Patience is a virtue

With roots dating back to 1930, Markel has long held the key to unlocking success through a strategic focus and a firm and supportive network of talent.

With an increase of 148 percent in revenues annually over a five-year period, Markel reached $5.1 billion in 2014, compared with $2.1 billion in 2009—a significant demonstration of the company’s apt execution of its patient strategy.

It is this strategy and forward thinking which has helped the company to build what it describes as a “defensively positioned portfolio”, allowing it to sail through the soft market conditions while maintaining profitability and innovating along the way.

“During these market conditions, being disciplined about sticking to our underwriting, capital, and reserving philosophies is essential. This is when our long-term view is most important,” says Anne Waleski, executive vice president and chief financial officer, Markel. “We do not want to write business when we believe prevailing market rates will not support our goals.”

Waleski explains that the ultimate goal is to build a company that is enduring—which is why a long-term strategy is imperative to the Markel philosophy.

“We believe that a longer time frame eliminates the noise that can be misleading in shorter time frames, and the metric is a good indicator of our success in building value for our shareholders and policyholders,” she says.

Waleski adds that as interest rates persist at very low levels across markets, the challenge of generating meaningful returns is growing.

“At Markel we will stick to the very conservative investment philosophies that have served us so well historically. Our portfolio is defensively positioned and we are long on patience,” she says.

Maintaining focus on the company’s bottom line and the wider markets, Markel also invests significantly in businesses outside the industry.

“In addition, we have the Markel Ventures portfolio of companies. This diverse portfolio of insurance, manufacturing and service businesses insulates us a bit from the cyclical ups and downs that define the insurance market,” says Waleski.

Optimising operations

Innovation is firmly on the tip of the tongue for every senior executive trying to steer his or her company through the current challenging environment—and this is no different for Markel.

By investing in technology infrastructure, the company has expanded its data analytics capabilities, and continues to increase its global presence and talent. Markel now has 60 offices in 19 countries.

"We need to compete more broadly for talent as an industry, recruit more creatively, and take steps to attract and retain the best and the brightest to insurance."

“We have appointed new presidents of the global insurance and specialty divisions and rolled out a well-received broker portal for our wholesale division. And, across the organisation, we are investing in optimising operations, redesigning workflows, and reducing our overall expense ratio,” explains Waleski.

With a heavy focus on consistent underwriting, operating profits and superior investment returns to build shareholder value, Markel reviews and reports on each segment of its business carefully, with underwriting operations reported in three segments: US insurance, international insurance, and reinsurance.

“We tend to think about our business model as being driven by three operating engines: insurance, investments, and Markel Ventures, our non-insurance operations,” says Waleski.

“We believe that our success is partially related to our ability to react opportunistically to market conditions. Having these three engines gives us a nimbleness that would be impossible if we had to rely on only one engine. Within each of these operational areas, we have various product offerings further increasing our ability to be flexible as required by the circumstances surrounding us. At the end of the day our most valuable resource is our associates.

“Additionally, we offer specialised insurance products and possess unique underwriting expertise; we treat our customers fairly and think of them as partners; we celebrate long-term relationships; we reward and enable innovation; and we believe that integrity is non-negotiable.

“The Markel style and our business model (ie, generating high rates of return over long periods of time) are pretty unique and the successes that we have enjoyed are attributable to our culture, business model, and our associates.”

Driving talent

Attempts to encourage new talent into the re/insurance industry are increasing, but there is still more to be done, says Waleski, who believes that the industry needs to recruit in a more creative way.

As a firm believer in promoting the industry Waleski, who recently presented at a Berkshire Hathaway shareholders meeting, says that as an industry, re/insurers need to compete harder if they are to attract the best candidates.

“People want to work for successful companies that provide development and career opportunities as well as recognition for accomplishments,” she says.

“Personally, I think we need to compete more broadly for talent as an industry, recruit more creatively, and take steps to attract and retain the best and the brightest to insurance.

“The industry should be mindful that the best and brightest across all spectrums will be attracted to those places that offer the widest array of opportunities with the best ultimate career potential. One of the ways that we reach out to and support young people beginning their careers is through a comprehensive immersion-type programme for recent college graduates which we refer to as Markel University.

“Our 2015 ‘Markel U’ graduates are now deployed to underwriting positions throughout the organisation. By exposing recent college graduates to all that insurance has to offer and the vital role that it plays in an interconnected, complex, global economy, we will attract a new generation of big thinkers, disciplined underwriters, and evangelists for the Markel style,” she explains.

The company also works hard to promote the greater good, following Markel’s principles of sharing success with others by creating a matching gift programme which sees the company match and increase charitable donations made by staff.

“Markel has always been generous and philanthropic, but recently we decided to create even more opportunity for our associates to make a difference in their communities. We now match employee financial contributions to not-for-profit organisations of more than $50 on a three to one basis. So, if an employee donates $100 to a cause s/he deems worthy, Markel will follow with a $300 contribution,” says Waleski.

“Through the matching gift programme we are partnering in a meaningful way with our most important assets—our people—and the charitable organisations that they support. It is really gratifying to work with generous people and for a company that ‘walks the walk’.”