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    MKL
    Earnings call· Jun 2026(Q2 FY26)

    MARKEL GROUP Q2 FY26 earnings call MKL

    Jul 30, 2026 Source

    Executive summary

    Markel Group Inc. Q2 FY26 — Underwriting Profitability Improves Amidst State National Reserve Charge

    Markel Group delivered improved underwriting profitability in its insurance segment, maintaining a 93% combined ratio, while actively deploying AI to enhance operational efficiency. However, a significant reserve charge in the State National business impacted the Financial segment's results. The company continues its disciplined capital allocation, prioritizing share repurchases and long-term value creation, even as industrial markets face headwinds and property insurance remains competitive.

    Highlights

    5

    • Markel Insurance achieved a combined ratio of 93% for the fourth consecutive quarter, improving from 97% in Q2 FY25.

    • Ongoing insurance business (excluding Global Reinsurance exit and Hagerty fronting) grew top-line gross written premiums by 10% in Q2 FY26.

    • Consumer and Other segment's adjusted operating income increased by 20% to $122 million in Q2 FY26 on 4% revenue growth.

    • The company repurchased $237 million of its shares in Q2 FY26, bringing year-to-date repurchases to $371 million and reducing total outstanding shares by nearly 10% over the last five years.

    • AI deployment in insurance operations led to a 50-90% reduction in initial risk assessment time and over 90% accuracy, contributing to 50% GWP growth in London for specific lines.

    Concerns

    5

    • A $205 million reserve was recognized in the Financial segment for a collateral shortfall related to a bankrupt capacity provider within State National, impacting Q2 FY26 adjusted operating income.

    • The Financial segment recorded an adjusted operating loss of $149 million in Q2 FY26, down from an income of $78 million in Q2 FY25, primarily due to the State National charge.

    • Industrial segment adjusted operating income declined by 27% to $75 million in Q2 FY26, driven by tighter margins and softer demand in car hauling equipment.

    • U.S. Wholesale and Specialty division's gross written premiums decreased by 4% in Q2 FY26 due to intentional contraction in certain lines and a softening property rate environment.

    • Programs and Solutions division's underwriting gross written premiums were down 27% in Q2 FY26, primarily due to the shift of the Hagerty program to a pure fronting model.

    Guidance & targets

    2
    CategoryTargetConfidence
    Return on Equity (Insurance Operations)
    double-digit return on equity
    high materiality
    Medium
    Underwriting Profit
    a little lighter than $700 million
    high materiality
    Low

