I am delighted to have this next guest. Um, it's a it's a real pleasure. Um, Tom is from Markel Group, which is a holding company with several operating businesses. At the center uh, is Markel Insurance and like Berkshire Hathaway generates the capital to support the growth and investment in the group. Uh, the firm has a long history of flexible capital allocation generating shareholder returns. It's about 12 and 1/2 million shares closing uh, trading around 1800 22 billion market cap. I estimated book was about 1500 to a trading around 1.2 times. Um, and Tom Gaynor is the CEO and no stranger to this weekend. Uh, he joined Markel in 1990 to head the public equity portfolio which now tops 13 billion. Uh, and I would note the significant unrealized gains. After serving as co-CEO starting in 2016, he became CEO in 2023. Uh, and he serves on the boards of Coca-Cola, Markel, and Graham Holdings. And I would just say on a personal note, we've been honored to interview Tom a number of times over the years and like Buffett he brings a very consistent and pleasant communication a style to explaining Markel and the culture that has generated so much success over the years. Thank you, Tom Gaynor. All right, let's get started. Uh, the first question, uh, in your annual letter, uh, you state Markel structure is uncommon among publicly traded companies. Uh, if you could take a few minutes to explain to our audience, uh, I think there are some people that are probably new, um, to the story, but um, how how is the company unique and and how is that evolved over time? >> uh, again, start off, thank you for the hospitality. It's it's great to be back and appreciate the chance to chat with so many of you and and talk about one of my favorite topics, which is Markel. So, I appreciate the invitation. I I do think Markel is indeed a a horse of another color to to some degree. The history, for those of you who are who are new, uh, company started in 1930, so we're coming up on 100 years. It started by a gentleman named Sam Markel, uh, who uh, observed that in the early days of the automobile, there were people driving cab rides, they were called jitneys at the time for a nickel a ride, and there started to be accidents. And, uh, there really wasn't a whole lot of actuarial data about what the losses were or how you could have insurance. So, Sam Markel, who's an insurance agent, started a business to insure those jitneys in North Virginia. He happened to be a a great entrepreneur and catch a pretty good wave because for the next 30 or 40 years, at the build-out of the automobile industry, the trucking industry, the inter- interstate highway system, and Markel really was the leading transportation insurer for those those those decades. That became a a commodity. Uh, the earlier panel was speaking about Geico and their their skills and and certainly the the auto side of things. Uh, so, the next generation of the Markel family really became more of a specialist. In fact, became agents of Lloyd's of London, things things of that nature, and provided all the all the sort of exotic coverages you would associate with with Lloyd's of London, but primarily as an agent. Now, the third generation of Markels came along, and that was Alan Kirshner, who was married to a Markel, Tony Markel, and Steve Markel. So, three cousins and one being a cousin-in-law. And, Steve, who was the financially oriented of those three, had the brilliant insight that look, being an agent, we're collecting money in the US, we're sending it to London, when a claim happens, we're getting some of that money back to pay the claim, perhaps we could start an underwriting operation and retain that money and cut out the middleman, improve efficiency and and build a business that way. So, that started in the 1970s. Uh they started bootstrapping their their coverages of they had a tiny amount of capital at the time. So, if they sold a million-dollar policy, they could retain $5,000 and reinsure 995 through the Lloyd's kind of relationship and bootstrapping coming along. Well, in 1986, they went public to raise some capital to fund the underwriting uh operation a bit more and it started growing. Uh I was lucky enough to be the analyst who covered Markel at the time of its IPO. I'd known about Berkshire since 1984 on reading the Carol Loomis article. And the fundamental way in which Buffett built Berkshire was an insurance operation that made an underwriting profit and take those pennies of underwriting profit and invest it for the longer term. He started off with public equities and then he started owning uh entire businesses, controlling stakes. So, I saw that picture when Markel went public in 1986. And it was 500,000 shares at $8 a share. And I I bought some stock on the IPO myself, which I still own. And and really we've been following that playbook all the way along to the point where as as you you're kind enough to point out, the market cap is $22 billion instead of the 30-some million dollars it was at the IPO. And most of that has been bootstrapped, uh one or two equity raises along the way, but uh majority of that capital has been internally generated over the years and we still do specialty forms of insurance all around the world. Uh