Tom Gayner - President and CIO Anne Waleski - EVP and CFO Mike Crowley - President and Co-Chief Operating Officer Richie Whitt - President and Co-Chief Operating Officer.

John Fox - Fenimore Asset Management Mark Dwelle - RBC Capital Markets.

Good morning, and welcome to the Markel Corporation First Quarter 2015 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 reconciliation to GAAP of these measures in the press release, which can be found on our Web site at www.markelcorp.com in the Investor Information Section. Please note this event is being recorded. I would now like to turn the conference call over to Mr.

Tom Gayner, President and Chief Investment Officer. Mr. Gayner, the floor is yours sir..

Thank you so much. Good morning and welcome to the 2015 first quarter conference call for the Markel Corporation. My name is Tom Gayner and I'm joined as usual by Anne Waleski, Mike Crowley and Richie Whitt.

Anne will brief you on the financial results, Mike and Richie will follow with some comments on our insurance operations and then I’ll finish with invested results and an update on Markel Ventures. As always we thank you for your interest and support in Markel and we look forward to your questions.

With that Anne?.

Thank you, Tom and good morning everyone. I am happy to report that we are off to a fantastic start in 2015 with our investing, underwriting and Markel Ventures operations all contributing to our success. While this is an exciting beginning, it's important to remember that there is a lot of year left to go.

Let's jump into our first quarter results; our total operating revenues grew 5%, to $1.3 billion in 2015 from $1.2 billion in 2014. The increase is driven by higher revenues from Markel Ventures.

Other revenues which include revenue from Markel Ventures were up just under 40% to $260 million from $186 million last year, primarily due to our acquisition of Cottrell in July 2014.

Moving into our underwriting results, gross written premiums were $1.3 billion for the first quarter of 2015, compared to $1.4 billion from 2014, a decrease of 8% driven by the climb within our reinsurance segment. During 2014, we see [trailing] auto reinsurance in the UK and we also decreased our non-standard U.S. other reinsurance business.

Foreign currency exchange rates had an unfavorable impact on the year-over-year change in gross written premium. However even on constant rate of exchange gross premium volume decline 5%.

As Mike and Richie will discuss in more detail later, market conditions remain very competitive, consistent with our historical practices we will not rate business when we believe prevailing market rates will not support our underwriting profit targets.

Net written premiums for the first quarter of 2015 were approximately $1 billion, down 9% from the prior year for the same reasons I just discussed. Net retention was down slightly in 2015 and 83% compared to 84% in 2014. Earned premiums decreased 1% to $944 million for the first quarter of 2015.

The decrease in 2015 was driven by the unfavorable impact of the U.S. dollar strengthening against foreign currency. At a constant rate of exchange earned premiums for the first quarter of 2015 increased 1% compared to same period a year ago. During the portfolio we saw organic growth in several product lines within our U.S. insurance segment.

Our consolidated combined ratio for the first quarter of 2015 was an 83% compared to a 95% year ago. The decrease in the combined ratio was driven by seven point improvement in the prior accident year’s loss ratio in 2015, compared to 2014.

Also contributing to the decrease in the combined ratio was a three point improvement in the current accident loss ratio and a two point improvement in the expense ratio in 2015. The improvement in the current year loss ratio was due to lower attritional losses in our U.S. insurance and reinsurance segments in 2015, compared to 2014.

The improvement and the expense ratio is primarily due to lower general expenses in 2015, compared to 2014. For the first quarter of 2015, prior year redundancies were $167 million, compared to $107 million for the same period a year ago.

The increase in prior year redundancies in 2015 was due in part to a decrease in the estimated volatility of our consolidated net loss reserves as a result exceeding a significant portion of our 1992 and prior asbestos and environmental loss reserves to a third-party during the first quarter of 2015.

Due to the unique nature of asbestos and environmental exposures, the ultimate estimated value of these reserves is subject to greater uncertainty in other types of loss reserves that we hope, once this transaction occurs, the resulting decrease in estimated volatility cause the confidence of on our consolidated net loss reserves to increase.

As you have heard us say over the years, a core principal of our reserving philosophy is to maintain a margin of safety in our loss reserves, plus that those reserves will prove to be more likely [redundant] and efficient.

We apply this reserving philosophy period-over-period and monitor the [actuarial] determined confidence level in our reserve among other things to ensure that we apply our judgments in this area consistently.