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Markel Group Consolidated
    Operating revenues were flat for both the quarter and the first six months compared to the prior year. Adjusted operating income decreased due to the State National charge.
    Operating income (Q2): $1.6B vs $1.1B (Q2 FY25)Operating income (6M): $1.3B vs $1.4B (6M FY25)Adjusted operating income (Q2): $436M vs $578M (Q2 FY25)Adjusted operating income (6M): $934M vs $1.1B (6M FY25)Net income to common shareholders (Q2): $1.2BDiluted EPS (Q2): $93Net income to common shareholders (6M): $957MDiluted EPS (6M): $74
    		$4.0Bflat——
    Markel Insurance
    Improved underwriting profitability and higher net investment income drove increased adjusted operating income. Growth was strong when excluding the impact of exiting Global Reinsurance and transitioning the Hagerty program.
    Gross written premiums (Q2): $2.4B vs $2.8B (Q2 FY25)Gross written premiums (6M): $4.6B vs $5.6B (6M FY25)Growth (ex-Global Reinsurance and Hagerty fronting): 10% (Q2 and 6M)Net earned premiums (Q2): down 3%Net earned premiums (6M): down 3%Combined ratio (Q2): 93% vs 97% (Q2 FY25)Combined ratio (6M): 93% vs 96% (6M FY25)Catastrophe losses (Q2): $41M (2 points) related to Middle East conflictCatastrophe losses (6M): $76M (2 points) related to Middle East conflictAdjusted operating income (6M): $746M vs $552M (6M FY25)Total operating income (H1, including net investment gains): $1.2B
    		———Adjusted operating income (Q2): $376M
    International division (Insurance)
    Growth was led by marine and energy, general liabilities, and professional liability lines. The combined ratio was impacted by catastrophe losses from the Middle East conflict.
    Gross written premiums (Q2): $890MCombined ratio (Q2 FY25): 78%Middle East conflict losses: 6 points (Q2)
    		—31%—Combined ratio: 82%
    U.S. Wholesale and Specialty division (Insurance)
    The decrease in GWP was driven by intentional contraction in binding contractors and casualty lines and a softening property rate environment, partially offset by growth in professional liability. The combined ratio improved due to underwriting actions.
    Gross written premiums (Q2): $799MCombined ratio (Q2 FY25): 102%
    		—down 4%—Combined ratio: 97%
    Programs and Solutions division (Insurance)
    The reduction in GWP was primarily due to the shift of the Hagerty program to a pure fronting model. The combined ratio increased due to a higher current accident year loss ratio in personal umbrella and certain delegated programs.
    Underwriting gross written premiums (Q2): $717MGrowth (ex-Hagerty shift): 6%Combined ratio (Q2 FY25): 91%
    		—down 27%—Combined ratio: 94%
    Industrial segment
    Revenue growth was driven by a bolt-on acquisition. Organic revenue was flat due to lower sales volume in car hauling equipment, offsetting growth in precast concrete and fire safety services. Adjusted operating income declined due to tighter margins and softer demand.
    Revenue (6M): $1.9BRevenue growth (6M): 4%Organic revenue (Q2): flatOrganic revenue (6M): 2%Adjusted operating income (Q2 FY25): $105MAdjusted operating income (6M): $125MAdjusted operating income (6M FY25): $162M
    		$1.0B2%—Adjusted operating income: $75M
    Financial segment
    The segment recorded an adjusted operating loss primarily due to the $205 million bad debt charge within State National Programs. Prior year's 6-month revenue included nonrecurring gains of $41 million.
    Revenue (Q2 FY25): $173MRevenue (6M): $333MRevenue (6M FY25): $351MAdjusted operating income (Q2 FY25): $78MAdjusted operating loss (6M): $113MAdjusted operating income (6M FY25): $158MBad debt charge: $205M
    		$171M——Adjusted operating loss: $149M
    Consumer and Other segment
    Increased sales volume, particularly in ornamental plants during the seasonally strongest period, drove revenue and adjusted operating income growth. Organic revenue was essentially flat for the first six months.
    Revenue (6M): $832MRevenue growth (6M): 2%Organic revenue (6M): flatAdjusted operating income (Q2 FY25): $102MAdjusted operating income (6M): $162MAdjusted operating income (6M FY25): $134M
    		$552M4%—Adjusted operating income: $122M

    Operational metrics

    26
    Average annual operating income
    $2.5Bvs $1.2B (previous 5 years)
    5 years ending June 2026

    Reflects the compound annual growth rate over the last five years.

    Average operating income per share
    $188.94vs $88.99 (previous 5 years)
    5 years ending June 2026

    Reflects significant earnings growth delivered in a capital-efficient way on fewer shares.

    Average shareholders' equity growth
    9%
    5 years ending June 2026

    Growth in the capital base used to produce the reported earnings.

    Shares outstanding reduction
    just under 10%from 13.7M to 12.4M shares
    5 years

    Reduction in total outstanding shares through repurchases.

    Share repurchases
    $237Mup from $134M in Q1
    Q2 FY26

    Repurchases funded through earnings, not leveraging up.

    Share repurchases
    $371M
    YTD FY26

    Year-to-date share repurchases.

    Total share repurchases
    >$2B
    since beginning of 2022

    Cumulative share repurchases over the specified period.

    Public equity holdings fair value
    $13.5Bup from $12.3B at Q1 end
    Q2 FY26 end

    Fair value of public equity holdings at quarter end.

    Public equity holdings increase
    4%
    first 6 months FY26

    Increase in the public equity portfolio over the first half of the year.

    Cumulative pretax unrealized gain on equity holdings
    $9.3B
    Q2 FY26 end

    Total unrealized gains on the equity portfolio.

