Continuing a tradition dating back to 1991, Markel's management team answered questions for two hours on the day after the Berkshire Hathaway annual meeting.
Ravi, you wrote, “As interest rates rose over the past four decades,..” Didn’t you mean ‘declined’?
You make an important point: Tom Gayner, and Steve Markel, have been serious students of Buffett for over 3 decades. They have carefully sought to model Markel after Berkshire--to the extent they are allowed. Markel is not authorized by its insurance commissioner to hold concentrated equity positions in its insurance capital, as Berkshire has since the mid-80s; it must hold much higher levels of fixed income securities. This hurt them at zero interest rates.
Tom once told me that he and Steve decided after Markel went public not to set up an investor relations office: it would only produce the kind of short-term investor they didn’t want, and they would be forced to hold regular presentations. In the early days, if you called the IR phone number, you got Tom’s office, if his secretary recognized you, she or he would put you through. They started the Omaha brunches when they realized that Berkshire’s shareholders were the kind of shareholders they wanted to attract. My guess is that a very large percentage of Markel shareholders were represented at the latest brunch. As an aside, Warren once said to me that he measured his performance as CEO by how few shares traded; to which he added, with a chuckle: that is not how his fellow CEOs think, nor on Wall Street. My guess is that Markel experiences low turnover, which of course mirrors Berkshire for the same reason. And that explains why both have resisted splitting their shares.
Arthur, Thanks for the comments. Shortly after sending out the post, I fixed a couple of typos and errors including the one on interest rates declining over the past four decades rather than rising - unfortunately, I can only fix that on the website, not the emails.
I think it has become clear in recent years that Markel would like to hold more equity and less fixed income to the extent they are allowed to. The 2021 letter to shareholders made this clear (the discussion of "orange" and "blue" capital). And this was reinforced by Tom Gayner at the Omaha brunch.
Last night, after writing this article, I went back and looked at Berkshire's 1995 annual report because, at that time, Berkshire's shareholders' equity was in the neighborhood of where Markel is today. I was struck by how little fixed maturity securities Berkshire held at that time relative to equity securities:
For example, at 12/31/94, Berkshire held $1,820.7 million of fixed maturity securities and $15,236.5 million of equity securities, not including $1,023.4 million of Salomon.
But Berkshire had less than $1 billion of earned insurance premiums in both 1994 and 1995. Insurance policyholder liabilities were estimated at $4,629.7 million at 12/31/95.
Tom Gayner mentioned the GEICO acquisition as a turning point for Berkshire. I would say the same about GenRe a few years later.
In many ways the "mini Berkshire" label puts a lot of pressure on management. My sense is that management is going to focus on being the best version of Markel that they can be rather than trying to emulate Buffett and Munger. Markel and Berkshire are similar and different at the same time. The Markel Style is really something management takes seriously and represents a culture unique to Markel.
Ravi, the nice thing about typos is that they aren’t irrevocable.
I have long felt that looking for ‘mini’ Berkshires is foolish and lazy, like looking for a mini Newton or a mini Einstein. Or a mini Shakespeare. Finding a four, that is, putting two and two together in the real world, is not easy, but we only need a few four to succeed.
What is interesting is managements that have learned from Warren, like Markel and Constellation Software, where Tom’s wife is a director, as is Larry Cunningham. Both Toms—Gayner and Leonard—aim to build margins of trust in ways that suit them. Where they will be in 25 years beats me; I know where I will be.
I think Tom’s humility is genuine and he’s really not looking to be compared to Buffett. This is both smart and practical. He can only be the best version of himself and emulate the Berkshire process. And while he’s clearly proud of the record so far and wants to attract the right kind of shareholder, he’s not overly promotional.
Ravi, you wrote, “As interest rates rose over the past four decades,..” Didn’t you mean ‘declined’?
You make an important point: Tom Gayner, and Steve Markel, have been serious students of Buffett for over 3 decades. They have carefully sought to model Markel after Berkshire--to the extent they are allowed. Markel is not authorized by its insurance commissioner to hold concentrated equity positions in its insurance capital, as Berkshire has since the mid-80s; it must hold much higher levels of fixed income securities. This hurt them at zero interest rates.
Tom once told me that he and Steve decided after Markel went public not to set up an investor relations office: it would only produce the kind of short-term investor they didn’t want, and they would be forced to hold regular presentations. In the early days, if you called the IR phone number, you got Tom’s office, if his secretary recognized you, she or he would put you through. They started the Omaha brunches when they realized that Berkshire’s shareholders were the kind of shareholders they wanted to attract. My guess is that a very large percentage of Markel shareholders were represented at the latest brunch. As an aside, Warren once said to me that he measured his performance as CEO by how few shares traded; to which he added, with a chuckle: that is not how his fellow CEOs think, nor on Wall Street. My guess is that Markel experiences low turnover, which of course mirrors Berkshire for the same reason. And that explains why both have resisted splitting their shares.
Thanks for writing thoughtful pieces!
Arthur, Thanks for the comments. Shortly after sending out the post, I fixed a couple of typos and errors including the one on interest rates declining over the past four decades rather than rising - unfortunately, I can only fix that on the website, not the emails.
I think it has become clear in recent years that Markel would like to hold more equity and less fixed income to the extent they are allowed to. The 2021 letter to shareholders made this clear (the discussion of "orange" and "blue" capital). And this was reinforced by Tom Gayner at the Omaha brunch.
Last night, after writing this article, I went back and looked at Berkshire's 1995 annual report because, at that time, Berkshire's shareholders' equity was in the neighborhood of where Markel is today. I was struck by how little fixed maturity securities Berkshire held at that time relative to equity securities:
https://www.berkshirehathaway.com/1995ar/1995ar.html#ConsolidatedFIN
For example, at 12/31/94, Berkshire held $1,820.7 million of fixed maturity securities and $15,236.5 million of equity securities, not including $1,023.4 million of Salomon.
But Berkshire had less than $1 billion of earned insurance premiums in both 1994 and 1995. Insurance policyholder liabilities were estimated at $4,629.7 million at 12/31/95.
Tom Gayner mentioned the GEICO acquisition as a turning point for Berkshire. I would say the same about GenRe a few years later.
In many ways the "mini Berkshire" label puts a lot of pressure on management. My sense is that management is going to focus on being the best version of Markel that they can be rather than trying to emulate Buffett and Munger. Markel and Berkshire are similar and different at the same time. The Markel Style is really something management takes seriously and represents a culture unique to Markel.
Ravi, the nice thing about typos is that they aren’t irrevocable.
I have long felt that looking for ‘mini’ Berkshires is foolish and lazy, like looking for a mini Newton or a mini Einstein. Or a mini Shakespeare. Finding a four, that is, putting two and two together in the real world, is not easy, but we only need a few four to succeed.
What is interesting is managements that have learned from Warren, like Markel and Constellation Software, where Tom’s wife is a director, as is Larry Cunningham. Both Toms—Gayner and Leonard—aim to build margins of trust in ways that suit them. Where they will be in 25 years beats me; I know where I will be.
Enjoy your summer!
I think Tom’s humility is genuine and he’s really not looking to be compared to Buffett. This is both smart and practical. He can only be the best version of himself and emulate the Berkshire process. And while he’s clearly proud of the record so far and wants to attract the right kind of shareholder, he’s not overly promotional.
Indeed, very Buffett-like!