US business headquartered in Richmond, international business headquartered in London. We have a a public equity portfolio, you were kind enough to point out, our unrealized gain at the end of the last year was was $9 billion. Gave back a little of that in the first quarter. It's about $8 billion as of March 30. I think that probably is the second largest unrealized gain in the country of of any company with a publicly traded equity portfolio. And again, we learned and how the model of that works by by being here in Omaha and studying Berkshire. And starting in 2005, we started buying controlling interests in businesses, and those businesses we call Markel Ventures. So, net net net, when you think about Berkshire and you think of that as being one of a kind, and it strikes me that there have not been more people who have tried to recreate and duplicate and do the sorts of things that Berkshire has done because it's been so successful, well, we're one of the companies that did study the playbook and have modeled ourselves very much on on what they've done. But there are not a whole lot of them. And oftentimes um Wall Street analysts don't seem very comfortable with hybrid business mixes where you have a financial insurance business and an industrial commercial business at the same time within the same company. As business people, it seems logical to us and we think the idea of diversification adds resilience and endurance. And and that's how we can continue to continuously compound the capital. So, last year, 2.8 billion of operating cash, um and you allocated public equities, acquired some companies, you bought back the Markel preferred and some common shares. I'm sort of sort of curious, I mean, we're now we're into the year now and you just had earnings this last week. Um could you just talk about more realistically your capital allocation process to say start the year. Um How do you think about you know your operating cash flow to some extent, but how are you going to go into each of the buckets? And then how how are the mix, the optimization of sort of the allocation? Do you respond to certain elements of valuation, market disruptions? I mean, those are fairly obvious, but how do you think about the budgeting of that capital and the ebbs and flows and the >> sort of the bottom-up approach to it. >> Well, I think one of the real advantages we have to our structure is we have a 360-degree view of capital allocation. There's no religion, there's no formula, there's no doctrine of where that money has to go. It is only driven by where we think it will be treated best. So, each dollar that comes in, this $2.8 billion he spoke of last year, we have a wide-open blank sheet of paper as to where that where that goes. Our first priority, so number one on the list, is within our existing businesses, the insurance and non-insurance businesses, if we have people who have done a good job, who have produced good returns on capital, and they raise their hands and say, "Hey, I think we can do this or add this or grow here." If they are proven veterans within the system who have already demonstrated their skills by earning good returns on capital and what they've done, they're at the front of the line. They they get capital first. Uh second thing we would we would do is we would look at um possible acquisitions, and sometimes those come about from relationships or ideas from those very same people because we've got 150 different products and people with with P&L uh responsibility throughout Markel, and and they know people I don't. So, to the extent that they can point out their friends, colleagues, uh things that they they know of in in the world in which they travel, and they and they vet those ideas, that's a pretty good uh uh piece of ground to farm to to try to find possible ideas. So, that that's one of the ways in which new ideas will surface, which is sort of a different form of flow than than other people would say. Thirdly, we can look at what's publicly available in either equity or fixed-income securities. And fourth, we can repurchase our own stock. So, we we sort of rank order and look at what the alternatives are and go into it with a completely open mind as to which which which place would the dollar be treated best. For the For the last year, I think the largest item on that list would have been share repurchases. And for the last 3 years in total, that that number would be about a billion and a half. So, we've we've shrunk the share count by about 10% in in the last 5 years. And as I commented on the conference call just earlier this week, I don't think it'll take us 5 years to to get the next 10% at at current prices and valuation. >> Um we we asked the panelists before in terms of everybody's caught up in AI and thinking about the durability. I mean, you you have a similar makeup at Markel in terms of owning businesses and getting that view. >> Mhm. >> Uh maybe you can give us your perspective on the AI landscape, how you're thinking about the durability of your businesses and and disruption. >> I think that's an incredible Yeah, absolutely. AI is pervasive and and it is. And the idea that I I think 5 or 10 years from now, we won't even be talking about AI. We'll