    Net investment income
    $256Mup 11% from Q2 FY25
    Q2 FY26

    Reflects a higher average book yield and increased average balances in the fixed maturity portfolio.

    Net investment income
    $512Mup 10% from a year ago
    6 months FY26

    Net investment income for the first half of the fiscal year.

    Acquisitions (small bolt-on)
    $24M
    Q2 FY26

    Small downstream deals within existing companies.

    Increased ownership stake in existing businesses
    $74M
    Q2 FY26

    Capital deployed to increase ownership in existing businesses.

    State National acquisition cost
    ~$900M
    2017

    Original purchase price for State National.

    State National cumulative earnings since acquisition
    >$1B
    since 2017

    Cumulative earnings generated by State National since its acquisition, even including the recent charge.

    AI impact on risk assessment time reduction
    50-90%
    past 12 months

    Reduction in time to have an initial risk assessment in front of an underwriter due to generative AI deployment.

    AI accuracy levels
    >90%
    past 12 months

    Accuracy levels of generative AI in sophisticated specialty underwriting.

    GWP growth
    50%
    past year

    Growth in a specific portfolio after deploying generative AI tools.

    State National collateral shortfall business type
    —
    2012-2021

    Description of the business lines involved in the collateral shortfall.

    Casualty claims trending
    10-12%
    current

    Observed trend in casualty claims across the U.S. market.

    Casualty rates
    ~9%
    current

    Average rates in the U.S. casualty market, noted to be slightly below claims trends.

    Workers' comp reserve development
    favorable
    recent accident years

    Reserve development for workers' compensation has been favorable, leading to releases.

    Casualty and professional reserve development
    modest adverse development
    current

    Reserve development in casualty and professional lines is holding the line, with modest adverse trends.

    Personal umbrella loss pick
    increased
    Q2 FY26

    Loss pick for personal umbrella line was increased proactively due to early signs of adverse trends, impacting two quarters of premium.

    Stop-loss reinsurance treaty
    —
    accident years 2019 and forward

    A stop-loss reinsurance treaty is in place for certain accident years, impacting the reserving basis and providing IBNR to reinsurers once deductibles are met.

    Industry KPIs

    8
    MetricValueDetails
    Combined ratio93%%
    Capital returns$237MUSD
    ROE operating ROEdouble-digit%
    Catastrophe losses$41MUSD
    Net investment income$256MUSD
    Net premiums written earned$2.4BUSD
    Renewal rate change pricing9%%
    Prior year reserve developmentfavorable

    Product announcements

    2
    ProductTypeDetails
    Cortex business unitlaunch
    AI accelerator fundlaunch

    Deals & partnerships

    2
    Bain & CoPartnered to build a new strategic business unit (Cortex) for U.S. casualty risks.

    Collaboration to reimagine underwriting and servicing of hard-to-place U.S. casualty risks using AI tools, leading to the launch of Cortex.

    Harvey AIPartnered to deploy generative AI across 6 classes of business for sophisticated specialty underwriting.

    Comprehensive wiring of 6 classes of business across U.S. and international operations, totaling over $500 million of existing GWP, to enhance underwriting efficiency and accuracy.

    Risks & headwinds

    5
    Collateral shortfall and reserve charge in State NationalQ2 FY26

    $205M reserve charge

    Mitigation: Conservative estimate, internal and third-party actuarial review, State National is well-capitalized and part of Markel Group's diversified system.

    Soft end market conditions in Industrial segmentH1 FY26, continuing

    Adjusted operating income down 27% to $75M (Q2 FY26)

    Mitigation: Long-term competitive position, enduring and essential end markets, making long-term SG&A investments for future growth.

    Softening property rate environment and aggressive competitionH1 FY26, expected to continue in H2

    GWP down 4% in U.S. Wholesale and Specialty

    Mitigation: Disciplined underwriting, walking away from risks where technical rates are not met, focusing on areas where Markel can add value.

    Divergence between casualty claims trend and ratescurrent

    Claims trending 10-12%, rates ~9%

    Mitigation: Reducing line sizes, decreasing exposure to construction casualty, launching Cortex business unit for hard-to-place risks, operating in a defensive mode.

