Markel Group Inc. (NYSE: MKL) is making bold moves to streamline its insurance operations, announcing a complete exit from its global reinsurance business and reporting sweeping structural changes aimed at restoring its reputation as a top-tier specialty insurer.

During its second-quarter earnings call Thursday, the Richmond-based company disclosed a significant reorganization of its insurance business, putting underperforming lines into runoff and placing new emphasis on operating transparency, accountability and profitability.

The most striking move: Markel will sell the renewal rights of its global reinsurance book and stop writing new business in that segment. That decision marks the end of a decade-long foray into reinsurance, which began with the 2013 acquisition of Alterra Capital Holdings.

Wilson, appointed earlier this year to turn around the company’s core insurance business, emphasized that the reinsurance unit had been a persistent drag on performance, contributing $50 million in adverse development this quarter alone.

The quarter’s results reflected three pain points: ongoing issues in collateral protection insurance (CPI), further losses in the now-discontinued risk-managed Directors and Officers (D&O) line, and the long-troubled reinsurance segment.

Markel reported a combined ratio of 96.9% for the quarter, up from 93.8% a year earlier. Losses in CPI and D&O alone added eight percentage points to the combined ratio. Stripping those out, the underlying insurance businesses are profitable, with Wilson citing a sub-90% underlying ratio — and even sub-80% in the International division.

The discontinued D&O line, primarily composed of U.S. large-cap risks written in the low layers of coverage, posted $127 million in losses for the quarter. Management described those underwriting years — especially 2020 to 2022 — as unexpectedly toxic due to rising severity in litigation trends.

“We thought we were writing excess layers, but with inflation and legal trends, they became working layers,” Wilson said. “We’ve taken strong action to get ahead of that.”

Markel booked additional reserves to address losses in both the D&O and reinsurance books, setting them above actuarial best estimates — a strategy aimed at eliminating ongoing distractions from legacy portfolios.

Alongside the exits, Markel has implemented a wholesale reorganization of its insurance division. U.S. operations were restructured into two new segments: U.S. Wholesale & Specialty and Programs & Solutions. International business, which has outperformed, remains unchanged. The former Insurance and Reinsurance segments are now reported together.

Each division now operates with fully aligned profit-and-loss responsibility. More than 70% of shared services staff — including IT, finance, and claims — were moved into the business units they support. Management said these moves will enable clearer cost ownership and better decision-making.

The U.S. reorganization includes a four-region model (Northeast, Southeast, Central, and West), each led by a single executive accountable for results. Specialty product lines such as surety, personal lines, small commercial and Bermuda now sit under a revamped Programs and Solutions unit led by Alex Martin.

“We’re putting decisions as close to the customer as possible,” Wilson said. “Responsibility and accountability go hand in glove.”

Despite insurance-specific setbacks, Markel posted robust investment and venture results. Consolidated operating income hit $1.1 billion, compared to $410 million a year earlier, buoyed by $597 million in mark-to-market gains in its equity portfolio.

Recurring investment income rose to $467 million in the first half, up from $441 million a year earlier. Markel’s public equity portfolio returned 5.4% for the quarter and carries $8.3 billion in unrealized gains.

Markel Ventures, the company’s private business arm, also posted strong growth. Operating income climbed 17% year-over-year to $208 million, driven by recent acquisitions (EPI and Valor) and strength in construction services, partly offset by transportation softness.

Revenues from Ventures reached $2.7 billion year-to-date, with operating income of $310 million. The unit continues to fund its own capital expenditures and contributes to share repurchases at the holding company level.

Analysts focused on the capital that could be unlocked by winding down reinsurance. With an annual premium of roughly $1.2 billion in the reinsurance book, some estimate more than $1 billion in capital could be freed up over time.

Markel executives said they have no immediate plans to deploy the capital, but will consider options as reserves run off and regulatory capital requirements decline. Investment income from those reserves will continue to flow in the meantime.

Markel’s stock has compounded at 16% annually over the past five years and 15% since going public nearly four decades ago. Shares closed at $1,997 on June 30, 2025 — more than double the $923 level five years earlier.

The company continues to repurchase shares, with fully diluted share count falling to 12.8 million from 13.1 million a year ago.

While acknowledging that results will remain choppy in the near term due to portfolio runoff, management emphasized that decisive action taken over the past 18 months is positioning Markel Insurance for long-term gains.

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