Greetings and welcome to the Markel Corporation Second Quarter 2012 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Tom Gayner, President of Markel Corporation. Thank you, Mr. Gayner. You may begin.

Thank you, Manny. I appreciate it. Good morning and welcome, everyone, to the Markel Corporation’s second quarter conference call. We’re pleased that you’re joining us as we all look forward to sharing the good news of our substantial year-to-date progress in 2012 and building the value of your company. Over the past several years, we’ve been telling you about the transformation underway at Markel. We’ve told you about the growth of our insurance operations through entry into new geographical areas, our new products, and our acquisitions. We’ve told you about our focus on improving the operating efficiencies in our business and how we’ve restructured the company to increase our revenues from existing customers. We’ve also told you about our expanded investment activities through Markel Ventures which now owns controlling interests in about a dozen profitable manufacturing and service businesses. We’ve told you about how Markel has more ways and more flexibility to create value for our shareholders than ever before and it is now delightful to begin to show you the fruits of these efforts, rather than just telling you about them. As is our custom, our Chief Financial Officer, Anne Waleski, will lay out the overall numbers from the first half. Then, my Co-Presidents, Mike Crowley and Richie Whitt, will discuss our domestic and international insurance activity. I will then cover our investment in Markel Ventures operations, and then we will open the floor for your questions. Before getting started with today’s lineup, though, the rules say we need to repeat the safe harbor statement so here it goes. During our call today, we may make forward-looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements as described under the captions Risk Factors and Safe Harbor and Cautionary Statements and our most recent Annual Report on Form 10-K and quarterly report on Form 10-Q. We may also discuss certain non-GAAP financial measures in the call today. You may find a reconciliation to GAAP of these measures on our website at www.markelcorp.com in the ‘Investor Information’ section under ‘Non-GAAP Reconciliation’ and our quarterly report on Form 10-Q. With that, Anne?

Thank you, Tom, and good morning, everyone. Before I get to a discussion of our financial results, I will point out a couple of accounting items new to the quarter and the year. First, I’m sure you have all noticed some changes in our statements this quarter. Redeemable non-controlling interest is a new line item on the balance sheet this quarter. For all periods presented, we have reclassified amounts previously included in the non-controlling interest balances for relevant Markel Ventures affiliates to this new line item. This is required because some of the Markel Ventures’ minority shareholders have the option to sell their shares to us in the future generally at a fixed multiple of EBITDA. In addition to the reclassification, there is an adjustment recorded on these redeemable non-controlling interest balances. As of the end of each reporting period, the carrying value of the redeemable non-controlling interest is adjusted to the calculated redemption value if that price is higher than the current carrying value. The purpose of the adjustment is to record the potential cash obligations we may have to the non-controlling interest shareholders. This quarter, redeemable non-controlling interest balances were marked up by $8.2 million. The adjustment is recorded to retained earnings and reduces net income to shareholders when calculating earnings per share. You can find the earnings per share calculation in Footnote 2 and additional information regarding our contingent obligations to the non-controlling shareholders in Footnote 8. The second item I would like to point out was previously discussed in our first quarter conference call and filings, but I’d like to remind everyone that we chose to prospectively adopt the new DAC accounting standards. As of June 30th, 2012, we have recognized approximately $35 million or 3 points of expenses related to the prospective adoption of the…

Thanks, Mike. Good morning, everybody. During the first six months of 2012, Markel International’s gross written premiums grew 7% to $514 million. Significant areas of growth continue to be in the marine and energy and our catastrophe exposed property lines, so tricky and open market property. We continue to see price increases on catastrophe exposed property and marine and energy business; however, as the years progress, these price increases appear to be moderating to some extent. Our overall average price increase on renewal business in the first six months of the year was approximately 5%. Cat property increases have generally been between the 10% and 20% range, and energy has seen low single-digit increases. All the rest of our lines on the international side are relatively stable, maybe a point or two up, a point or two down, but pretty stable I would say. So, despite solid price increases in several of the lines of business in the first half of the year, there is still a pretty competitive market, and there is still quite a bit of capacity out there. International’s combined ratio for the first six months of 2012 was 86%. That includes 3 points of expense related to the adoption of the new deferred acquisition cost accounting standard that Anne mentioned. As opposed to the significant cat losses that we experienced in the first half of 2011, our first six months of 2012 results really include minimal catastrophe losses. In addition, Markel International’s 2012 combined ratio included $86 million of favorable development on prior-year reserves. This included $18 million of takedown on 2001 and prior-year reserves. We always strive to establish reserves that are more likely redundant than deficient at Markel. However, the releases we experienced in the first six months are more than we would normally expect and, as Anne said, are the result of favorable development across a number of product lines including that 2001 and prior reserve release that I mentioned. I want to congratulate William Stovin and the international team on this really strong start to the year. Our goal for the second half of the year is going to be to continue to build on this positive momentum, continue to look for opportunities to profitably grow the international franchise. Finally, switching gears, I’d also like to mention a significant accomplishment for our IT, Finance, Actuarial, and Information System teams – Information Management team, excuse me. During the second quarter, we went live with the first phase of a data warehouse which includes all of our Excess and Surplus Lines business. We’re already seeing the benefit of being able to better analyze our Excess and Surplus Lines data. We’ll be able to provide our underwriters and product line leaders with significantly better information about production, profitable classes, classes that need corrective action. We believe that over time better access to this information is going to help us gain a competitive advantage. With that, I’d like to turn it over to Tom.