    Higher current accident year loss ratio in personal umbrella and certain delegated programsQ2 FY26

    Combined ratio up to 94% in Programs and Solutions

    Mitigation: Proactively increased loss pick on personal umbrella line earlier than typical, based on early signs of adverse trends.

    What to watch in Q3 FY26

    5

    Underwriting Profit Trajectory

    next quarter
    CurrentPreviously targeted $700M, now 'a little lighter'
    TargetClarity on revised full-year underwriting profit outlook

    Why it matters

    Underwriting profit is a key driver of insurance segment performance and overall profitability.

    I think that it's probably a little lighter than that, but we're very encouraged by the progress so far, and I don't want to put a number on it.

    Q&A highlights

    8

    Was the third-party actuarial review for the State National collateral shortfall limited to one counterparty or did it cover all unrated reinsurance partners?

    The specific third-party engagement was limited to the contract with identified issues, though management continuously reviews all exposures. The $205 million reserve reflects a conservative estimate based on a comprehensive internal review and external validation.

    “That specific engagement was for the specific contract where we thought we had some issues, and we wanted to nail that down. the best of our abilities. As you might imagine, we as managers do in our duty are looking at everything at the same time, but the specific third party was engaged just for that topic.”

    asked by Tracy Benjiji · answered by Thomas Gayner

    2 min read5 chapters

    Detailed Narrative

    01

    Insurance Business Transformation and AI Adoption

    Markel Insurance has undergone a significant reorganization, establishing 3 divisions and 14 business units, each with clear leadership and financial plans. This restructuring, focused on customer obsession and empowering business leaders, has led to improved and more consistent underwriting results, with the combined ratio at 93% for four consecutive quarters. The company is also aggressively deploying AI, including launching a new business unit, Cortex, for U.S. casualty risks, wiring 6 classes of business with generative AI to reduce risk assessment time by 50-90% and achieve over 90% accuracy, and funding an AI accelerator for ground-up innovation.

    02

    State National Collateral Shortfall and Reserve Charge

    The Financial segment recognized a $205 million reserve charge in Q2 FY26 due to a collateral shortfall within its State National business. This issue stemmed from losses developing faster than collateral for specific primary habitational casualty business, concentrated in a few states, written between 2012 and 2021. Management engaged a third-party actuarial firm for this specific contract and confirmed that the charge reflects a conservative estimate, consistent with Markel's reserving philosophy. Despite this, State National remains well-capitalized and a significant contributor to Markel Group's long-term earnings.

    03

    Capital Allocation and Shareholder Returns

    Markel Group continues its 360-degree approach to capital allocation, prioritizing long-term returns. The company repurchased $237 million of its shares in Q2 FY26, bringing year-to-date repurchases to $371 million and over $2 billion since the beginning of 2022. These repurchases, funded through earnings and not leveraging up, have reduced outstanding shares by nearly 10% over the last five years, contributing to a 16% compound annual growth rate in average operating income per share over the same period. The company maintains a solid balance sheet to pursue acquisitions and investments.

    04

    Segment Performance Dynamics

    The Industrial segment experienced a 27% decline in adjusted operating income to $75 million in Q2 FY26, despite a 2% revenue increase, primarily due to tighter margins and softer demand in cyclical markets like car hauling equipment. Conversely, the Consumer and Other segment saw strong performance, with adjusted operating income growing 20% to $122 million on 4% revenue growth, driven by leadership execution, higher-margin businesses, and acquisitions. The International insurance division showed robust growth, with gross written premiums up 31% to $890 million, while U.S. Wholesale and Specialty GWP declined 4% due to strategic contractions and a softening property market.

    05

    Underwriting Discipline and Market Conditions

    Markel is focused on underwriting discipline, prioritizing bottom-line profit over top-line growth. In casualty lines, claims are trending in the low double digits (10-12%), while rates are slightly below (around 9%), leading Markel to reduce line sizes and exposure to construction casualty. The property market remains highly competitive, with rates continuing a downward trajectory, prompting Markel to walk away from risks where technical rates are not met. Management notes an encouraging trend of increased discipline across the insurance industry, suggesting more stable market cycles.

    AI-generated summary of the company’s earnings call. Not investment advice.