be a huge mistake to sell the Markel Ventures unit. I personally like the superior business economics and the cash flow diversity that it brings to Markel. And I need to tell you, I've spoken to many other shareholders and I haven't found a single one that supports the notion that this is a good idea. So again, I just say I think it'd be a huge mistake to sell the Markel Ventures unit.
Now, the other issue that Jana raised was around share repurchases. And it seems to me that there's some more common ground between Markel and Jana on that issue. Markel's been buying back shares as you showed in your presentation for a number of years now and you've publicly stated that you know given the current share price you would expect the robust pace to continue. I will just say, yeah, tender offers can make sense in many situations, but they're also costly, time consuming. And they often result in low take up rates and higher prices being paid than a slow, steady, methodical compounding or purchase of shares. So even on this issue, I find the approach you're already taking more compelling than what Jana is suggesting. So, while I accept that Jana has the right to advocate for any course of action they want, as does any Markel shareholder, I think the time has come for them to recognize that they don't represent most shareholders and their views are contrary to what most shareholders want. And for them to continue advocating with this approach is just time consuming for management. It's a time drain and a distraction. So my question is just simply would you care to comment on this?
I think I prefer hearing you comment on it. Yeah, Jeff. No, thank you very much. I appreciate the questions. To be fair, when Jana first raised the issues, I happened to have been in New York City at the time. I was in a meeting, my phone started buzzing quite a bit. So, I excused myself and went and looked at my phone and I said, 'Oh, a bad word.' So, I called those folks and I said, you know, as it turns out, and of course, they make their actions without telling us first or giving us any calls or whatnot. That, you know, they have their own agendas and what they're trying to do. So, I said, I happen to be in New York City. I'd be happy to meet with you and discuss this face to face. Now, I could be at your office by 2:00 tomorrow afternoon. I did.
So, I was advised by my advisers and counselors to go and be listen only, listen only, listen only. And I went in for this meeting. And for the first 45 minutes, I would give myself an A, maybe an A+ on listening. I probably slipped to maybe a B+ or maybe even a B or B minus as we got into the last 15 minutes or so because there were some factual things that I just wanted to ask where did you come up with this? Where did you come up with that? To make sure we agreed upon the facts.
I also said at the same time that they raised a lot of legitimate issues and we talked about those five-year buckets and we talked about how bureaucracy had crept in as Simon would say that we'd lost our way a little bit. That was a fair criticism and I acknowledged and said that right now but we had already started to take steps to make that better and we were working hard at it. I will share a story with you which my wife tells me not to do. So of course I'm going to do it. And in that conversation I asked had they done insurance related things before and they really hadn't done a lot of insurance related things. And so we talked about the accounting, the time sequences that are involved. So if we sell an insurance premium you might collect that money on day one but we will advertise and sort of accrue that premium over the course of a year and normally it's at least two years before you really get an indication as to how well that particular book of business is doing.
So the kinds of things that Simon is doing right now and the kinds of things that we were starting to do, it's just now I've used the phrase green shoot and then in our second quarter of 93 I called that green shoots. We're getting but there's a lot more plural to come behind that s. So I was just sort of trying to have an accounting conversation which people love having by the way. And I said, you know, to give that two-year horizon, and I said, no disrespect here, Simon, but I said, if we had Jesus Christ running our insurance business, it would be two years before whether we knew if he knew what he was doing or not yet. So, give the guy a break. Give him some time.
I think the core difference and the core ways in which we see the world differently, and it's not right or wrong, it's just different, is Markel is a long-term company. We were coming up on a hundred years. People invest their life in this company. I have people come up to me and they say, you know, the biggest chunk of my net worth is in Markel stock. That is a heavy responsibility and that is a responsibility I take very seriously. There's an epic amount of trust that has been placed in us from investors, from our colleagues. It's our own life story as well of our own accumulation. And when you think about things in the time horizons that we think about things, the pace at which we're repurchasing shares is subject to a lot of other factors of what goes on in financial markets. What deals are we seeing that we want to have dry powder and the ability to execute on should they come about? What is our opportunity and ability to answer the bell for the next round of the fight over and over and over again no matter what happens to us? And the financial conservativism and the pace at which we've operated is reflective of that to make sure that we continue to compound the value of your company forever and right now. But thank you for the question. Zone two.
Hi Tom, my name is Joey Opin and I've been a shareholder since 2019. I'm based out of Richmond. Thank you again for holding such a wonderful event. Now Andrew answered my first question during the presentation so we'll go with the backup. This question is for Simon and Brian. How should we look at the future of float over the next few years after exiting the reinsurance business? Should we expect it to accelerate as more resources get funneled into specialty and Markel Insurance doubles down on its bread and butter core business? Thank you.