Thank you, Richie. As Anne mentioned earlier, book value per share rose to a new record high at $380 as of June 30. Our comprehensive income so far in 2012 of $279 million created an increase in book value per share of roughly $28 or 8% during the first six months of the year. I’m happy with those results and I hope you are as well. I am also especially pleased that those results occurred even though we were not hitting on all cylinders. Specifically, while we enjoyed excellent results from our insurance and equity investment operations as well as positive returns from our fixed income portfolio, the results at Markel Ventures were below my expectations. The fact that we can hit new records in book value and compound capital at the rates we did, despite not hitting on all cylinders, is very encouraging to me. The reality is that it is highly unlikely that we will ever get on every single cylinder at once. That said, look at the returns we’ve earned given that fact. I’m encouraged by what we’ve built and are continuing to build at Markel. We’ve got more cylinders than we used to and more chances to keep the engine going forward. We’ll let the politically minded of you debate whether we built that ourselves or not but the numbers seem to indicate that somehow or another Markel’s long legacy of creating enduring value continues. As to some details, during the first half, the total return on the investment portfolio was 4.5%. Equities enjoyed a return of 9.7%, and fixed income produced a positive overall return of 2.9%. Markel Ventures’ consolidated results, however, as I said, were below my expectations for the first six months. On revenues of approximately $190 million, EBITDA totaled $9.4 million. This…

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator Instructions) Our first question is from Mark Hughes of SunTrust. Please go ahead. Mark Hughes – SunTrust: Thank you very much. Good morning.

Good morning.

Good morning. Mark Hughes – SunTrust: In terms of pricing, it sounds like things are getting better in North America. In talking about the marine and energy and cat exposed properties, though, you did suggest that the pace of improvement has moderated recently let’s say. What do you think about the broader P&C environment in the U.S.? Is this moderating as well? Or, are you continuing to see progress?

Mark, Richie. How are you doing? Mark Hughes – SunTrust: Good.

The thing I think you’ve got to recognize is those lines of business in London, they probably started strengthening before some of the other lines, some of the U.S. lines as an example. So, the price increases we’re getting in energy and the price increases we’re getting on the cat exposed stuff, that’s on top of price increases we were getting last year. So, it doesn’t surprise me given that there is still a decent amount of capacity out there that we’re not going to continue to see increasing price increases unless we start to have events or something else happens, capacity starts to leave. So that doesn’t surprise me a lot. I think what Mike would tell you and what Mike said about the second quarter is actually we saw some incremental improvement in the price increases in the U.S.

Yeah, I agree. And, I think – I don’t want anybody to think that the world isn’t still competitive out there because it is. But, so far, we’ve been working hard to get rate and we’ve been successful in doing it. And I think you also have to keep in mind that the way we price our products, we’re not – a lot of times we’re not the cheapest guy out there, so we’re starting from a different position than maybe some of our competitors are that might be reporting larger rate increases. But the market is fairly consistent. There are still some lines like the medical malpractice that are very competitive. But, we have been making progress. Mark Hughes – SunTrust: Got you. The systems you talked about, the – how broadly are those going to be implemented? Is that across most or all product lines and then how much more granular or timely is your information going to be?

Well, right now it’s across really the wholesale division and so it’s all the systems. It aggregates all the information up there. Over time, we’d love to expand that to the Specialty areas as well. London has their own systems in terms of looking at their information. It’s a good bit more granular than what we’ve had in the past. And, we were having to do a lot of work to combine the information. So, we’re pretty excited about it. We’re able to give our underwriters and product line guys a lot more to work with now to manage their portfolios. So, I think it’s a real step forward for us. Mark Hughes – SunTrust: Thank you.