We'll be talking about it like we would talk about um telephones or kilowatt hours or rail lines. It's It's It'll be an endemic feature of every business and everything you can think of. We're We're going through the adoption curve uh over the course of the the last year or two, but it's it's systemic and and and will be everywhere. Uh um There's different layers. So, for instance, the operating kind of use of AI where you have an existing process, an existing thing that you're doing. For example, a lot of insurance coverages for us would involve an immense amount of document review and just data that you're taking in and you're reviewing that in order to start making an underwriting decision. Well, the manual nature of that is diminishing. So, we're able to process today, as we stand, an infinite's not the right word, but a but a vast increase in the number of documents, the number of pieces of data that go into making an underwriting decision and that's throughout the company everywhere you can imagine both on the insurance and and the non-insurance side. Any kind of operating place where you can gain efficiency and turn that crank faster and cheaper, we're we're doing that and we'll continue to do that and that there's nothing new about that and I I think that's pervasive for all businesses that would not be unique to Markel. The other layer is with the agentic AI where as as opposed to having humans in the loop and using the tool in in ways that um are sort of the human-centered, human-driven, can the AI do it itself without human involvement? I think we remain in early days of that um and there's a lot of conversation, there's a lot of experimenting, a lot of figuring things out, but but I think the the inter- not only have the final chapters not been written on that. I don't think the intermediate chapters have been written on that. Everybody's trying to uh figure that out and it will have different levels of applicability to different businesses. So, for instance, in the panel that was on before and I was listening in the back of the room, they talk talk about the railroad. Well, Burlington Northern is thought to perhaps not uh be at the cutting edge of of some of the things that are going on right now. AI will be very helpful in allowing them to to make those changes in the same way that GEICO has made some spectacular uh improvements in its efficiency under Todd Combs' leadership over the last couple years. But, it won't change the fundamental position of Burlington Northern in the landscape of railroads or in the landscape of industry. The laws of gravity, physics, weight still mean you got to carry something that's heavy from one place to a to another place. That's that's not something that can be done by AI. There's physical reality. Uh the the the new acronym, I think, that's being bandied about is HALO. Uh heavy assets, low risk of obsolescence is the term that that that's floating around. So, the railroad would be an example of things where AI is going to be useful as a tool and create efficiency, but it won't change the fundamental nature of the business. And we consciously think about those sorts of things when we're making capital allocation decisions because there there are some businesses that um are very much in jeopardy because of the way the tools of business are changing, and they and we've seen businesses go away. The new the newspaper business, which if you if you had met me anytime up until the last 5 years, I think you would might have confused me for being a coal miner because my my fingers were always black with ink. I mean, I grew up reading five newspapers a day my whole life. Well, I don't do that anymore. I I read them, but I read them online, and the business has changed dramatically, and technology and changes in technology have been what has powered that. So, we're very sensitive to make sure we're not on the wrong side of history on on some of those those types of changes. Uh so, uh the fundamental business of insurance is going to continue to exist. The fundamental business of uh growing houseplants, like we do, of uh carrying cars and trailers, then build those trailers, uh the the flooring for tractor trailers that keep stuff from falling onto the road. There There are basic physical realities that go into that sort of thing, which we're very thoughtful about trying to have our capital in because we think those are enduring enduring good returns on capital, not transient ones. >> It sounds like you're I mean you you're upbeat for some of the opportunities to help your businesses though overall. >> Absolutely. >> Um So, we just heard from Chris you know, insurance and you you made reference to Berkshire you know, softening up some of their under you know, the on the reinsurance side I think on your call you talked about the reinsurance business. Maybe you could just talk about Markel's migration and evolution of their insurance businesses, what you're seeing, the macro that's sort of changing you know, your platforms and where you're allocating capital and that. >> Right. Um Well, I have a friend who was telling me about a biology teacher he had in 10th grade. And the biology teacher to try to make the point of the way life really