Good morning and welcome to the Markel Corporation Third Quarter 2017 Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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 Form 10-Q, 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 Mr. Tom Gayner, Co-Chief Executive Officer. Please go ahead.

Good morning. This is Tom Gayner, I'm the Co-CEO of the Markel Corporation and it is my pleasure to welcome you to our third quarter 2017 conference call. I'm joined this morning by my Co-CEO Richard Whitt and our Chief Financial Officer, Anne Waleski. In a few moments they will review our financial performance for the first nine months of the year as well as provide some comments and updates on our Insurance operations. Following that, I will return and update you on our investment and industrial operations and then we will take your questions. Mark Twain once said, a man who carries a cat by the tail learns something he can learn no other way. I don't know if Twain was anticipating the record catastrophe losses of 2017 when he penned those words, but as a fan of his, I'm going to give him credit and foresight for brilliance with this bit of wisdom. 2017 will be a record year for catastrophes. And at the moment, we've got 66 days to go before the ball drops in Times Square to call time. Catastrophes are known as CAT in the property and casualty insurance industry, and it is our job to pick them up by the tail. That is what we do. In doing so, we fulfill our social responsibility and our reason for being – by responding to the CATs with resources to help our policyholders put their lives back together again. As we reported – we will record charges of just over $500 million net of our Reinsurance recoveries to pay claims to our policyholders for losses they suffered as a result of Hurricanes Harvey, Irma and Maria. Additionally, we've witnessed earthquakes in Mexico and fires in California into the fourth quarter. As I said a minute ago,…

Thank you, Tom, and good morning everyone. Markel's comprehensive income and growth in book value for the first nine months of 2017 reflects strong performance in our investment portfolio and demonstrates the value of having diversified operations. While underwriting results were impacted by several catastrophes, we continue to see positive growth across several product lines. Within our Markel Ventures operations, we completed the acquisition of Costa Farms in August. Costa Farms is a Florida-based grower of house and garden plants, which adds to the diversity of our portfolio of non-insurance Markel Ventures companies. We're also excited about our upcoming acquisition of State National, which is expected to close in the fourth quarter. Now, let's talk about our results for the first nine months of 2017. Total operating revenues grew 5% to approximately $4.4 billion in 2017. The increase was primarily attributable to an 8% increase in earned premiums which reflects higher earnings in all three of our underwriting segments. Starting with our underwriting results. Gross written premiums were $4.1 billion for the first nine months of 2017 compared to $3.8 billion in 2016, an increase of 9%. The increasing gross premium volume was attributable to premium gross in all three of our underwriting segments. The increase in gross written premiums in the U.S. Insurance segment was attributed to growth within our programs, general liability and personal lines business, as well as premiums from our new surety business. In the International Insurance segment, higher gross written premium were due to new business in our marine and energy and excess liability product lines. Higher gross written premium in our Reinsurance segment were attributable to two large specialty quota share treaties that were written in the first quarter of 2017, assumed re-instatement premiums attributable to the 2017 catastrophes and higher premium volume in…

Thanks, Anne. Good morning, everybody. Today I'll focus my comments on our underwriting operations and also provide an update on our CATCo operations and also a brief update on our pending acquisition of State National. Obviously, as we've heard the news for Markel's underwriting operations, Markel CATCo and the Insurance and Reinsurance industry as a whole is the significant catastrophic events that took place in the third quarter. As Anne pointed out, our underwriting losses were $503 million, net of Reinsurance and before tax. These are obviously meaningful losses. However, with our strong balance sheet we're well-positioned to respond to the claims of our insurers and we're also prepared to respond to our insurers and producers ongoing insurance needs. So starting with the U.S. Insurance segment, gross written premiums are up $150 million or 17% compared to the third quarter of 2016. On a year-to-date basis, writings are up $171 million or 9% to last year. Results attributable to our new Markel surety business added $22 million of gross written premium in the quarter and $34 million to the year-to-date premiums. Premium growth excluding Markel's surety is driven by growth in our programs, personal lines, which is primarily our classic auto program and several of our general liability lines on both the quarter-to-date and year-to-date basis. Earned premiums are up 9% for the quarter and 7% year-to-date, due to the same drivers as gross written premium increases. The combined ratio for the U.S. Insurance segment was 112% for the third quarter of 2017, as compared to 101% for the same period a year ago. The 2017 CAT events added 24 points to the 2017 quarter-to-date combined ratio. Excluding the impact of the 2017 CATs, the segment combined ratio decreased due to more favorable development on prior year loss reserves in…