Thank you. The next question is from Jay Cohen of Bank of America. Please go ahead. Jay Cohen – Bank of America: Thank you. Good morning. A couple of questions; on the E&S business, the premium growth slowed pretty considerably from the first quarter growth rate. I’m wondering what’s behind that.

Well, we did have an earlier close this year than we did last year. That had a little bit of an impact on it. I’m not going to quantify that because we’ll just have to deal with it next quarter if we did. But, I think the growth rate, we’re comfortable with. As I pointed out, we’ve been working hard to reduce the number of – I wouldn’t use the word useless, but the number of submissions that we get where in reality we have very little opportunity to write business. And we’ve been more focused on spending our time on stuff that we really want to write, and we’re starting to make some incremental progress there. Other than that, we feel very good about where we are in the E&S segment. We feel very good about our submission flow. We feel very good about our buying rate and are very optimistic about the rest of the year. Jay Cohen – Bank of America: It does jump around a bit quarter to quarter. If I looked at the first half results, is that a better indication?

Probably.

Yeah. Jay, this is Ritchie. We do have a – Mike just mentioned, we’re constantly adding products, but at the same time, we’re constantly looking at products that aren’t performing and we’ll discontinue those if they’re not performing. We have a little bit of noise in the numbers around some of those exited lines, and so there is a little bit of lumpiness between the first and the second quarter. So, I think looking at the growth rate over the first six months is probably a good way to look at it.

Yeah, I agree. Jay Cohen – Bank of America: Great. And, then the same question in London, I’m not sure if currency played a role here, but the growth rate had been double-digit and it slowed down to about 2% on a written basis.

We’ve got some seasonality obviously to the book in London. A lot of places – where we’re getting a lot of the price increases as well as we were writing more premium is the cat exposed business and January 1 and April 1 are big dates for that but January 1 in particular. So, there is a little bit of seasonality there. But, again, I’d probably look at the six months’ growth rate and that’s probably a pretty good proxy. Jay Cohen – Bank of America: That’s helpful. And then, the last question the tax rate, just given where you made your money, and a lot of it came in the underwriting side obviously given that huge reserve release, the tax rate to me seems a little low. And, I can talk offline about this but is there anything in the tax rate that distorted things at all this quarter?

No, nothing unusual and I’m happy to take it up with you offline. But, there’s nothing odd in it. Jay Cohen – Bank of America: Okay. Maybe we’ll follow up on that then. Thank you.

Thanks, Jay.

Thank you. The next question is from David West of Davenport. Please go ahead. Dave West – Davenport: Good morning.

Hi, Dave. Dave West – Davenport: Probably a question, one for each of you; first, Anne, on the accounting side, on the prospective adaptation of a new tax expense accounting. I think earlier you estimated about a $43 million impact for the full year. Is that still a good estimate?

That’s correct. Dave West – Davenport: Okay, great. So, we’ll – and it’ll still be primarily third quarter – more third quarter than Q4?

Right. It’ll – it’s front-loaded. In the first half of the year, you’ll start to see the quarter number come down and the whole year should be about $43 million. Dave West – Davenport: Great. And then, Tom, when I look at the cost basis of the portfolio, June 30th versus yearend, it looks like fixed income basis is down, short term down, but equity up. Is that more of a conscious acceleration of monies toward the equity portfolio?

There is a mild acceleration but it’s – I think actually if you look at that pattern, you’d find since the first quarter of 2009 we’ve steadily dollar cost averaged our way into bigger and bigger equity position and where you could really track that if you wanted to is to look at exactly that, the cost basis. And that’s a reasonable number to look at because our turnover compared to the high-frequency guys at night, we’re the low-frequency guys at Markel. Our turnover (inaudible) are very low. So that would be a relatively accurate way of seeing the dollars we’re putting in the equity portfolio. Dave West – Davenport: And, it’s also just a reflection of the alternatives with the low interest rate environment as well?

Yeah. But, I would say it is really more driven by the fact that we see equity opportunities. We think that’s where we get the best long-term total return over time and we have the balance sheet and the business flow to do it. Dave West – Davenport: Right. And, Mike, turning to FirstComp, the premiums written there have increased year over year. The losses that have been recorded this year are also higher than last year. Are those still running within your range of expectation?

Yeah, they are, David. And, FirstComp, as I said, we’ve given FirstComp a plan and they are executing the plan right on target with our expectations. As I mentioned in my comments, they are getting rate increases. They are focusing on a geographic analysis, working on moving to areas where there’s more opportunity for better business and moving out of some areas where historically the performance has not been good. Last year, we added a couple of states. We added Alaska. We added Louisiana. They are focused on their expense reductions, so we’re very comfortable that they’re executing exactly like we want them to. Dave West – Davenport: Are you continuing to move away from California?

