Good morning and welcome to the Markel Corporation Fourth Quarter 2016 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] During the call today, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in or suggested by such 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 Statement in 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 in the press release, which can be found on our website at www.markelcorp.com in the Investor Information section. Please note, this event is being recorded. I would now like to turn the conference over to Tom Gayner, Co-Chief Executive Officer. Please go ahead, sir.

Thank you so much. Good morning. It’s my pleasure to welcome you this morning to our year-end 2016 conference call. We’re pleased with solid economic progress that we achieved in 2016, but we’re not satisfied. What encourages the most is that, we were able to earn these returns despite ongoing hypercompetitive conditions in every market in which we compete. We also earned these returns despite some specific challenges in our underwriting results, as well as from the modest uptick in interest rates that occurred at the back-end of the year. I think these results stand as a testament to the hard work, creativity, and adaptability of the people of Markel. These results also demonstrate the benefit of operating diverse lines of insurance, investment, and industrial businesses. We’re not reliant on any one market or industry. We continue to evolve and adapt as a corporation in the face of an ever-changing business environment. The world is changing fast and so are we. This is what we’ve always done and it is what we will continue to strive to do. We appreciate your long-term support and partnership as we do so. As is our usual practice in these calls and we’ll ask your Chief Financial Officer who will review the numbers, and then Richard Whitt, our CEO will discuss our insurance operations, and then I’ll make a few brief comments about our investments and Markel Ventures operations. After that, we’ll open up the floor for questions. With that, let me turn it over to Anne.

Thank you, Tom, and good morning, everyone. I’m happy to report that our financial performance for 2016 was strong across our underwriting investing in Markel Ventures operations. We are pleased with our underwriting results for 2016, especially given the continued challenging market conditions that Tom mentioned. Markel Ventures revenues surpassed $1.2 billion, which reflect organic growth in the addition of CapTech in late 2015, book value per share was up 8% in 2016 and reflect strong performance in our investment portfolio, driven by favorable movements in the equity markets. Total operating revenues grew 5% to $5.6 billion in 2016 from $5.4 billion in 2015. The increase is driven by a roughly 16% increase in revenue from Markel Ventures, which is primarily due to our acquisition of CapTech and higher sales volume from one of our transportation-related manufacturing businesses. We dive into the underwriting results, gross premium volume for 2016 increased 4% compared to 2015. The increase was attributable to the U.S. Insurance and Reinsurance segments, partially offset by lower gross premium volume in our International Insurance segment. Within the U.S. Insurance segment, we’re seeing higher volumes within our personal and general liability lines of business in 2016 compared to 2015. As we discussed in previous calls, the increased volume in the U.S. Insurance segment is also due in part to closing our underwriting systems one week later in 2016, as compared to the same period a year ago. The increase in premium volume within the Reinsurance segment was due to new business and to the favorable timing of renewals of multi-year policies in our general liability and property lines in 2016. Lower premium volume for the International Insurance segment in 2016 was due to unfavorable movements in foreign currency rates of exchange, as well as lower premium volume within our…

Thanks, Anne, and good morning, everyone. Today, my comments will focus on our three ongoing underwriting segments; U.S. Insurance, International Insurance and Reinsurance. As Anne commented, all three segments produced really solid underwriting profits in 2016. At the end also provide a brief update on Markel CATCo and review market comments, and of course, in the question-and-answer, we’re happy to talk about market conditions. So. First, I’ll start with the U.S. Insurance segment. Gross written premiums for the segment were up 3% for the quarter and 5% for the year compared to the same period in 2015. For both the quarter and the year, this increase continues to be driven by growth in personal lines, primarily the Hagerty classic car program and personal property lines, as well as our general liability lines, mainly excess and umbrella and brokerage and binding contractors. The combined ratio for the fourth quarter of 2016 was an 88% compared to 87% for the same period last year. For 2016, the combined ratio was 93% compared to 89% in 2015. The increase in the combined ratio for both periods of 2016 compared to 2015 is driven by less favorable development on prior year’s loss reserves in 2016. This is partially due to the redundancies in 2015 related to the decrease in the volatility of our consolidated net reserves, which Anne just discussed, and we’ve discussed for a number of quarters now, that added 3 points to the combined ratio in the quarter and 2 points for the year. Additionally, our fourth quarter 2016 results included $18 million of underwriting losses related to Hurricane Matthew, which increased the combined ratio 3 points in the quarter and 1 point for the year. Finally, our 2016 results were also impacted by adverse development in our medical product lines of…