Thank you, Riche. Markel enjoys a relatively unique position and we have three powerful engines to drive this company forward. Richie described our insurance engine circumstances and I'll pick up with our investment in industrial products and services engines. The investment engine produced excellent results during the first nine months of 2017. We earned 17.6% on our equity investments through September 30th. More importantly, our longer-term record remains one of the finest in the investment industry. We've outperformed the S&P 500 Index by more than 100 basis points over decades and this record continues in 2017. We do so at extraordinarily low costs and with a high degree of tax efficiency. Currently, we have roughly 64% of our equity capital invested in public traded equity securities. This is enough to give us a meaningful return in pleasant environments like what we've experienced so far this year. It is also balanced and conservative enough to provide a measure of safety and liquidity to absorb bad debts and remain in a position to make positive investments in more turbulent times. In our fixed income operations we continue to execute our strategy of owning high quality, plain vanilla bonds and matching the duration of our portfolio to that of our insurance liabilities. We earned 2.8% on our fixed income holdings through September 30th and we continue to earn the coupon. There were no credit losses to report as has been the case for quite some time. That is how it should be. I'm delighted to report to you that is also how it actually is. Our industrial products and services engine known as Markel Ventures also produced substantial positive results. We earned EBITDA of $115 million versus $133 million in the prior year. When you look at those raw numbers I would suggest…

We will now begin the question-and-answer session. The first question is from John Fox of Fenimore Asset Management. Please go ahead.

Thank you, everyone. I have a few questions. The first one is I guess, my only surprise in the quarter was the high rate of gross premium written, which is in the low to mid-teens ex the acquisition. Now I'm just curious given my sense we've been in a soft market for a period of time, and your disclosure in the Q about most premium rates are kind of trending down. Where are you seeing opportunity to write business at, the way – the double-digit gross premium written rate? Thank you. Then I have an unrelated question.

Okay. All right. Thanks, John. I'll try to tackle that one. There's no doubt the market is competitive, and we've talked about it in previous quarters, there's any number of lines where we're probably shrinking or actually shrinking. But there are some areas where we've found opportunities and we're growing. In London, we found a particular marine and energy program last year that we added to the book this year. So that's coming online. That number was zero last year and that program's coming online. It could be $50 million or $60 million by the end of the year. A similar thing has happened in the U.S. where we found another program, that was kind of a property package sort of program, and again it's probably a $60 million to $70 million opportunity that's coming online that would have been zero last year. So we've had some nice pickups like that, very, very targeted rifle shots. And then we're growing in other areas such as our classic auto program. We're seeing some nice increases in our National Markets over in London which is retail business, which has been – it's a stickier business, it doesn't move around as much in terms of price and so it's a good place to grow. So we're – I guess I would say we're not surprised by the growth. These are things that we kind of put in the works in 2016 – at the end of 2016 and knew they would come online during 2017 and hopefully the goal would be each year to find a few things like that, a few gold nuggets amongst what is otherwise a fairly competitive market at least up until now.

Right. Okay, well I hope you're not surprised, Richie.

No.

But how do you think about the return on equity or the returns on that business? You know when you find these pockets, is it – you think about, gee, they have a good combined ratio, or you say gee, we can write $2 of premium for $1 equity and a 90 combined and that's a good return. How do you think about or identify that's a good niche?

We first and foremost as we always do, focus on what we think we can write in terms of the combined, so.

Okay.

We're not bringing on a program, we think we're going to have a $1.10 (37:46) combined on it. These are programs...

Yeah. They're the programs we believe we can make an underwriting profit on.

Okay, great. And then my second unrelated question is, we reported $2.5 billion at the holding company at the end of the quarter, of course $900 is going out for the acquisition, insurance acquisition. Do you guys have a kind of a minimum you'd like to have there, like a Berkshire talks about their minimum? And if so, do you need to reload that or can you just talk about the liquidity and kind of the minimum you like to have?

Yeah, John, I think we're comfortable, you'll note that the balance was flat to year-end and we've closed out the two acquisitions already year-to-date.

Right.

We're comfortable that we can absorb the State National acquisition and still have sufficient liquidity. I don't think we feel like we have to replace that. We will as we have always done, be opportunistic about that. So if there is some option to do that and it makes sense for us economically, we'll certainly look at it. But we're...

Right.

We're not concerned about liquidity levels around the organization.

Okay, great. And then my final question is, I understood – you mentioned the Ogden rate which I understand is going back up, could you just either confirm that or not, and would it have any impact going forward? Thank you.