Well, parts of California, but there are parts of California that we’re comfortable with and they are restructuring their book in California. Dave West – Davenport: All right, very good. And, Richie, on the international side you mentioned in the Q that 2008, 2009 were the years for the favorable development. You mentioned it extended across a lot of product lines, but could you add a little bit more color to that? Were there any particular lines that made a meaningful contribution to that favorable development?

Yeah, David. It really was across product lines there. I know that it sounds like a copout but it really was. I think part of the issue is we’ve been very concerned about how the market has been – was declining in those years, so we were very cautious in how we established the reserves. And we’ve had some pretty darn good developments the last few quarters. So, it really was pretty much across. It was professional liability; there was actually some in the property with marine and energy. It – and then, of course, there were some 2001 and prior where we’ve been incredibly cautious with those reserves because that’s the old legacy business that came to us when we purchased Terra Nova, so we’ve been very cautious with those and have got to the point where we could release some of those reserves. So, it was a really good quarter. The only thing I’d say is that it was a really good quarter and I wouldn’t take that into numbers in the third and fourth quarter. Dave West – Davenport: Thanks very much.

Thank you. The next question is from Scott Heleniak with RBC. Please go ahead. Scott Heleniak – RBC Capital Markets: Thanks. I was just wondering the THOMCO book, you said you expect $60 million in premium this year and was wondering if you had a target you might be able to share for next year, for 2013? Is it – are you going to get to the – eventually get to the $150 million?

They – the $60 million is a number that we feel we’ll book this year. Obviously, THOMCO writes a lot more business than that but we are also transitioning the business to Markel paper from other carriers and so the ability to forecast exactly what the slippage might be there is not something we want to do at this point. But, their volume was considerably more than $60 million. Scott Heleniak – RBC Capital Markets: Okay. And then I just wanted to touch on the Markel Ventures. Tom you mentioned some investments that you’re making there. I was just wondering if you could elaborate in maybe some of the areas. Is that across the board or was there a few specific divisions you can talk about?

It’s across the board. In each of the companies, there are some pretty dramatic opportunities to expand. There are competitors who have more leveraged balance sheets and are having competitive difficulties that give us the opportunity to pick up the businesses. So, we’re undergoing fairly dramatic physical expansions in a lot of the different business units. Scott Heleniak – RBC Capital Markets: Okay. And then just one other one too on Markel Ventures; you acquired two Dutch companies in the quarter. Is that – was that a one-off? Or, should we continue to expect to see international acquisitions at Markel Ventures?

Well, the – my insurance colleagues were hanging around Holland, so we were in the neighborhood. No, that just happened to be the case. No, the Markel Ventures Company in fact is – Ellicott is the most dramatic example, but they do 80% of their revenue outside the U.S. It’s a global company and has been so for decades. AMF, at the time we purchased it back in 2005, might have been 10% or 15% international; probably that’s more like 35% or 40% these days. So, a lot of these businesses are seeing international expansion opportunities, and we don’t plan on geography. What we plan on is trying to find what the best business opportunities are and going there. Scott Heleniak – RBC Capital Markets: Okay. That’s helpful now that you explained that correlation there. The other one is I just wanted to ask about the foreign government exposure you have. Could you just remind us what exactly you have most concentrated, which countries, and whether you’ve reduced any exposure to any of those – any countries at all this year, whether that’s changed much this year?

Well, the good news is that the exposures haven’t really changed because we did not have too much in the way of countries where we didn’t want to have exposure that you would read about in the headlines now. What we do is we try to match the liabilities of our insurance policies and the – we take in premiums in euros or sterling and we’re going to make a claims payment in one of those currencies. We buy bonds in that currency to the best of our ability to match that liability and we buy the very highest credit quality we can. And, we take the results as they are. We don’t try to engineer our results that would be better than what the natural circumstances would create. Scott Heleniak – RBC Capital Markets: Okay. Thanks a lot.

Let me come back to your THOMCO question. Let me give you a little more clarity on looking forward to – when we acquired THOMCO, the prior year they had placed over $160 million of premiums. There are a couple of programs that THOMCO wrote, a couple of their smaller programs, that we probably won’t move to Markel paper because it’s a different underwriting appetite than what we have. And so that could give you a little more clarity on THOMCO. Scott Heleniak – RBC Capital Markets: Okay. Thanks.

Thank you. The next question is from Ron Bobman of Capital Returns. Please go ahead. Ron Bobman – Capital Returns: Hi. Good morning and thanks. I had a question on E&S and Aspen. On the E&S front, I was wondering if you would – you touched on you’re happy with your – I think it’s app counts and your buy-in rates. Would you give us some metrics on how those two stats compared Q2 this year versus Q1 this year?

Slightly better. It was not a lot of difference. Ron Bobman – Capital Returns: Okay, marginally better but not all that dramatic.

Yeah. Ron Bobman – Capital Returns: And, then I had a question about Aspen and changes there. Will Aspen in – I wonder if you could share with us California rate changes for Aspen of late and....

I don’t have those in front of me. We’d be happy to talk about it but it’s not inconsistent with our rate increases elsewhere, which has been in the neighborhood of around 5%. Ron Bobman – Capital Returns: Okay. And, will it be – should we think of Aspen shrinking this year compared to last?

No. You mean in California? Ron Bobman – Capital Returns: Well, either way. Yes, I was thinking California.

At this point, they’re not shrinking in total. Ron Bobman – Capital Returns: Okay, understood. Thank you very much.

Thank you. (Operator Instructions) And, the next question is from Meyer Shields of Stifel, Nicolaus. Please go ahead. Meyer Shields – Stifel, Nicolaus: Thanks. Good morning, everyone.

Hi, Meyer.

Good morning. Meyer Shields – Stifel, Nicolaus: Two quick questions, I think, if I can; one, on the international or the London side, we saw the expense ratio up 300 basis points sequentially. Is that a consequence of the reserve releases?

It’s two things. It’s the deferred acquisition accounting which – how many points is that?

In London?

In London. Anyway, we’ll find that. The other thing is with the significant reserve releases, we’ve got better bonus accruals going up so it’s interesting there. We – you put up – you have prior-year reserve releases but there’s no such thing as prior-year bonus expense that goes against this year’s bonus – this year’s expense ratio. So, a little bit of a mismatch when you think about it. Meyer Shields – Stifel, Nicolaus: Okay. And, when we calculate that tax rate for the London segment, should we be using U.K. corporate tax rate?

Can you say that one again? I’m sorry. Meyer Shields – Stifel, Nicolaus: Yeah. I’m just – if we try and break up the expected tax calculations based on the geographic regions (inaudible). I guess, is that reasonable? Should we use U.K. corporate tax rates for the London Insurance Market segment?

No, the way that U.S. works is it taxes you at 35% on everything you make in the world. So, really the thing you should think about probably is we pretty much have a 35% rate other than our muni portfolio which is not taxed. Meyer Shields – Stifel, Nicolaus: Okay, great. Thank you.

Thank you. Our next question is from Adam Klauber of William Blair. Please go ahead. Adam Klauber – William Blair: Thanks. Good morning.

Good morning, Adam. Adam Klauber – William Blair: What’s your overall loss trend in workers’ comp for 2012? And, what’s that trend in California, workers’ comp?

I don’t have those with me. I don’t have that information here. Adam Klauber – William Blair: Okay, that’s fine. As far as THOMCO, what – are those programs rolling right now, the programs you’re keeping, the main ones?

They are pretty stable. They are in the transition. We’re being very careful and trying to be efficient in what we’re doing because we are transitioning from another company’s paper to our paper, which requires notices and everything else. But, they are very stable. Adam Klauber – William Blair: Okay. And, then finally on the Lloyd’s reserve release; you have had significant redundancies but this is a bigger number. Could you do some review or why was the number that big this quarter?

Well, really we didn’t do anything differently. We’ve – like I said, I think we were probably – if anything, we’ve been fairly cautious the last few years given the decline in the market. And, 2008 and 2009 have gotten to an age now where you can believe what you’re seeing in terms of development. And that really drove it more than anything. We are very, very consistent in terms of how we work with reserves and put up the margin in safety in terms of our reserves. So, nothing really changed other than just we’ve gotten to a point on those two accident years where you can believe what you’re seeing. Adam Klauber – William Blair: Okay. Thank you very much.

And I want to just emphasize one point about the reserve release discussion. We’re talking about geography on the right-hand side of the balance sheet in terms of accounting, whether it’s in the loss reserves or retained earnings by the time reserves are released. The good news is that over on the left-hand side of the balance sheet, the assets, the number is unchanged. The cash was collected a long time ago; it’s in the investment portfolio. It’s making money no matter what geography you have it on the right-hand side of the balance sheet. And, I think that’s a fundamentally important point that goes into the comprehensive economic thinking of the way we run things around here. Adam Klauber – William Blair: Great. Thank you.

Thank you. We have no further questions in the queue at this time. I would like to turn the floor back over to management for any closing remarks.

Thank you very much. We’re glad you joined us. We look forward to seeing you again soon. Thanks. Bye-bye.

Ladies and gentlemen, this concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.