Thank you, Richie. Anne gave you the detailed number. So I’ll just add some color commentary what I consider to be some of the key points on our investment in Ventures operations. First, we earned 13% on our equity investments during the year, which exceeded the S&P 500 return to 12%, 500 basis points. More important than any one year though is longer-term record. With the 2016 results from the books, we now enjoy a 27-year record of excellent equity investment returns with that 100 basis point advantage in place for 27 years now. While there have been and will continue to be volatility in these results, this is an outstanding result. And we think it’s reasonable to suggest that our disciplined, rational, longstanding approach to investing works. Also, I think it’s important to note that in my opinion, public equity markets offer more opportunity than many of our other capital allocation choices in today’s environment. It is difficult, but not impossible witnessed the SureTec acquisition. We find attractive acquisition opportunities in our insurance and Ventures operations at good prices. Public equity pricing is more dispersed than what we generally find in insurance and private equity markets. That volatility of stock prices creates opportunities and we continue our practice of Steady-Eddie dollar cost averaging into equities. I expect this to continue into 2017. In our fixed income operations, we continue to own a very high quality portfolio with a duration and currency profile that is roughly matched to our insurance liabilities. For all of 2016, we earned 2.4% in local currency terms. While the mark-to-market price of that portfolio dropped a bit in the fourth quarter, with rising interest rates. The reinvestment of new funds took place at higher rates. Over time, the volatility of returns diminishes almost completely and…

Thank you, Mr. Gayner. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] And your first question will come from Jeff Schmitt of William Blair. Please go ahead.

Hi, good morning everyone.

Good morning.

It looks like the Investment Management revenue jumped to close to $34 million in the fourth quarter, what sort of caused that jump and how do we think is there seasonality in there? How do we think about sort of the run rate of that?

Yeah, sure, Jeff. Yes, there is a lot of seasonality to that, we’ve taken the accounting position in terms of treatment of that, that is basically the performance fee that CATCo earns at the end of the year if they generated profits for the fund investors. So it’s roughly 10% of the profit is the amount of that performance fee and we wait until the stroke of midnight on December 31 to be certain nothing has happened somewhere in the world before we record that income. So that is a – it can be a very volatile number from year-to-year based on what catastrophes occur that is basically 10% of the profit we create in the fund.

Okay, great. And then on the medical line some of the issues that you are seeing there, is this driven by the litigation environment, I mean are verdicts on the rise or is this more medical cost inflation is picking up or a combination of the two?

I think it’s probably more suits being filed and the suits getting further and ending up with more damages being awarded, in the past maybe there is suits would have been dismissed earlier, now they are getting further and so they are incurring more legal expense. And then some of the suits are actually ending up in verdicts for the plaintiffs. So that market changed, I mean the biggest issue we had there was in the correctional medical facility market, we’ve withdrawn from that market, given the rapid deterioration in it. And the other areas where we were also having some heartburns such as contract staffing and things of that sort, we’ve looked at the types of doctors recovering and we’ve refined that and we refined prices and attachments and all those sorts of things. So, we feel good about what we’ve done and it was nice to see no development in the fourth quarter and we’re just going to continue to monitor it.

And are you seeing this sort of a more active litigation environment beyond medical, I mean, are you seeing in other lines as well?

