Good morning and welcome to the Markel Corporation Fourth 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 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, Denise. This is Tom Gayner. It's my pleasure to welcome you to our 2017 year-end conference call. As usual, I'm joined by our Chief Financial Officer, Anne Waleski; and my Co-Chief Executive Officer, Richie Whitt. In a minute, Anne will review the numbers for the year and Richie will cover our insurance operations. I will then return with some comments about our investment and Markel Ventures operations. Before we dive into the details though, I think it's worth stepping back and looking at the big picture of what is happening at Markel. I'm proud to share with you, our fellow shareholders, that 2017 was a transformative year for your company. We are a larger, more profitable, more resilient, more durable and more creative company than ever before, and you can see that reality in a list of some of the things we did in 2017. For example, one, we provided the record claims to our policyholders with record loss and loss adjustment expenses of $2.8 billion in 2017. These payments help our clients recover from the record level of catastrophes from Hurricanes Harvey, Irma and Maria, as well as earthquakes fires and other losses during the year. Our primary purpose in our insurance business is to help our clients put Humpty Dumpty back together again after catastrophes and losses. And we did so in record amounts in 2017. That's why people buy insurance and we're delighted to have the financial strength and resources to respond to and help restore our clients in the face of devastating losses. Having insurance matters. Two, we acquired SureTec and added surety to the list of products and services we offer our clients. Three, we acquired Costa Farms and added a substantial and diverse source of earnings to the Markel Corporation. Four, we…

Thank you, Tom, and good morning, everyone. Our 2017 results provide us with many reasons to celebrate, many of which Tom has mentioned. Operating revenues for the year were a record-setting $6.1 billion, and both net unrealized investment gains and comprehensive income exceeded $1 billion for the first time in our history. While we experienced a consolidated underwriting loss from seven separate catastrophe events during the year, our U.S. Insurance segment posted an underwriting profit and all three insurance segments saw year-over-year growth in premium. Our Markel Ventures operations had very positive results and investments had an amazing year as well. Lastly, we completed two insurance-related acquisitions and one Markel Ventures acquisition, adding to the diversified products and services that we offer our business partners. Lots to celebrate, for sure. Markel's comprehensive income and growth in book value for 2017 reflects strong performance in our investment portfolio and demonstrates the benefit of having diversified operations. We also recognized, as Tom mentioned, a benefit during the quarter resulting from the enactment of the Tax Cuts and Jobs Act, which I'll discuss later in my comments. Now, let's talk about the details of our results for 2017, starting with our underwriting results, gross written premiums were $5.3 billion in 2017 compared to $4.8 billion in 2016, an increase of 10%. The increase in gross premium volume was attributable to premium growth in all three of our underwriting segments. The increase in gross written premiums in the U.S. Insurance segment was due to growth within our specialty programs, general liability and personal lines businesses, as well as premiums from our new surety and collateral protection product lines. In the International segment, higher gross written premiums were due to new business in our marine and energy and excess liability product lines. Higher gross written…

Thanks, Anne, and good morning, everyone. Today I'll focus my comments on our underwriting operations and also provide updates on our State National operations which, as you heard, we acquired during the fourth quarter, and Markel CATCo. Following Anne's theme of 2017 successes, we had numerous successes in our underwriting operations even with the 2017 catastrophic events. As Anne mentioned, we grew organically in all three insurance segments. We completed acquisitions of two outstanding companies to further add to our insurance capabilities, SureTec and State National. And, in addition, our team worked hard to successfully launch the combination of our wholesale and global insurance operations as Markel Assurance effective January 1, 2018. It was an incredibly busy and productive year. There is a lot to celebrate, but we are also well aware that our 2017 combined ratio of 105% did not meet our longstanding goal of consistent underwriting profitability. Each time catastrophes happen, we learn from them and we're getting better at managing the risk in the future. We're proud to be able to help our customers recover from these events and we recognize that they buy our products for this very reason. So, let's start with the U.S. Insurance segment. Gross written premiums for the quarter are up $79 million, or 12%, compared to the fourth quarter of 2016. For 2017, writings are up $250 million, or 9%, compared to 2016. Our Markel surety line, acquired in the second quarter of 2017, added $21 million and $55 million, respectively, for the quarter and the year. State National's collateral protection line added $30 million in both periods. Premium growth excluding these newly acquired product lines was driven by growth from our specialty programs business, our personal line products, primarily a classic car program, and our general liability lines for both…

