Markel 2Q15 Earnings Call Notes

Small loss in investment portfolio due to marks on foreign holdings

“The investing message is short and straightforward: we made modest returns of 1.5% in our equity portfolio for the first six months; and we were flat on our fixed income portfolio, as a slight rise in interest rates offset the modest coupon income from the portfolio. After the effects of foreign currency exchange rates are taken into account, we show a small loss of 0.5% for the entire portfolio, due to our holdings of foreign currency bonds.”

Foreign holdings to offset foreign currency liabilities

“As a reminder, foreign holdings exist largely to match against our foreign currency interest liabilities. The net effect to Markel from swings in the value of the dollar is as close to zero as we can possibly make it. Our longstanding policy of matching our foreign liabilities to foreign assets remains in place and it has functioned well over many years. That will continue to be our approach. But given the large moves in the dollar recently and the low level of interest rates, the relative contribution of that line item is bigger than normal. As such, I thought it was worthwhile to call it to your attention.”

This market is bizarre to me

“This market is bizarre to me. We’ve got a disproportionate number of names at the top and a disproportionate number of names at the bottom at the same times, with very few companies in the middle of the range. To me, this illustrates the volatility and somewhat topsy-turvy nature of things right now. I apologize for my use of such technical terms. More importantly, my point – and I do have one – is that I believe this represents a real opportunity for us.”

Increased our equity holdings in energy, finance and consumer products

“During the first six months of the year, we increased our equity holdings as a percentage of our shareholders’ equity from 54% to 56%, with our steady and unrelenting program of regular additions to the equity portfolio. With the price volatility present in the markets, I believe we’ve been able to purchase shares in high-quality companies at very reasonable prices as they go on sale and that we’re stocking the pipeline for attractive future returns. Specifically, we continue to acquire holdings in energy, finance and consumer products businesses that meet all of our four-point tests. And I’m optimistic about the future returns we’ll see from doing so. Expect us to continue this approach.’

In the current marketplace see more opportunities in publicly traded securities than private

“In the current marketplace, we see more opportunities to buy attractively priced, publicly traded securities than private businesses so we are allocating our capital more towards public markets.”

Our strength is that we have a 360 degree view of capital markets

“We continue to actively hunt for opportunities in both arenas, and I’m optimistic we’ll find treasures in both markets. That’s one of the true beauties of Markel and that we are able to pursue the highest and best returns no matter where they might be. We have a full 360-degree view of insurance, industrial and public and private debt and equity markets, and we’re comfortable in deploying capital into any and all of them as circumstances arise. “