is. And you can argue about it all you want, but there's certain fundamental realities. So, the teacher had these t-shirts printed up and the t-shirts said, "Adapt, migrate, or die." They're your choices. That's That's it. Now, that that gentleman is now about 60 years old and he was telling me the story when he was in 10th grade. So, that teacher is right then, she's right now, she will be right going forward. In in order to to be alive and in order to be part of an organization that lives and breathes and has people and has the fact that the world spins goes you know, 26,000 miles or whatever it is every day. The world spins and keeping up with that is is very important. So, in insurance business and in any of those businesses you constantly have to be adapting or migrating. I For us in reinsurance, we we tried hard at reinsurance and we we couldn't succeed. We could not make it work. So we exited the reinsurance business midway last last year and are you know working our way out of it. So we are adapting and migrating in order to not die. And that's the story of all of our businesses. I think it's the story of every business. >> And you as you mentioned you have very admirable securities portfolio and and we have certainly a lot of stock pickers in this room. Um Maybe just talk about the process at Markel for picking securities, how you manage the book in terms of allocating capital there. Is there any kind of fun I assume fundamental research perspective, how you screen the companies? There's Could you give us a little insight as to some of the targeting and the processes behind and then what kind of people do you hire? Is there any specifics or unique about some of the human capital putting behind these decisions? >> Well, I I'd say there's really four lenses we look at things through and and as as Buffett quoting John Burr Williams said, you know, the present value of any business is the net present value of the future cash flows discounted back to today. That is a universal reality. So any business valuation challenge is what is the net present value of the future streams of the cash flows. We are I mean that's the basis of value investing. We are 100% believers in in that basic approach. So next step, okay, if you say that, there are four steps we would go through and we look for businesses which are profitable and earn good returns on their capital without using too much debt. And that's that's filter number one. And the reason I would say exactly those words and exactly that way is if you look at business and and this goes back to the Sam Markel story and it pervades everything that we've done. We have 22,000 people roughly within Markel who only have jobs because they do something for somebody else. They solve somebody else's problem. So, if you're a business, your job is to do something for somebody else. You don't You don't have to write or the license to exist unless you are fundamentally doing something that people want to be done. And you need to be doing it with a profit because otherwise you're going to run out of the opportunity to keep doing it. So, when you see a profitable business to me, that is a social stamp of approval that the world wants what you're doing, wants that problem solved, and that you're good enough at it to leave over a profit margin. So, that that's basic. What that means is I I don't know how to do venture capital. It's It's just a different skill. So, not right or wrong and and really venture capital is still subject to the same math that you know, if a venture gets funded and it works, well, then it starts producing cash flows, which can be valued. In In our world, if we do 100 things, I sort of I sort of want 85 of them at least to work because you know, the for the composite returns to be good, we can't have uh zeros. For a venture capitalist to do 100 things and two of them work, that that might produce spectacular returns. It's just different. So, um profitable business, then not too much debt is important because you have to have staying power. And if you uh have too much debt and use too much leverage, there could be a bad day and forces that are outside of your control that cause you to be facing a situation where you either have to fund your business or pay your interest bill. And that is a uh a death spiral if you if you put yourself in that situation. So, we try to be very light and and pretty conservative capitalized both in the way we run our business and the businesses we look at. Second thing is, and again, this is a direct learning from from Buffett and things he would say, is uh we want uh management teams with equal measures of talent and integrity because one without the other is worthless. If you have somebody who's talented and really good but has an integrity hole they may do well but you as their partner are not. That that will not have a happy ending. So we we underwrite to both talent levels and integrity levels. If you have somebody who is has integrity but maybe is a little short talent, they may be nice people. You may like them but they can't get the job done. So that is a is a function. Then we look for do the businesses have reinvestment opportunities or capital discipline. So what kind of returns on