Given these considerations and in an attempt to maintain a level of confidence in our loss reserves within a range consistent with historic levels, we reduce prior year loss reserves during the period by $36 million which had a four point favorable impact to the combine ratio.

In addition to this one-time impact, we experience more favorable prior year loss reserve development in our professional liability and workers compensation environment in the first quarter of 2015, than in the same period a year ago. Now I’ll discuss the results of Markel Ventures.

During the first quarter of 2015, revenues from Markel Ventures were $245 million compared to $171 million a year ago, that’s a 43% increase. Net income to shareholders from Markel Ventures for the period was just under $11 million in 2015, compared to approximately $1 million for the first quarter of 2014.

EBITDA was $34 million in 2015, compared to $14 million in 2014. The increase in each of these measures during 2015 was primarily due to our acquisition of Cottrell in July 2014 and improved results within our other manufacturing operations due in part to increase shipments in 2015, as compared to 2014.

Now we’ll talk little bit about our investment results. Investment income increased to $93 million for the first quarter of 2015, compared to $87 million last year.

During 2014, we continue to replaced lower yielding fixed maturity corporate and mortgage-backed securities with higher yielding fixed maturity tax-exempt municipal securities as part of our effort to reposition the investment portfolio acquired through the Alterra transaction. We are seeing the benefit of that effort in the first quarter of 2015.

Also contributing to the increase as higher dividend income on our equity portfolio due to our larger equity portfolio in 2015 compared to 2014 due impart to the restructuring of the Alterra investment portfolio. Net realized investment gains for the first quarter of 2015 were $6 million, compared to $17 million a year ago.

Looking at our total results for the year, our projected effective tax rate was 19% in the first quarter of 2015, compared to 25% a year ago. The decrease in the effective tax rate in 2015 was driven by foreign tax credits for foreign taxes paid.

In previous periods taxes paid in foreign jurisdictions were not available for use of tax credits against our U.S. provision for income taxes. In 2015, we anticipate a sufficient amount of earnings from our foreign operations will be taxable in the U.S. This will allow us to recognize the benefit of significant foreign tax credits against our U.S.

provision for income taxes. The recognition of these tax credits has a favorable impact of eight points on our 2015 estimated in new effective tax rate, similar benefit may not be available in future years. We reported net income to shareholders of $191 million in the first quarter of 2015, compared to $88 million a year ago.

Comprehensive income for the period was $282 million, compared to $230 million a year ago. And as a result book value per share at the end of March 2015 was $564, an increase of 4% since the end of 2014.

I’ll make a couple of final comments about cash flows and the balance sheet; net cash provided by operating activities was $23 million for the first three months of 2015, compared to $22 million for the same period of 2014.

Operating cash flows for the first quarter of 2015 included higher cash flows from our Markel Ventures operations and investing activities offset by lower payments for income taxes and employee profit sharing compared to the same period a year ago.

Operating cash flows for the period was net of approximately $70 million of cash paid in connection with the asbestos and environmental transaction that I previously mentioned.

While we recognize that this transaction will have the short-term impact of reducing investment income, we will have eliminated the uncertainty around these exposures, and increase our flexibility regarding capital allocation.

Historically first quarter is our lowest cash generating quarter based on the timing associated with incentive compensation payments to our associates and to our brokers. Invested assets at the holding company were $1.4 billion at the end of March 2015 as compared to $1.5 billion at the end of the year.

With that, I’ll turn it over to Mike to talk about our U.S. Insurance segment..

Thanks Anne, good morning. As we’ve outlined before, the U.S. Insurance segment comprises all direct business written on our U.S. insurance companies and includes all of the underwriting results of our wholesale and specialty divisions, as well as certain products written by our Global Insurance team.

For the first quarter gross written premium was up 2% over prior year. We've seen some growth in our wholesale casualty lines and our specialty workers comp line.

This growth was been offset by lower premium volume from architects and engineers where we have exited certain classes and our wholesale property lines where we’re seeing the softening market conditions. The combined ratio for the quarter was 84% compared to 96% for the same period a year-ago.

In the quarter we benefited from lower attritional losses in our binding and brokerage property lines and program business, as well as more favorable prior year takedowns due in part to the change in volatility which Anne just discussed.