Thank you, Richie. The results from our investment in Markel Ventures operations are wonderful. We earned 25.5% on our equity portfolio in 2017 and continued our nearly three-decade-long record of outperforming the S&P 500. This record stands as one of the finest in the investment industry and continues to add meaningful value to Markel. At year-end, equity stood at 63% of total shareholders' equity, compared to 56% a year ago. We continue to invest regularly and repeatedly as has been our longstanding pattern. We continue to find attractive investment opportunities and we continue to invest in them in our measured and disciplined way. Overall, prices remain high in many sectors, and we think retaining some dry powder makes sense. At reasonable equity investment allocation, coupled with our cash inflows from our insurance and Markel Ventures operation, allows us to be in a position to respond to volatility and attractive investment opportunities on a moment's notice. We also protect our balance sheet at the same time. I sleep well with this approach and our long-term record of compounding suggests that our process works. In our fixed income portfolio, we earned 3.4%, a result in line with the coupon and recurring interest income from the portfolio. We continue to invest in the highest quality fixed income securities that we can find and we match the duration of our portfolio to the duration of our insurance liabilities. We also keep a pleasant amount of walking around money in cash and short-term investments. At Markel Ventures, we produced total revenues of $1.3 billion, compared to $1.2 billion a year ago. Net income nearly doubled from $56.2 million to a $103.6 million. EBITDA grew to $177.6 million, compared to $165.1 million a year ago. There are a few salient points I'd like to communicate regarding…

Thank you, Mr. Gayner. At this time, we will begin the question-and-answer session. Your first question this morning will be from Mark Hughes of SunTrust. Please go ahead.

Yes. Thank you very much. Good morning.

Good morning.

Good morning.

You had mentioned that the primary casualty pricing was also improving. Any way to sharpen up that number? What specifically are you seeing and do you think that'll get better as we go through the year?

Mark, yeah, we're seeing some improvement. It's spotty at this point. I'm delighted to say we are seeing it though. I was wondering how long it would take before price increases from property would bleed over into other areas. It's modest, very modest, single-digit, probably low single-digit and it's not on every account, but you have to stop going down before you can start going up. And so, I'm an optimist and I'm happy with what I'm seeing. And I know some other people that have been a little bit down in the mouth about the reaction of rates. But you got to start somewhere and this is a start and we and I know a number of others who I think are pretty disciplined players who are going to be trying to push rate because we need rate. So, I'm optimistic, but we're going to have to see how it plays out over 2018.

In the Markel Ventures, in the manufacturing operations, if we do get a stronger economy here, could some of those cyclical businesses start seeing some firming?

Yeah. Part of the comparison is 2016 was just a blow-the-doors-off kind of number and the CEO of one of those businesses has said, in some bit of irony, I wish 2016 wasn't so good, because 2017 was fantastic. What they are most sensitive to would be auto sales and just general freight circumstances. So, I'm delighted with the absolute levels of cash those businesses are producing right now and would be happy to sign up for a long time to come. And if you want to know directionally what's going to happen, watch auto sales.

And then, a final question. Tom, your general view on inflation?

I believe there's flation. There's inflation in the things that you buy and deflation in the things that you have.

If you were to put that into numbers, do you think the inflation is going to accelerate? Does this increase in wages worry you, or how would you position the portfolio for it?

Well, I was polling everybody in the room as you were asking your question. The profound consensus is that neither they nor I know. I mean, we don't know. And we really don't spend any time thinking about it. But what we have is a spectacularly well-positioned portfolio for whatever kind of circumstances we find ourselves in. So, the fixed income portfolio, what we have there is something that is, in many ways, a treasury function. It is there to have cash to write checks when we write insurance claims and we max that up and we earn a spread. And that spread is relatively constant, whether rates are smaller or high, because it's just a spread. It's a spread business. And in the equity portfolio, what we have are things that can move and respond and be dynamic for whatever environment we find ourselves in. And that's also true of the Markel Ventures businesses themselves, which are in effect equity investments. So, we own the residual equity economics of a lot of businesses, which succeed and prosper and figure out whatever environment they find themselves in.

Understood. Thank you.

The next question will be from Jeff Schmitt of William Blair. Please go ahead. Jeff Schmitt - William Blair & Co. LLC: Hi. Good morning, everyone.

Good morning. Jeff Schmitt - William Blair & Co. LLC: Couple of questions. On Costa Farms, the contingent liability said was $19 million for the year, the increase. Last quarter, there was a $10 million incentive payment. Was that the same or is sort of $10 million and then $9 million this quarter, is that $19 million on the fourth quarter, that increased?

