On the desk today · Markel Group
The insurance funds the portfolio. The portfolio funds the businesses. The businesses fund more insurance. Three engines, one loop.
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Three Engines
Compounding Together
In 1930, in Norfolk, Virginia, a man named Sam Markel started an insurance company. His first clients were jitney operators — the drivers of small, privately owned buses that shuttled workers around the city. Nobody else would insure them. The vehicles were old. The routes were dangerous. The drivers were unproven. Markel took the risk because nobody else would — and because the premiums, priced for that risk, were high enough to make money even when claims arrived.
Ninety-six years later, the company Sam Markel founded still writes the insurance that other companies won’t touch. And it does something with the premiums that most insurers never attempt.
I was reading Markel’s annual report last month. It looked less like an insurance company and more like a small conglomerate — or a very specific version of one. There were earned premiums. There was an equity portfolio. And then there were operating businesses — fire protection, construction services, building products, consumer brands. The three sat side by side, each feeding the other. I asked a friend in insurance how many companies run all three at once. He said two. Berkshire Hathaway — and Markel.
Most insurance companies collect premiums, invest them conservatively in bonds, pay claims, and return whatever is left. Markel does more. It runs three engines inside one holding company. The first engine is Markel Insurance — the specialty underwriting business that wrote $8.4 billion in earned premiums in fiscal 2025 and generated $456 million in underwriting profit. The second is the investment portfolio — $32.8 billion in total investments, including $13 billion in publicly traded equities, managed by Tom Gayner since 1990. The third is the collection of wholly owned operating businesses — industrial, financial, and consumer companies that generated more than $6 billion in combined operating revenues.
Tom Gayner joined Markel in 1990 as chief investment officer. He became CEO in 2023. His investment philosophy — patient, long-term, concentrated in high-quality businesses — mirrors Buffett’s at Berkshire. The equity portfolio’s one-year return was 10.5% in 2025. The five-year annualized return was 11.9%. And the float that funds it — the premiums Markel holds between collection and payout — costs less than nothing when the underwriting is profitable. Markel earns on the insurance. Then it earns on the money the insurance generates.
In fiscal 2025, Markel Group reported $15.5 billion in total operating revenues — up 5% from the year before. Operating income was $3.2 billion. Adjusted operating income — which strips out the volatility of equity market movements — was $2.3 billion. Net income was $2.15 billion. Operating cash flow reached $2.76 billion. And comprehensive income to shareholders exceeded $2 billion. Gayner said it plainly in the FY2025 results: “In 2025, the Markel Group delivered meaningful progress. Operating income was $3.2 billion and adjusted operating income exceeded $2.3 billion, with every reportable segment making meaningful contributions.”
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That $32.8 billion investment portfolio is the number that separates Markel from every other specialty insurer. Most insurers invest their float in bonds — safe, liquid, predictable. Markel does that too — $19.8 billion in fixed-income securities. But it also holds $13 billion in publicly traded equities — a concentrated portfolio of high-quality businesses selected by Gayner and his team. When the equity portfolio appreciates, the gains flow through to book value. When it generates dividends, the income supplements the underwriting profit. The float isn’t just held. It is deployed.
The stickiness runs through all three engines. In Markel Insurance, specialty policies — errors and omissions, excess liability, marine, professional liability — are renewed annually by clients who have built their risk management around Markel’s coverage. In the operating businesses, customers depend on Markel’s subsidiaries for fire protection, construction materials, and consumer products. And in the equity portfolio, Gayner holds positions for years — sometimes decades — letting the compounding work without interruption. The average five-year return on equity across the enterprise was 13%.
The pricing power is embedded in the specialty niche. Markel doesn’t compete in standard commercial lines. It writes the policies that are too complex, too unusual, or too risky for mainstream carriers — the same philosophy Sam Markel applied to jitney drivers in 1930. Earned premiums grew 3% in fiscal 2025 to $8.4 billion. Underwriting profit grew 24% to $456 million. The combined ratio improved — meaning more of every premium dollar was kept as profit. You raise the price on a specialty policy, and the client pays because the policy can’t be placed elsewhere.
The flywheel is the connection between the three engines. Underwriting profit and investment income generate cash. That cash funds the acquisition of operating businesses. The operating businesses generate their own cash — $343 million from Industrial, $327 million from Financial, $175 million from Consumer and Other in fiscal 2025. That cash returns to the holding company, where it funds more underwriting capacity and more investment capital. Each engine feeds the other two. The loop has been running since 1930 — and under Gayner, it has accelerated.
WHY THIS WORKS
Three engines compound together. Insurance generates float. The float funds a $32.8 billion investment portfolio. The portfolio’s returns fund acquisitions of operating businesses. Each engine reinforces the other two.
Underwriting profit means the float is free. A combined ratio below 100% means Markel earns money on the insurance itself — before a single dollar of investment income is counted. The float costs less than nothing.
$13 billion in equities managed with a 36-year track record. Tom Gayner has managed the portfolio since 1990. One-year return: 10.5%. Five-year annualized: 11.9%. The patient, concentrated approach mirrors Berkshire — at a smaller, more focused scale.
96 years of one family’s philosophy. Sam Markel insured the risks nobody else would touch. His descendants expanded the model across specialty lines, investments, and operating businesses. The holding company structure ensures that capital flows to wherever it compounds best.
Sam Markel started insuring jitney drivers in Norfolk, Virginia, in 1930 — the drivers of small buses that nobody else would cover. He charged high premiums because the risk was real. He paid claims when they came. And whatever was left over, he kept. Ninety-six years later, the company he started runs three engines inside one holding company: specialty insurance that generates float, an investment portfolio that deploys it, and a collection of operating businesses that compound alongside it. Tom Gayner has been managing the portfolio since 1990. He became CEO in 2023. And the philosophy — write the hard stuff, invest the float patiently, own good businesses — hasn’t changed since a man in Norfolk decided to insure the buses nobody else would touch.