In our core product lines we also saw a favorable development of prior year losses in our professional liability and worker's compensation books. Additionally the expense ratio was better due to lower general expenses in quarter one compared to last year.

Operationally [indiscernible] is fully engaged in his new position as President of Markel Global a large account business.

We've recently returned from the RIMS Conference in New Orleans where our Senior Global Underwriters had the opportunity to engage with the number of clients, brokers and prospects, and we continue to believe that under better market conditions we have the talent and products to grow this business.

Matt Parker assumed the position of President of Markel Specialty April 1st taking over from Greg Thomson who is focusing his efforts on finding new program opportunities for Markel. I am very confident Matt's ability to lead this division.

Chad [indiscernible] replaced Matt in the leadership world at FirstComp and is well prepared to continue that progress having served in a number of different capacities at FirstComp over the last few years. Market conditions throughout the U.S. segment remain largely unchanged from the fourth quarter of 2014.

We continue to generate modest rate increases on our smaller E&S and specialty accounts the market is considerably tougher for the larger complex risk underwritten by our Global Division.

Brian Sanders and his team in our wholesale division are focused on three key issues maintaining our relationships with our key wholesalers, continuing to communicate -- excuse me our underwriting appetite to these wholesalers and improving efficiency in our backroom processes.

We held our Binding and Brokerage Council Meeting in early in the quarter and feedback from our wholesale partners remains very positive. Gerry Albanese and our product line leadership initiated several changes to their structure to better align with certain segments of our business.

The public entity team transferred to the global reinsurance division and the senior leading team transferred to the Global Insurance division. We also had a talent to our environmental and binding teams. All of the units in the U.S.

segment are currently reviewing their profiles, objectives and priorities making sure that their goals remain in line with our longer-term objectives. Our North American platform is solid and we look forward to the rest of the year. I will now turn the call over to Richie. .

Thanks Mike, and good morning everybody. Today I will focus my comments on the underwriting results of the first quarter of 2015 for both our international insurance and reinsurance segment.

As Anne said 2015 is off to a fantastic start however we all need to keep in mind that one quarter does not make any year and we all know there is a long way to go and lot of hard work ahead of us.

The international insurance segment which includes business written by our Markel International division as well as that written by our Global Insurance division had a great first quarter.

Gross written premiums in the international insurance segment did decrease slightly by 2% to 289 million however the combined ratio was 73% compared to 91% in the prior year. The decrease in premium writings is primarily due to the impact of the strengthening U.S. dollar.

Excluding currency impacts gross written premium volume actually increased 4% due to increased volume in our professional liability product lines partially offset by decreases in our marine and energy product lines.

The lower segment combined ratio was driven by more favorable prior accident years we takedowns and lower current accident year loss ratio partially offset by higher expense ratio.

The decrease in the current accident year loss ratio was primarily driven by the nine claims development and lower attritional loss ratios across the number of lines within our Markel International division.

This segment included approximately 18 points of favorable of prior accident year's movement related to the change in estimated volatility on our loss reserves that Anne discussed earlier. We also experienced favorable prior year's development across our Global Insurance division which reported adverse development last year.

The expense ratio for this segment increased slightly due to higher general expenses. On the subject to volatility it's worth pointing out that at least two types of volatility impacts our underwriting results, business mix and reserve volatility. While they are closely related they are different.

We have discussed reserve volatility in great detail this quarter due to the movement in prior year reserves; equally important however is the impact of business mix. With the acquisition of Alterra which just celebrated its two year anniversary a week or so ago, we added Global Insurance and Reinsurance divisions.

The addition of these divisions changed our business mix adding larger excess limit Fortune 1000 business with global insurance and additional capacity exposure and larger limits with global reinsurance. This change in business mix contributes to additional volatility and underwriting results as demonstrated in this quarter.

Now I'd like to discuss the results of the reinsurance segment which includes three reinsurance programs written by our Global Reinsurance Division, as well as that written by the Markel International Division. Gross premiums written during the quarter for this segment decreased to $378 million for 2015, from $409 million a year ago.

And mentioned as the decrease in writings was driven by underwriting decisions to ceased writing UK motor business and significantly reduced our writings of U.S. non-standard orders for the business. The combined ratio for the reinsurance segment was 89% compared to 94% last year.