I'm going to let Nora Crouch, our Chief Accounting Officer, opine on that. What I will say before she jumps in is, qualitatively, you've seen a consistent pattern over the last couple of years, where the contingent expense from the deals that we incur a charge for that. What that means is, those deals are working better than what we expected when we first bought them. So, she'll give you the precise number, but the qualitative information is more important. Jeff Schmitt - William Blair & Co. LLC: Right.

There was a recognition in the third quarter upon accounting for the purchase that was associated with the original estimation. That estimation increased in the fourth quarter. We've now recognized the full amount of the contingent consideration associated with the Costa Farms transaction. So, there will be no more impacts in the future. But there were two pieces, one in the third and one in the fourth.

And by the way, since you asked about accounting, and I know you love to talk about it. One of the things that I think is descriptive of the conservatism of the organization is those kinds of numbers we're putting to the income statement. That's an expense. Remember, in my point of view, this is the capital amount that we're paying for the business itself. It's almost like, if you bought a house, you paid a certain amount of money for it, and between the time you put the contract down and the time you close, you also added a sunroom or something like that. Well, in the house itself and the mortgage financing you did, that's a capital transaction. The amount of money that you're spending to do the renovation work or add the sunroom, we, in effect, are flushing that through the income statement immediately. The bank will be more than happy to loan you money for the increase in value of the business that you have. So, I think it is fundamentally a very conservative way of presenting things. Jeff Schmitt - William Blair & Co. LLC: Right, exactly, yeah. And I was just trying to look at that, pulling that out. So that is $10 million and $9 million, so those are both – that $10 million last quarter was part of the $19 million. Does Costa Farms flow through non-manufacturing, by the way, or is that in manufacturing?

We will be revisiting the presentation of that in light of the new accounting rules and possible changes going forward. So stay tuned on that. Jeff Schmitt - William Blair & Co. LLC: Okay.

In 2017, is a non – it's a non-manufacturing in 2017.

That's right. Jeff Schmitt - William Blair & Co. LLC: Got you. Got you. And then...

And I might add, if I may. We're trying to get away from that term non, because you think about Markel and the development of Markel over time, someone joked we have insurance and non-insurance revenues. And in the non-insurance revenues, that non-manufacturing people had a pretty good year. So I was almost thinking of getting some T-shirts printed up that said the non, nons because they were the stars of the day (43:57). So we just think this is probably bad terminology in the way people would feel. So, that's why I blanched at that question. Jeff Schmitt - William Blair & Co. LLC: All right, got you. In the $20 million inventory charge last quarter, was that in the manufacturing piece?

That charge was a loss related to Hurricane Irma and it was inventory-related and it was last quarter. Jeff Schmitt - William Blair & Co. LLC: In manufacturing?

No, it was Costa. So, it would be non... Jeff Schmitt - William Blair & Co. LLC: It was Costa. Got you, got you, okay. And then...

And if I may continue to answer that question, you will be going down the looking glass, Alice in Wonderland terms, when you try to back in what's recurring and non-recurring through what happened in Costa in the period of ownership, because things that seem like their insurance recovery, actually the bulk of that and the largest single item in that was federal crop insurance where in effect were sort of pre-selling some of the inventory to the crop insurer rather than (44:59). I mean, there's just lot of ins, lot of outs, lot of strands here. So, I would suggest that you stay tuned until you get through to the second and third quarter of this year to see what Costa looks like on a normalized basis. Jeff Schmitt - William Blair & Co. LLC: Got it. Okay. And then, one last question. Just looking at – in the U.S. segment, looking at those accident year losses backing out catastrophes, it looks to be down year-over-year and I think every quarter, but the first, which is a little different than what we're seeing at some peers. Can you maybe speak to what you're seeing in terms of loss cost trends?

I don't have the numbers in front of me, Jeff. But I would say, in terms of loss cost trends, there are, Tort reform, which was big a few years ago. Someone else mentioned the potential of some inflation in the future. Those things are – Tort reform has been slowly eroded and there is some inflation out there. So, the trend is up and that's why we will be pushing for rate, as we go through 2018. I'm not sure if some of the benefit was from prior year development where we have a consistently conservative approach to prior years and some of that which we're seeing could just be prior year releases. Jeff Schmitt - William Blair & Co. LLC: Okay. Thank you.

I would expect – I guess, to kind of try to bring that around, I would expect us to be booking our current accident year higher than previous years as a result of trend and what we see happening in the markets. Jeff Schmitt - William Blair & Co. LLC: Got it, okay. That's helpful. Thank you.