You know there is – the government has picked up the issue. The UK government has picked that issue up and what they really said is they will look at that rate more often. I think it had been something like 15 or 16 years since they had last looked at it, then they made this rather...

Right.

...aggressive move. I think people believe it will come back up, but that's not their biggest issue right now. I think they're focused on Brexit. So when that change occurs, we'll obviously take a look at it and see what it means for us. But that could take – we believe that could take a while. They've got a lot of bigger things to deal with.

Okay, I won't pencil anything in. Thank you.

But it is – the one thing I'll say John is it's interesting. The government set the rate at negative 0.75. The reality is the market has basically ignored that and when deals are settling, when claims are settling, they're settling at something between zero and positive one rate. So as often is the case the market sets the rates, the government doesn't.

Right. Because everyone knows you're making a positive return on fixed income and I mean you're over-reserved at minus 0.75. So it makes sense.

So it is interesting deal. Deal – that claims that are settling are settling in that zero to plus one range.

Yeah, it makes sense. Okay. Thank you.

Thanks John.

The next question is from Scott Heleniak of RBC Capital Markets. Please go ahead.

Hi. Thanks. Good morning. Appreciate the thoughts on pricing. And I'm just wondering if you see any early signs of pricing moving since the storms. Anything you can share there? And is there a sense of there's others? I know you guys talked about your casualty pricing moving, I mean, everyone that we've heard has certainly talked about property and reinsurance, but you get the sense that others are going to follow suit with that, just anything anecdotally you can share on that front, would be appreciated.

Yeah, sure. We're seeing the ability to raise prices on property. We are definitely seeing that ability. I would say that, in terms of the market, how much and what you do on loss free accounts, what you do on non-CAT exposed accounts, it's a little all over the place right now. And I think – but I think that will develop as we go forward, the market will kind of find a level. But what we are seeing the ability to push for rate on property accounts certainly. It may take a little longer to be able to push and get rates in casualty lines and other specialty lines, but I think, I think that's going to happen. I do believe that's going to happen. But I do believe that could take a little longer than what we're seeing right now on the property side.

Okay. That's helpful. And I wanted to ask you about the California wildfires. Appreciate you guys putting the loss estimate there. And it was interesting and we've heard a lot of industry loss numbers out there anywhere from a few billion to $10 billion. And just wondering what kind of industry loss estimate you guys might have assumed when you came up with your number for that you might be able to share?

You know we tried as best we could and we noted in there, this is an ongoing and developing situation. So that range is – it's got a lot of estimation to it. So we tried to build it bottom up as best we could. I think we see those industry numbers as well and I think we're thinking its anywhere between $3 billion to $6 billion or $7 billion event. And unfortunately it's growing every day because there are still buyers out there. So that one is you know very tough to pinpoint right now. I can't caution enough about, the volatility that could be in that number.

Okay. The – in an expense ratio you had the benefit from the reinstatement premiums received and lower contingents paid. I believe you guys said. So was it – the run rate in the quarter was that still kind of in that 38% to 39% range? Is sort of a normalized rate, if you were to take those out of there, the way things are changed in there or?

The expense ratio also benefited in the quarter from the increase in gross written, which I think – yeah, as that comes into earned, we'll continue. So I think the run rate's likely to be 37, 38.

Okay. All right. And just the last question on the $20 million inventory loss charge for (44:38), was that specific to one particular operation or was it multiple operations?

One.

One. Okay. Thank you.

Thank you.

The next question comes from Bob Farnam of Boenning & Scattergood. Please go ahead. Bob Farnam - Boenning & Scattergood, Inc.: Yeah, hi there, good morning. I think just a follow-up question on Scott, we're talking about the California wildfires. Do you get a sense whether that's going to be more of a – in your Insurance operations or Reinsurance operations, where you see most of the losses there?

That's hard. It is really hard to say right now. It's going to hit both. I mean, in fact it's probably going to hit more widely through portfolio because I mean, it's going to be classic cars. It's going to be camps. It's going to – it is just all over the map in terms of where it might touch our portfolio. And I don't think it'll be outsized on Insurance or Reinsurance. I think it would be fairly well spread. Bob Farnam - Boenning & Scattergood, Inc.: Okay, all right. That was it for me. Just want to see if I can clarify that. Thanks.

Okay.

There are no additional questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Tom Gayner for closing remarks.

Thank you very much for joining us. We look forward to connect with you next quarter. Take care, everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.