Reduction in combined ratio was driven by a lower current accident year loss ratio [whether its] driven by lower property losses in the first quarter of this year compared to last year. Finally I'll touch on competition as Mike and Anne both said, the market remains competitive.

In the reinsurance segment we saw pressure in terms and rates during the January 1 renewal process. As the year moves forward, while still extremely competitive it does appear that the decrease in rates and terms has slowed to some extent.

We certainly believe there is very little left in getting reinsurance terms or rates and it would appear that at least a few of our competitors feel the same way and are pushing back against additional decreases. In our international insurance segment we continue to experience rate pressure with property and marine and energy being the most impacted.

I don’t see much in the way of change in the environment over the last quarter. In summary and we stated it many times, we're not going to chase premium when we feel the rates are inadequate. We continue to reinforce this message with our underwriting teams as is reflected in our first quarter's gross premium numbers.

Now I'd like to turn it over to Tom. Thank you very much..

Thank you, Richie. I'm going to try and set a record of revenue this morning in my investment and Markel Ventures comments. My colleagues in the room are placing bets as we speak. In short we're earning positive productive returns on our investments in Markel Ventures operations.

And I'm optimistic that we can continue to do so even in the faith of the tectonic force of low interest rates.

More importantly our short duration fixed income portfolio, our percentage of equity capital invested in equities have range of possibilities that we can pursue in Markel Ventures and in our ongoing profitable insurance operations with the cash flows that they produce, gives us a great flexibility and many options as conditions and circumstances change.

I'm highly confident that we will see change and most of us will be surprised by the nature and speed of whatever comes our way. I also think it's fair to say that we are in better position than many to take advantage of dynamic markets rather than just suffer [blows].

As to the current numbers so far in 2015, we're continuing to see the trends that have been in place for the last several years. We've earned reasonable returns from our equity investing activities with a return of 2.3% in the first quarter.

In our fixed income operations, we earned 1.6% in the ongoing low interest rate environment and we kept our duration at just over four years. The total portfolio have earned 1.7% in local currency terms, but only half the percent after currency effects from the higher U.S. dollars.

That currency drive and investment results is largely offset by the fact that we remain largely hedged in foreign currencies for our insurance reserves. As such the dollar value of insurance liabilities diminishes by a similar amount. CapEx effect has been and remain largely neutral in our insurance operations.

Those were the numbers and the facts, the game plan going forward on the investment side is as follows and most of you will recognize these comments from previous quarters and years. A; we will continue to steadily and methodically increase our equity portfolio as we fine tune [indiscernible].

We will continue to come to work every day and sort and sift through our universe of opportunities to deploy capital in insurance, investing and Markel Ventures opportunities.

B; we will continue to lesser duration of our fixed income portfolio be less than our estimates of the duration of our insurance liabilities given the low level of interest rates. We certainly don't think we're being paid appropriate to take the risk at higher rates.

Also the opportunity cost of holding the shorter duration portfolio remained minor since it's more of a yield line than a yield curve out there. C; we will continue to focus our fixed income holdings at the higher end of the credit quality universe. Again, we just don't think we're getting paid to take on more risk, so we will not do so.

Finally I'm sure that if we were really smart and clever we could find some alternative investment approach that would increase the yield on our short term portfolio from essentially nothing to something more than that. We're not that clever or smart, so we won't try to perform that sort of alchemy.

We've seen enough of those experiments end badly to dissuade us from going down that path. As to Markel Ventures we've got some unabashed good news. Our business has enjoyed a record quarter of profitability, revenues were 43% of 171 million to 245 million and EBITDA grew 136% from 14.2 million to 33.6 million.

Our manufacturing operations particular performed quite well. While several of our companies are cyclical and will have volatile results during an economic cycle, I can report to you that business is good right now and order books look encouraging as well.

Given the overall pricing environment for new acquisitions, we’re finding it tough to find the businesses to add to Markel Ventures at the moment. We are pleased with their organic growth and we are focused on running what we already have.

We act in the same discipline fraction all around Markel, whether you are talking about insurance underwriting, equity or fixed income investing or within any corner of the Markel Ventures.

The good news for all of us as shareholders is that approach continues to serve us well and I expect it will continue to do so in the future, I think that we are in a relatively unique position where we can continue to earn positive returns in the current environment and we have a wide range of flexibility of options as the environment inevitably changes.