Nominate Costanzo. Yeah, thanks. Thanks for your question. I think you'll see two different dynamics going on there. So first we put the global re business into runoff. When we do that we stop writing new premiums. So that stops generating new float. The reserves sit there for a long time. And so we've got about three billion of reserves. Those are longer tail reserves. So that float's going to sit on the books. It'll sit there for a while and continue to be invested in the securities that we hold. At the other side of the equation is what Simon talked about and all the growth strategies that we have and how do we redeploy that capital into our other business units that we have. So that's where you'll see the growth in the float coming in the future. The ability to grow in those 14 P&Ls, the growth that we have there will continue to reinvest that float further and further and compound but at better combined ratios and better returns on capital.
So at the end of the day, the two metrics that we're looking at on a day in day out basis is what's our combined ratio, how much are we making on the underwriting profits, and how efficient are we with the capital that we're using to generate those underwriting profits. And so the changes in the disclosures we made to have return on equity is a key metric. That's been something I've been after for a while. That's near and dear to everything that we do and it's core to how we manage the business every day.
Yeah. One point I would offer on that is that we obviously stopped underwriting the reinsurance business. That was the decision we made. Brian says it's now in runoff. We continue to actively look to draw a line underneath that reinsurance book if the right deal comes across the table where we can essentially buy a loss portfolio transfer, reinsurance policy or transfer those losses over or an adverse development cover. If the right economics are there we'll probably take that so we can sort of release some of the capital and then move on with those growth strategies. So, it's very much that area of the business is very much something that we talk on a fairly frequent basis.
Thank you, Joey. Mr. Brown.
All right. I was going to begin with a question about Omaha because for the first time since 1991, we didn't have our Omaha brunch and that would have been naturally where a lot of shareholders would have gotten some of your perspective on Berkshire and we had some questions to that effect. So I wanted to give you the opportunity to answer Scott Chapman's question which has the retirement of Warren Buffett as CEO changed your thinking about the large allocation to Berkshire and do you feel constrained by the large unrealized capital gain in that position?
Well, thank you. So I'll start with the constrained by the large unrealized capital gain position. May the Lord smite me with such a curse. We will worry about those kinds of problems as much as we possibly can and would love to do so. That contributes to the tax efficiency that we talked about. So if you look at the equity portfolio in total at the end of the first quarter, I think the unrealized gain was a little north of $8 billion. It's probably more than that today. So that would be roughly a $2 billion deferred tax liability that we would have. That means there's $2 billion working on your behalf as shareholders for which our cost of capital is zero. That is an awesome advantage. And I think that that number is probably the second highest total of any company in the country. And so I think it's stunning. This little business that grew in Richmond, Virginia now has the second biggest unrealized gain of any company in the country. Obviously with the largest one being that of Berkshire. So a high class problem.
If the economics were such that I was concerned that we should sell it anyway and give up that tax advantage, we would do it, but we would always do it thoughtfully as to if we were reinvesting 80 cent dollars as opposed to hundred cent dollars, is that the wise thing to do? Sometimes it is. So we're very open-minded about that. In terms of the brunch out there, we decided we would trade the Omaha brunch for the Richmond barbecue. I didn't know it was going to be 100 degrees literally for barbecue, but we did want to shift the focus and the emphasis to Richmond because things are changing out there.
The first question again the feelings and the sensation we would have about Berkshire. One, I think it's a wonderful investment. I think it'll continue to be a good investment. I think it is diversified. It's low cost. It's very well run. Greg Abel will do a fine job. And in the course of time it's like if you think about J.P. Morgan, great company, 150, 60, whatever how many years old J.P. Morgan is. I think most of us if we had to take a bet on naming the first chairman ever of J.P. Morgan we could probably come up with the winning bet. The first chairman and CEO of J.P. Morgan was J.P. Morgan. I think there's a lot of people who probably can name the current chairman and CEO of J.P. Morgan. That's Jamie Dimon. Very public figure, well-known business leader. There were a lot of people who served in that role between J.P. Morgan and Jamie Dimon. And I don't know any of them. And I think a lot of us would struggle to come up with the names of people who had that job. But it was a seasoned executive, a professional, somebody who was qualified to do the job. And I think the case we can expect with Berkshire for a long time to come is that is a major substantial well-diversified business that will be well run by a talented team of investors. There will never be another Warren Buffett. One of a kind. But the good news is that's not what Berkshire needs at this point. What Berkshire needs are talented executives to run it and they have them. Zone one.
My name is Raith. I am from Richmond and I am a five year Markel shareholder. I have a small question and I will be happy if you all four can answer. It's not an original question. I was reading Davis Dynasty and Shelby Davis used to visit insurance companies and he will ask one question and he used to ask if you had one silver bullet to shoot a computer which competitor you would like to shoot.
So, I am not going to even allow my colleagues to answer that question. I don't like to be dictatorial top down, but I'm going to say that. You know, we are competitive and we want to win and there's times where we see people doing things or saying things about Markel that sort of gets under our skin and so be it. But positivity is important, optimism important, goodwill is important, grace, trying to meet people halfway in a positive way. And we've been through a time period of adversity and some challenges, but at the end of the day, that is handing over the agenda to somebody else and letting somebody else control the way you feel and that's a mistake. I love your story about the helping people and just all right, this the situation that's helpless and what it you can help somebody and then that goes so well that somebody starts helping and the daisy chain reaction is set off in a positive way. So, we're not about the business of shooting other people. We've shot ourselves in the foot from time to time and we're stopping doing that. So, we're putting the guns down and running the business.