You know we’ve wondering with, we would just call that trend, when trend would pick up in the business and there has probably been some pickup in trend that has been tremendous, so I don’t see a huge difference in that regard, Mike?[ ph]

No, I agree. I agree.

Okay, thank you.

Thank you.

[Operator Instructions] The next question will come from Mark Dwelle of RBC Capital Markets. Please go ahead.

Yeah, good morning, just a few questions. With respect to the CATCo, I mean I understand that the most of the increase was because of the performance fee, so I’ll ask the question this way. I guess the normal run rate of revenues in that was kind of $8 million or $7 million to $8 million, so the whole increment over that kind of core quarterly run rate was all the performance fee?

Yeah, pretty much, yes. Now obviously we had more management fee, in fact assets under management had grown, but that happened during 2016, so the full effect really hasn’t been felt in the management fee numbers, so we would expect management fees to go up in 2017, some, some. And then performance fees is going to be what performance fee is at the end of the year.

Okay, that makes sense. The second question, you commented about the reinsurance premiums in the quarter, were there any actual new contracts in the quarter or these are just the continued benefits from contracts written previously, I think that most all of them were quota shares so…

Yeah.

…you know just kind of continue to roll through the numbers?

Yeah. No, there were some new contracts, I mean the plus 8% or whatever we were for the full year in reinsurance, it kind of – it mask a lot of surgery we were doing in the portfolio to move away from areas we felt were too competitive and try to move on to deals that we felt were better priced. So net-net, we were up 8%, but there were a lot of accounts we moved away from and there were a number of accounts we moved to, to try to optimize the portfolio as best we could.

Is the character of the book still primarily a liability oriented book or I guess just saying is the property been the portion that’s been dialing down?

Yeah. No, there has been some effort to increase the percentage of property a little bit in terms of the makeup of the portfolio, but it’s roughly 60% casualty and professional and then specialty lines like surety and things like that, and then 40% property.

Okay, it’s very helpful, thank you. Since you mentioned surety, maybe a few comments or observations about SureTec?

Yes. We’re delighted to welcome John Knox and the SureTec team to Markel. That was a – I would say that was a very quick courtship. We were introduced back late in the year and we were able to spend some time together here in Richmond and then go to spend some time, why don’t I spend some time with John and his team in Houston and very quickly we all felt like it was the right fit for both organization. As you know, Mark, I mean we don’t do any surety other than we do some surety reinsurance, we do no primary surety. And this was a team that, I mean just had fabulous results ever since their founding and they are our kind of guys in terms of that underwriting discipline and the way they think about the business, so we’re delighted to add surety to our portfolio of products.

Yeah, I wanted to add, again this is a spectacular example of where the culture of Markel really pays dividends over a long period of time, so John Knox contacted us directly, made the trip up here, Richie and I went to Houston. So we were able to sit down principle-to-principle and work this out very quickly and it’s delightful to be approached by someone of his caliber and quality and we see that on the vendor side, we see them on the insurance side and it’s the sort of thing that validates our approach to doing business.

Can you provide any kind of, I mean it’s great. Can you provide any kind of ballpark kind of census data or sort of ballpark of premium revenues, ballpark of historical combined ratios, anything like that?

Well, premium revenue is $75 million to $80 million; I think in 2016, our combined ratio is very attractive; I’m looking mid 70s to 80, so significant underwriting profitability in the book. And obviously John and his team had done a great job of growing SureTec, but we just believe bringing them into the Markel fold and introducing him to our contact, using our bandwidth sheets, we think gives us huge opportunity even in a very competitive surety market to continue to see profitable growth.

Okay, I appreciate the answers. Thanks very much.

And ladies and gentlemen, this will conclude our question-and-answer session. I would like to hand the conference back over to Mr. Tom Gayner for his closing remarks.

Thank you very much for joining us. Considering this as the closing remarks, we’ll see you next quarter. Thanks.

Thank you, sir. Ladies and gentlemen, the conference has concluded. Thank you for attending today’s presentation, you may now disconnect your lines.