capital are they earning? Can they grow their business organically? Can have they successfully made acquisitions or have they been disciplined about managing their capital either through share repurchases or dividends? So there's there's pretty good evidence cuz that that reinvestment dynamic is how is how real money is made and compounded over time. And then the fourth and final discipline would be price valuation. If you find those first three things, what what do you have to pay for it? What kind of multiple? And uh just make sure that you're paying something reasonable so that whatever intrinsic returns the business itself makes, your returns as an investor should match that. And you you just don't want to pay so high a price that the business may do fine but you paid such a high price that the valuation hits a a a decline curve and and you just don't make any money as an outsider. Uh in terms of flow and where specific ideas would come from, I see my partner Dan Gertner over there who's been a long-time partner Mark Gelfer for 15 years, something like that, Dan? Uh so Dan, got Tyler Brown also works with me on the equity portfolio as well as an investor relations. And a very spectacular dynamic that has happened over time is that the relationships of people that have actually met in Omaha through through this meeting have become personal friends and colleagues and thought partners. And and one of the things I I tell if you look at our list of investors, it's pretty pretty good list. We got a lot of very thoughtful high-quality people. I I I sometimes will tell somebody like that that the ironic thing is you're smarter than I am, but I'm managing money for you. So, we have public 13F filings. You can see with pretty good transparency what we own and what we don't own. If there's something that we own that you think I'm stupid or an idiot for owning, tell me. If there's something that I don't own that I should, tell me. And buy it for yourself and your clients first. That's your job, but if you think about how to get a little extra waiting of that good idea that you have into your portfolio to the extent you own Markel, it would be in your best interest for that to be in the Markel portfolio, too. So, I try to be pleasant and a listener and engage in conversations and hang out with smart, thoughtful people cuz they know more than I do. And to have some humility about that and engage in conversation I I found very productive over a long period of time. >> Well, I I appreciate the feedback and I I do actually stock you on the 13F, so. >> >> Um we have time for one more question. Uh a lot of questions tomorrow on capital allocation and uh given your model, if you could just share just briefly a couple of thoughts on the burgeoning cash balance um and the patience that, you know, Berkshire hopes to to use in order to allocate that capital efficiently. Um so, maybe just some thoughts on on, you know, degree of the balance sheet, do you think they'll um succeed in being able to put that to work and uh you know, how do you feel about the balance sheet today as an as an investor versus >> Well, certainly I can't think of any more rock of Gibraltar balance sheet than what Berkshire has at this point. And that cash pile is immense and it's being added to it at a fullsome rate shall we say. So, the the $64 question that is on a lot of people's mind is what's going to happen in in capital allocation for the next chapter and the next era of Berkshire. I would suspect that share repurchases will become a much more meaningful thing at Berkshire than it has been the the case in the in the past. I I think the idea of a dividend is is within the realm of possibility and in conversation. I I would not think of that as a negative signal in in the sense that some people might. The size and scale of of what they have is such that the the deal size they would look at that's that's a that's a limited universe. And I think given that this world has surprises along the way that none of us can foresee, the opportunity for them to episodically and periodically apply big chunks of cash is is real and that's a substantial advantage for Berkshire. But at the same time I think they have the and capability. It's it's it's not an either or trade-off for them. They could they could chew into the share count by a meaningful percentage sort of each each and every year for for a while and and still maintain all of the financial flexibility that they they have and will continue to have given the levels of cash generation that the the business does. >> Great. Thank you. Thank you. >> Again, best wishes for your continued strong capital allocation and I appreciate you coming here today. >> Thank you so much. >> Christopher Meranjee is the co-CIO and president and Mac Sykes is a portfolio manager at Gabelli. The above webcast is an excerpt from Gabelli's 17th annual Value Investor Conference, which occurred on May 1st, 2026. GAMCO is providing these links as a matter of general information. We do not intend for these links to be a complete description of any security or company, nor is it a research report with respect to any of the companies mentioned herein. 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