I'm not... I told I said you can... I'm going to say one thing. It's like often you go ah the competitors, you know, let's get rid of them or something like that. I don't think like that. Some of the competitors have done things to out compete us which we can learn from and if you just stare and put your head in the sand and go like I just hate the other guy misses the point if that it's like customer feedback is a gift. Competitors out competing you in an area can be a gift if you're playing a long-term game. Figure the game out and out compete them. And I think that's what we're trying to do now. We've changed a little bit in our... So don't worry Tom. I wasn't going to name anybody. I was going to say if you had asked me that question at 12:15 after Coach Cook was done talking if you were at the forum and I was ready to run through a wall I probably would have answered that question. I've at least had a few hours to calm down now a little bit. So.
I feel like I have to say something even though... You can see how well the fact that the colleagues are not going to answer this how that works. I will say so our friends at KKR have a great phrase around this and they're kind people but they are diehard competitors and what they talk about is we want to promote that competitor to customer and at the end of the day what they really mean is we want to eat their lunch such that they buy our plants instead of growing their own. And I think the notion of competition you earn the results that you get. You don't demand them. You don't sit back and self victimize. If you're gonna beat the competition, you do it because you earn it. And I think the leaders of our businesses think about that every single day is how do they earn the right to win, not how do they just get it.
Hello, my name is Jovanna Iikner. I am from Green Century Capital Management and we have been investors in Markel for about five years now. And my question is for Mr. Wilson in particular. Something that I would appreciate insight on is given the importance of Markel's insurance business to investor returns and the company's focus on long-term profitability, how is Markel assessing the potentially increasing exposure of certain lines of its businesses to physical risks, including increasingly severe and more frequent climate-related disasters.
Thanks for the question. I'll take the property question as you're touching on there, but I might pivot as well to casualty because there's some things happening in the economy over here in the US we should be mindful of as well. It is clear that there are certain events which occur, some people say more frequently, others are not entirely sure. On the windstorm, what is absolutely clear in the southeast of the US is that as and when they do come, the value of the property that has been built in that particular part of the world is way more expensive than it was 10 years ago and clearly 20 years ago as well. So we have to be really mindful that those incidents do happen and we've seen Cat 5 hurricanes that haven't made landfall that if they did, it could be quite significant. What we're doing from an insurance standpoint on that is we're actually relatively limited in the amount of property cat business that we write. We do have some cat-exposed risk, some energy installations that we have in the Gulf of Mexico. We have some properties up and down the Florida coast, but we're not overly focused on that particular line of business and we do buy quite substantial reinsurance for it as well. So we do believe that this thing can happen and I think wildfire is something that is a very, very significant issue for us as well. All the modeling that we do in our property book and all the reinsurance that we buy are very thoughtful in terms of what's the biggest loss that we would be prepared to stomach from an incident like a windstorm or a wildfire and we trade within that. So managing that very tightly.
The area that actually concerns me more than property, because in property you can really model things and you can know where your exposure is and how much the value of that exposure will cost you in the event of one of these storms. What is harder to gauge is the casualty problem. So this is, people call it social inflation. It's the US legal system which is absolutely unbelievable at the moment. I say that as a Brit. I'll give you an example of this. There's a road traffic accident that was caused by one of our insurers rear-ending a vehicle that was in front of him causing really sad injuries to the person that was driving the car in front. There is no doubt that our driver was responsible for that and a payment needed to be made from a claims perspective. Now this is two or three years ago. Those claims used to go, we've got history in this area, quite large claims would typically go between $10 million and $20 million depending on the jury and the arguments of the case. So we offered $11 million to settle the claim. The other side said $19 million. We said $12 million, they said $19. We said $13, they said $19. We said $14, they said $19. Okay, let's take this one to trial. This is, you know, because we've offered and we've offered and we've offered and we don't seem to be making progress. It goes to trial. The jury says $200 million and you're like, what the heck just happened? So this is depending on the geography where these trials are occurring and the jury selection you're getting these absolutely, well we call them nuclear verdicts, but they're out of nowhere, these incredibly severe decisions. Now that $200 million was reduced down to $100 million or so in subsequent trial but you've still gone for something which is between 5 and 10x what you expected it to be and that is happening increasingly and as the legal firms and the private equity money sees the opportunity to profit from this kind of adventurism, this wall of money is being thrown at the system to literally take insurance companies to court and to sue them. So, we're doing a heck of a lot within our casualty business to reduce the threat of this social inflation, mad legal system situation that we're finding ourselves at the moment. And that is the hardest thing in our underwriting portfolio that we see at the moment. And some of the issues that I described in that kind of middle years that we're coming back from were really akin to the casualty and the third-party losses that we're beginning to see. I think we've got cleverer about it in terms of the way that we're underwriting at the moment, but this pervasive investment strategy that we see across the country isn't going away anytime soon.
