Markel Corp. (NYSE:MKL) Q2 2017 Earnings Conference Call - Final Transcript

Jul 27, 2017 • 09:30 am ET

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Markel Corp. (NYSE:MKL) Q2 2017 Earnings Conference Call - Final Transcript

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Executive
Richard R. Whitt III

usual for State National. We expect the deal to close in the fourth quarter of 2017, of course, subject to regulatory approvals and satisfaction of the other closing conditions. As Terry and I discussed yesterday, close can't come soon enough, as we cannot wait to get started.

Now I'd like to turn it over to Tom. Thanks.

Executive
Thomas S. Gayner

Thank you, Richie. In keeping with the right now part of our forever and right now time horizons, I'll start with the right now of our first half investment results. In short, we're very happy with them. In our publicly traded equity portfolio, we're at 10.4% through the first half of the year. In our fixed income operations, we are in 2% and the total return from the portfolio after all investment expenses and foreign exchange adjustments is 4.8%. Those are wonderful results on an absolute and relative basis.

More important than the six months is that these results are just part of a wonderful long-term result. The schedule that the investment accounting department hands me starts in 1989. That in and of itself is a tell about our long-term culture. We have a working schedule that touches four decades of results. In our equity investments, we're now up to an unrealized gain of $2.6 billion. The total equity portfolio stands at a little over $5.3 billion. There's an old saying about, a bird in the hand is worth two in the bush. Yes, that's true and we're there. And speaking of bushes, the third goal in our hat-trick that we announced yesterday is the addition of Costa Farms to Markel.

Costa is the leading supplier of ornamental plants in the country. I love everything about this deal. First, the management team led by Jose Smith and Maria Costa-Smith, our third-generation family members that have spent their lives building Costa Farms into the number one firm in their industry. They will continue to lead the firm and build the business going forward with a permanent capital structure and a forever time horizon. They were already doing this. We don't need to change their focus at all. We just need to support them in the work they were already doing.

Second, the product is new every year and recurring in annual cycles of growth, renewal and replacement, especially for those of us like me who may not be great at keeping plants alive. Costa's mastery of growing beautiful plants and the logistics involved in getting them into the hands of their customers provides a strong argument that they will continue to grow in the future.

Third, this is the largest addition to Markel Ventures so far. We finished 2016 with revenues of $1.2 billion and EBITDA of $165 million. Through the first six months of 2017, we're on track to produce similar revenues and EBITDA this year. Our cyclical transportation-related businesses are cooling-off a bit from their white-hot pace of last year, and our other businesses continue to make steady forward progress that we