That is the long-term story of Markel and continues to be the case. With that, we look forward to answering the questions..

Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question we have comes from John Fox of Fenimore Asset Management. Please go ahead..

I have two questions; first one is on the reserve releases which over the last two quarters [with an over] 300 million and I imagine you could have started that process instead of fourth quarter last year, the second quarter of last year or maybe the second quarter of this year and I understand there's always a margin of safety and reserves, but other than the expense transaction, what’s been the catalyst or the reason why you feel comfortable taking the strategy reserve releases that you have taken in the last two quarters, did something change, did you just say you got to your margin and safety level or is there some other catalyst? And then I have another question.

Thank you..

I don’t think anything has changed, I think the overall the experience that we have seen in the loss reserves has been positive, I do think we have a tendency to wait until the second half of the year to look real hard if we have historically any or different things, but I don’t think anything in the process or our approach has change at all recently or over the long-term, nor do I think it will.

I think we have seen the Alterra portfolio experience maybe better than we expected on day one. But we are still being cautious in that space. So I understand the reserve take downs have been significant, but I don’t think there is anything different happening here..

John, Richie, I’ll just add to that I talked about volatility and as an example in our global insurance division, last year we had prior year development, this year we had prior year redundancies and that sort of gets back to you that business it's excess limit large limit business and it's just simply more volatile.

So that was just a complete turnaround year-to-year and one of the drivers..

And Richie my second question is on reinsurance, should we expect to see the magnitude of decline in gross written that we saw this quarter, which I applaud if you're not getting the adequate rate.

So should we think about that line being down 20% year-over-year or something of that nature?.

It's a little hard to say, I mean we’re going to have to see how the rest of the year goes John. We made too pretty fundamental decisions in the last number of months in terms of exiting UK motor and significantly reducing U.S. non-standard simply because we couldn’t make, we don’t think we can make money in either of them, the way we needed to.

We’re going to look at every contract that comes up on its own merits, those were obviously two pretty big items and we’ll just have to see how the rest of the year goes..

[Operator Instructions] Next we have Mark Dwelle of RBC Capital Markets..

A couple of questions; last one the UK motor book that you had exited at the end of last year is that a quarter share book or an excess book which is the same, is it something that’s going to affect all of the forward quarters of this year or is it something that’s kind of one and done?.

It's mostly market, it's mostly renewed January 1, there are some renewals throughout year, but update renewal date on that business is January 1. It is except loss business, it is not a quota share business..

The second question relates to the tax rate and I think you kind of described how it works, is it right or at least reasonable to assume 19% is going to be the run rate for this year unless something changes otherwise, I know you true it up later in the year, but as a starting point is that where we should begin thinking?.

That’s what our expectation is and we’ll true it up each quarter, but you're right..

And then finally on the asbestos retrocession transaction, what portion of overall asbestos reserves were transferred? And I guess if it's not a 100%, why not 100%?.

Well it was about 35%..

Mark as Anne said, 35%. The reason for the third is this would be all of the asbestos and environmental reserves that resided in our UK insurance company Markel International Insurance Company. And what it really does is it cleans up and removes all of that asbestos and environmental and in fact all 1992 and prior exposures from that balance sheet.

And it's just an opportunity to -- we’ve been working for 15 years to sort of clean up the legacy that we purchased with Terra Nova and this is the culmination if you will of those efforts and the guys up there did an absolutely fantastic job cleaning that up..

But you didn’t really -- this was just opportunistic with respect to that book, did you consider getting rid of the U.S.

portion as well or that just wasn’t really what was on the table?.

That wasn’t what was on the table at the time, I mean we’ve been running that book, that legacy position down for long time over there and it was an opportunity to complete it if you will.

In the U.S -- I mean we certainly, I mean obviously we look at it all the time to decide whether you're better off running it off for letting someone else run it off, but, we’re perfectly comfortable keeping the rust off it..

Well at this time, we’re showing no further questions. We’ll go ahead and conclude today’s question-and-answer session. I would now like to turn the conference back over to Mr. Tom Gayner, President and Chief Investment Officer for any closing remarks.

Sir?.

Thank you very much for joining us and we look forward to catching up next quarter. Take care..

And we thank you sir and to the rest of the management team for your time also today. Again the conference call has concluded. At this time, you may disconnect your lines. Thank you and have a great day everyone..