And the next question will come from Mark Dwelle of RBC Capital Markets. Please go ahead.

Yeah. Good morning. A couple of questions. First, I guess, in Markel Ventures, kind of further to some of the questioning on the last caller asked, I just want to make sure I understand all of the – particularly to the fourth quarter only some other kind of unusual ins and outs. So, you had $44 million of benefit from the insurance recovery. You had a $9 million charge related to the contingent payment. Were there any other unusual adds or subtracts along those lines in the fourth quarter alone?

I think those...

That will be the only thing.

Yeah. And part of that...

All of that – yeah, excluding tax entirely.

Yeah. And that would be it, other than tax.

Okay. Thanks. Speaking of tax, I guess, I'll ask that question next, and then this is really from an overall Markel perspective, not just Ventures. Would it be reasonable to assume from a taxation standpoint that since you've always paid a rate below the statutory rate that your go-forward rate would likewise be below the revised statutory rate?

It would be reasonable to assume that the new rate will be beneficial to our financial result. If you want to eliminate for purposes of hypothesis any volatility that may come from the new equity accounting rules, you could say that in most years we would expect a range of 16% to 18%. However, I will caution you that I feel like that is worth exactly what you were paying for.

Understood. And just to make sure I understand the interplay on that. So, what you're saying and I believe is, in periods where you would have realized or unrealized gains related to the portfolio, you would like – you would most likely have, in your hypothetical, a favorable rate. But in periods where you had unrealized or realized losses, you would most likely have a percentage that was well above the 21%. Would that be a correct thinking?

What I would say is, you're correct. It's a volatility from the movement in the unrealized position may have an outsized impact and may in fact render the concept of ETR for us to be not meaningful. But we just don't know that yet.

I think we're on the same page....

Okay.

I'll stop sharing that line.

But at the end of the day, Mark, 21% is hell of a lot better than 35%. So...

That's right, that's right.

Agreed.

The final analysis is good.

Right. Jumping over to CATCo. I just want to ask, you provided, as you usually do, the level of Markel's investment in CATCo. Did Markel participate in any of the various offering rounds that you did during the fourth quarter? I was just kind of trying to generally reconcile last quarter's two hundred and some odd million dollars of investment to the $189 million in view of the $52 million of losses?

Right. We did subscribe and then other people's demand, other investors' demand for the fund was so great. We did not want to squeeze other people's investments down. So, ultimately, we got – we didn't take our subscription, so that other people could participate. So, end of the day, we applied for it, but did not take it. So, the decrease is totally market value decreased in our investment.

Got it. And then, I guess, the last question I had, and it relates to the third quarter catastrophe losses, the amounts that you booked. I'm thinking, if I'm doing my math right that you may have taken favorable development related to some of the third quarter or prior quarters', I suppose, cat losses. Is that – is my math that good or am I off on math?

Your math is that good.

Okay. I presume that was all primarily – I think, that was all in the U.S. book that I calculated that, was there any on the Reinsurance side?

I don't have that detail with me, but you are correct, we did see improvement in the numbers for the third quarter catastrophes.

Yeah, we definitely did, Mark, but I just – I want to give a health warning there. Maria, as well as the California fires are just a little different than what people have seen in the past. And so, we're being pretty cautious about those two, and actually, I think, PCS came out with some numbers today, and they moved some numbers up. So, we're going to be very careful just because the events that happened in 2017, a couple of them just have no precedent.

Great, okay. I appreciate the insight and that is all my questions. Thanks.

Thank you.

The next question is a follow-up from Mark Hughes of SunTrust. Please go ahead.

Just curious, any thoughts you might have on the workers' comp business, pricing has definitely been down there. Is pricing down too much relative to loss trends or how are you viewing that business now?

Yeah, workers' comp has been very good for the last few years. And, as a result of that, the way that market works is the States set the loss cost multiplier. So, you're kind of going off of that base to set your pricing. There's loss cost multipliers in most of the states because of the good experience of going down. And so, as a result, our price is going down some since we base off of that. We still believe there's margin in that business and we're trying to hold as much of that price as we can. But, as a result of the great results, the pricing is under a bit of pressure in workers' comp.

Thank you.

And, ladies and gentlemen, this will conclude our question-and-answer session. At this time, I would like to turn the conference back over to Tom Gayner for any closing remarks.

Thank you very much for joining us. We're going back to work. Thank you.