Kaboom. Yeah. I hope and pray that's the only kaboom we've got going on today. Good morning and welcome to the Markel 2025 Markel Omaha Brunch. Now, I know that all of you are here probably for another reason before you come to the Markel Brunch, and I get that and I understand it. I just, before we get started with the program, and I welcome those on the webcast as well, I think it's appropriate to take a moment to recognize we were part of history yesterday. It is part of history and it's momentous. It'll be a moment that sticks with me for the rest of my life. I hope you appreciate the sensations that are involved in being here in Omaha this particular weekend. We're glad you're here.
I want to extend my greeting to all the people that are joining us via the live webcast for the presentation portion of the meeting that we're doing today. I'm Tom Gayner, your CEO, and it's my pleasure to welcome you to the latest chapter in a tradition that began over 30 years ago with just six people. Today, and believe me, I had this number written down, these are written remarks. I had the number 2,400 written, which was the count as of sort of 3:00 or 4:00 yesterday afternoon. I think we're over 2,500 in terms of people who registered for today. It's up, up, up. But 2,500 from six. Welcome, welcome, welcome. Normally, I would begin this by introducing my colleagues who made the trip, but we've brought a larger group than usual this year, and we have more than usual to cover.
In the interest of time, I can't introduce everybody by name as has been my custom in previous years. I would like to ask all of the Markel Group associates who are here today to please stand and be recognized. Thank you very much. They are indeed the ones who do the work and lead the work that 22,000 associates of Markel do. Also, I'm told that I need to point your attention to the disclosure that should be over my shoulder in a slide coming up. If we have that slide, yes, it's one of my favorites. One of the things that I'm sure you've seen, many of that. I will spare you the idea of reading it, but I think most of you in the investment business probably have a fair amount of familiarity with the forward-looking statement. There we go.
With that, here's what's ahead. In a moment, I'm going to turn things over to some key members of my team. They'll offer a presentation that we hope will give you some helpful context both for how we run our business and for the Q&A that will follow. I'll make a few closing remarks, and then we'll open the floor for your questions. First, let me introduce my teammates. Mike Heaton, COO of Markel Group, will kick things off. Mike's office has been next to mine for more than 20 years, and in all that time, he's been exactly what you would hope for in a partner. I often describe our working relationship using the analogy of a restaurant. One of us runs the front of the house, the other the back. I'll let you guess who's who.
We complement each other's strengths, and there's a steady ongoing exchange of ideas and perspectives between us. One of the exchanges began a few years ago when Mike spoke up about specific improvements that he felt we needed to make in the business, specifically related to our role serving the operating businesses and the leaders of the Markel Group. Since then, he's worked in the back of the house with his sleeves up, helping to ensure we're best positioned as a company to take advantage of our many opportunities. Today, Mike will walk you through the thinking behind that evolution and the work we've been doing and how we've structured the Markel Group to best serve our businesses and you, our shareholders. We believe in what we've created, but it's also important to note it's paramount that we never rest on our laurels.
We continuously test our assumptions and make sure we are the best at serving our shareholders. As we previously announced in recent months, we've engaged in a full board-led review of every aspect of the Markel Group, including our structure, operations, marketplace perceptions, and results. That doesn't mean that our work serving you to the best of our ability ever stops. We'll continue to work and improve as the board review continues to pace. Next will be Andrew Crowley, President of Markel Ventures. Andrew's story speaks volumes about our future. He started here as an intern and from there grew up in Markel working alongside Mike and me within the ventures part of our operations. If you want to see what happens when raw talent meets the right environment, Andrew's your proof point.
He'll share with you some key tangible examples of how our model works and how we aim to reliably and sustainably compound your capital over time. Finally, you'll hear from Simon Wilson, the new leader of our insurance business. Insurance underwriting is the cornerstone of Markel. While we have not been top quartile in recent years, make no mistake, we aim to return to the front ranks. Simon will lay out his vision for what top-tier underwriting looks like at Markel, how that happens best when we empower leaders locally and as close to the customer as possible and the steps we're taking to get there. