Greetings, and welcome to the Markel Corporation’s Second Quarter 2014 Earnings Conference Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Mr. Tom Gayner; President and Chief Investment Officer from Markel Corporation. Thank you, Mr. Gayner. You may begin.

Thank you so much. Good morning, and welcome everybody to the Markel Corporation second quarter conference call. I’m glad that you are here with us and we look forward discussing our results from the first half of 2014 as well as our thoughts about the business. Joining me this morning is Anne Waleski, our Chief Financial Officer who will review the overall financial results for the Corporation. Mike Crowley is unable to be with us this morning so my Co-President Richie Whitt will cover all of the insurance operations. Then I'll return to discuss our investments and Markel Ventures activities. Before we get started with the business of call we will proceed with the (inaudible) known as the Safe Harbor statement. 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 is included under the captions Risk Factors and Safe Harbor and Cautionary Statements in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. We may also discuss certain non-GAAP financial measures in the call today. You may find a reconciliation of GAAP these measures in Form 10-Q. With that let me turn it over to Anne.

Thank you Tom. And good morning everyone. We had a solid first half of the year. I think the numbers speak for themselves (inaudible) into the results. Our total operating revenues grew 35% to $2.5 billion in 2014 compared to $1.9 billion in the first half of 2013. The increase is due to the inclusion of six months of underwriting revenues from legacy Alterra product offerings in 2014. Higher revenue from the Hagerty business and higher investment income due to our larger investment portfolio. Also contributing to the increase, other revenues were up 15% to $380 million from $330 million of last year, primarily due to revenue growth within Markel Ventures. Moving into the underwriting results, gross written premiums were $2.7 billion for the first half of 2014 compared to $1.8 billion in 2013, an increase of 47% due to including six months of premiums from legacy Alterra products in 2014 versus two months of legacy Alterra premium in 2013. Net written premiums were $2.2 billion in the first six months of 2014, up 40% from the prior year and earned premiums increased 42% to $1.9 billion for the same reasons I just mentioned. Net retention was down in 2014 at 82% compared to 86% in 2013. The decrease which is in line with our expectations is primarily due to higher use of reinsurance on certain insurance products previously underwritten by Alterra. Our consolidated combined ratio for the first six months was 98% for both 2014 and 2013. However, as a reminder, the 2013 combined ratio included transaction and other acquisition related costs of approximately $62 million or almost five points related to the acquisition of Alterra. The combined ratio in 2013 also included approximately $25 million or two points of catastrophe losses. Excluding the impact of catastrophes and transaction…

Thanks Anne. Good morning everyone. I am going to talk about our U.S. Insurance, International Insurance and Reinsurance segments today. As discussed last quarter, U.S. Insurance segment comprised of all direct business and [faculty and] places written on our U.S. insurance companies and include all of the underwriting results of our wholesale and specialty divisions as well as certain products written by our global insurance division. Year-to-date gross written premiums in the U.S. Insurance segment have increased 19% as of the prior year. The increase was due in large part to Alterra lines of business that are now included in this segment. Excluding these lines premium volume is approximately 5%, mainly driven by higher volumes from the Hagerty business which was mainly 2013. In addition to growth in our casualty environmental and other lines which more than offset decreases in our brokerage property writings. The combined ratio for the first six months of 2014 was 98% compared to 92% in 2013. As Anne said, the increase in the segment combined ratio was driven by less favorable development on prior exited year loss reserves due impart to adverse development in the architects and engineers and on excess and umbrella lines of business. Partially offsetting this impact was a lower year-over-year expense ratio. The improvement in the expense ratio was primarily due to higher earned premiums from including the legacy Alterra product as well as the Hagerty product lines in 2014 versus 2013. Market conditions remain competitive for the wholesale and specialty divisions, however we continue to achieve rate increases during the second quarter in the 2% to 3% range which was actually slightly up from the first quarter. Market conditions in the global insurance division remained extremely challenging with rate decreases in most classes. Property business and large casualty accounts are…

Thank you Richie. As we noted before, one of the great things about Markel is that we’ve got several methods to build the value of this company for you as our shareholders. Insurance; investments; our industrial and service businesses; and capital management activities all work together to produce comprehensive income and value for you. As is usually the case, not every cylinder in the engine of Markel would be firing at the same rate. The good news is that with our multiple cylinders, the engine is moving the car down the road at a pretty good rate of speed. Specifically, as Anne noted earlier as shows up in the speedometer, as comprehensive income of about $480 million plus through the first half, an increase of 7.2% of the book value per share. For longer term and more meaningful and [enrollment] sizable rate of return our compound annual growth rate of book value per share continues to maintain and was 13% as of June 30. During the first half of 2014, we enjoyed excellent returns in our investment activity. The total return from the portfolio was 4.6% with equities up 8.6% and fixed income up 3.5%, both of these measurements are more than satisfactory on an absolute and relative basis. And I would be happy to sign up for them definitely in the future. If that option is not available, so we continue to come to work every day and make the best decisions we know how to make of these good results going forward. That we have done for a long time and I am confident that our client tested investment discipline will continue to work well for even our shareholders. I am also happy to report to you that recasting of the investment portfolio we picked up in the…

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. (Operator Instructions). Our first question comes from the line of Mark Hughes from SunTrust. Please proceed with your question.

Hey, good morning everyone. This is Rob Myers on for Mark Hughes. Two questions, one is just in favorable prior year loss development we saw in the quarter. Is that kind of a blip or is this something we should expect to continue going forward?

Mark, I think we've said in years past that history does not dictate the future particularly in this arena. So creating an expectation around prior year reserves based on history is not something we typically encourage. That said, what we would expect for this year is something that will slightly less than last year or but not dramatically less. So I think some of the adverse developments that you saw this quarter we're hoping that we have taken care of this quarter and won't repeat.

Okay. Thank you, that's very helpful. And then lastly just wondering if you guys had an update on pricing competition loss trends in med mal workers comp space?

This is Ritchie, Rob. In terms of med mal now still a pretty tough market right now. Just looking at our most recent rate monitoring and we're slugging it out and giving a couple of percentage points price increase on that business, but it's incredibly competitive. In terms of workers comp that's probably the strongest part of the market and I didn't mention that in my comments. But in workers comp or sort of probably mid-single-digits in terms of increases on workers comp business and in California that should be significantly more depending on the class and depending on the geography in California. So those two markets are sort of better end of the scale of where various products are in the industry.

Okay, thank you very much for taking my questions.

Our next question comes from the line of Jay Cohen from Bank of America Merrill Lynch. Please proceed with your question.

Thank you. A couple of questions, I guess the first one is on the reinsurance segment and you guys have been very upfront about moving the old Alterra business on to your reserving methodology and that’s put some near-term upward pressure on loss ratio that’s seen that with past deals, so it’s not surprising. I guess looking forward in that business, maybe we had potential opposing forces, one is the market conditions all else being equal which suggest loss ratio get worse, at the same time as you kind have already moved this business or at some point moved this business into your own reserving methodology to expect to see some improvement down the line. My question is do you think you can hold those margins flat or will the pricing dynamics kind of overwhelm whatever changes you are making on the reserve side?

Jay obviously reinsurance is incredibly competitive right now, to the extent we are still writing accounts we believe the pricing supports the margins we want to produce on the business. And honestly at this point I am not particularly I am pleased with the business we have put on the books this year, the big question to me what’s going to happen next year January 1 and forward. If people are looking for price concessions next year, I am not sure that it’s there, I think this market should be quite honestly at the bottom where people are being disciplined about what they are doing. So, I feel very good about the business we’ve put on the books this year, I feel good about what we believe the margins are going to be. As you know, as you say we've been putting Markel's sort of level of conservatism and margin of safety on the reserves. So everything, I feel good about everything this year, the unknowable is where does the market go from here, I believe we re-ensure that given all we can give, it will be interesting to see what the competition is willing to do as we go into ‘15?

Let's hope we find some sort of floor. The other question I had was regarding the comment about I guess calling to some extent the producer base within wholesale and specialty. What’s the outcome of that, I mean should we expect because of that action top line growth to slow down?

No, when we - you are always managing the producer base and we're always trying to it's sort of 80-20 role it's interesting that top 20% of your producers probably give you 80% of your business. And then you've got to decide with that, the rest of the group, do they have potential to move into that other group or do you need to move on and spend your time elsewhere. So, you are always managing the producer base. Our in the past what we've seen is when we focused more on the people who truly are producing the business for us, volume goes up. We don't tend to take a step back, we tend to continue to move forward and in fact we are seeing when you back out what's happening on the property book, we are pricing, where we had to reduce, because of pricing. We're up in most of the other lines of business in wholesale and in the lines where we're not in some sort of pricing actions on specialty, again we’re seeing decent growth. So no, I think it’s just a healthy thing that we’re always doing and I think we’ll continue to see modest growth as we go forward.

That’s helpful. And thank you.

Our next question comes from the line of Mark Dwelle from RBC Capital Markets. Please proceed with your question.

Hey good morning. Couple of questions, did you have any losses that you’re identifying as catastrophe losses in the quarter?

Nothing to note.

Any even uptick at all in weather related or non-cap losses that is worth highlighting?

Nothing at all worth highlighting.

Nothing that we -- you have a threshold for a name catastrophe Mark and really we did not have anything that would have hit threshold for any of the named cats. So, it was a very quite first half for the year, no it’s not that we didn’t have some attritional losses, we certainly did, but nothing that rose to a level of significance.

Okay. A question for Tom, it is just nothing able to hear and write quickly enough question, in the context of Markel Ventures, you said that something is now at a $1 billion rate or amount, what was that thing?

The revenue lines going forward of the entire Markel Ventures group.

Got it. Thank you. And my last question now that we’ve -- now that you’ve had Alterra for a full year, the amount of premium that you retained from that franchise, how does that compare relative to your very initial expectations? From my perspective it seems like relatively more premium which retains and then maybe was initially expected, but interested in your thoughts?

Mark, this is Richie. Yes, I’d agree with you. I would say we've retained more of the premium than we would have expected initially. I think if you look at our 10-Q, we have a pro forma gross written premium numbers in there for the quarter and year-to-date and I think actually in the quarter we were ahead of that pro forma number and for the six months we were basically flat to that number which -- some of that is growth in legacy Markel products, but I have been very pleased with the amount of premium we held on to from the acquired products of Alterra.

Would you say that the underlying quality of the book has been better than initial expectations or it's just the way the market conditions have developed, allowed you to retain perhaps more than you might would have initially judged?

I think the quality has been about what we thought when we went into the deal. I think the most important thing in any acquisition and I think I’ve said this before on the call is being able to keep the talent, keep the people. And we have done a very nice job there, people have stayed. And I think I contribute the success we have had to the fact that the talent has stayed with us. I think the quality of the business is about what we assume.

Mark, I would add one point to that. And that is the marketplace acceptance of Markel which is a bigger balance sheet that has the talent that Richie spoke of that has gone well. We didn't exactly know how the pencil and paper that going into it, but we certainly believe that the current entity will be more abstracted as an insurance partners (inaudible) world and that's really to be the case.

Yes, that's a really good point that Tom makes. People like to talk about synergies and acquisitions and we try to take away from those words. But it is fair to say, we’ve seen a number of large accounts, particularly on the reinsurance side and then the global insurance side where the Markel brand and the balance sheet strength and the relationship that Markel has throughout the industry has made a difference in terms of business coming to us. So clearly that has happened.

Okay. Thanks very much for the insights. Good quarter, thanks.

(Operator Instructions). Our next question comes from the line of Charles Gold from Scott & Stringfellow. Please proceed with your question. Charles Gold - Scott & Stringfellow: Tom, hoping you would go through an exercise with me and get out to the back of an envelope and it's a Markel venture question. Now the run rate and revenue is $1 billion dollars, looking at the 2015 let’s say, if the -- and also factoring in that the metrics you were looking at when you bought companies was roughly six to seven times EBITDA. So the assumptions I would use on the back of my envelope would be next year’s revenue funds in acquisition $1.1 billion that the companies we bought may not have lived up to the six or seven times EBITDA, so I use eight times. So I multiply the 1.1 times, 12.5 and get $137.5 million of EBITDA and bringing half of that to the bottom line in net income and get just under $5 per share in earnings on an annual basis. Is that in the right ballpark or am I thinking incorrect?

I think I will go home and say 2015 is done. Your back of the envelope and thought process is directionally correct. The thing that we can’t take for granted is that these things are always easier to say than they are to do, so there will be immense amount of work to make that happen. But those sort of rough, rough back of the envelope calculations are directionally correct. Charles Gold - Scott & Stringfellow: Thank you, sir.

Our next question comes from the line of Jay Cohen from Bank of America Merrill Lynch. Please proceed with your question.

Yes, I guess just maybe a follow-up on Markel Ventures. I am looking at simple calculation, just the margin on a non-manufacturing businesses. And they went down fairly dramatically from first half ‘13 to first half ‘14 and I don’t know if that’s a business mix issue, some of the different businesses, but I am wondering if there is a reason why they went down so much?

Right. On the non-manufacturing margins, I don’t have the numbers in front of me but directionally what will be happening is probably biggest swing is in our healthcare area. And there are two things going on there. One, the immense changes that are happening in the healthcare area have proven to be tougher challenges than what I would have expected to begin with. We are addressing them; we are making the best we can of it. But let’s just say that that has been a more of a challenge than what I expected. Second, within the healthcare, there are things that we are doing where we are funding and we have our foot on the gas to grow rather quickly. And we are expensing new office openings, this is specifically the [realm of partner MD] incurring front-end expense that we think produces wonderful returns on investment. But we’re spending that money right now. And realistically, I would say it’s this time next year, before we just start to see whether those initiatives are indeed bearing the fruit that we expect from them. And the bottom-line, just like in the insurance business, either they will be bearing the fruit that we expect or will stop doing it, one or the other.

Got it. And then the question on the reserves. So, the adverse development and the architect and engineers book and the excess and umbrella lines, what were some of the key underlying trends that you were seeing that drove that change? Is this a severity issue? And so, one, what were the trends? And two, were there any particular classes of business within the excess and umbrella area?

In terms of -- I’ll start with architect. It’s a relative small line of business for us. And I think if you were to go around and look at the industry, everybody has been struggling a little bit with the architect probably since 2008 with the credit crisis; architects and engineers got pulled into a lot of new and different ways of seeking recovery, post 2008. So, it’s then when we’ve been chasing a little bit and the bottom-line is we’ll lead it, get it right, or we’re going to write a whole lot less architects in starting and we don't write a whole lot to start with, but it could be a whole lot less, if we don't feel like we're getting the right rate for it. On excess and umbrella, that class has been a terrific class for quite a while, we’ve seen a little bit early developments recently and we’ve probably seen some auto losses, which is not surprising and we intend to see some heavy auto in excess number. But we’ve seen a little bit of auto losses and we’ve seen a little bit early losses. The team again is on top of it and we’re making some changes to address it, and again we need to get it straight or premium volume will decrease.

Okay, great. And I think you’re pretty proactive in that book?

We try to be.

Thank you.

Thanks.

Our next question comes from the line of David West from Davenport. Please proceed with your question.

Good morning. In the other revenue other expense tables on the insurance side, have your MGA operations and then the line item life and annuity, and I thought most of the Alterra life and annuity within discontinued operations. Can you dig down and tell me what that life and annuity line is associated with?

David it is in discontinued. And it is related to the Alterra discontinued life and annuity book. It’s just not underwriting.

Okay.

Right. Right. And I guess on the revenue side I don’t have the schedule in front of me, but revenue side would just be some small premium adjustments, I think it’s a relatively small number, that tax goes, it will be a few thousand dollars each quarter, they always are constantly adjusting premiums. And then on the expense side that’s just the amortization, the accretion of the discount on those life and annuity reserves. So, that will be a feature which shows up from now for the next 50 years on a decreasing basis.

Got it, okay. Decreasing basis, that’s encouraging.

Right, right. It’s just that …

All right. Thanks very much.

There are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

Thank you very much. We appreciate to joining us. We look forward to chatting with you next question. Take care.

Ladies and gentlemen, this does concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.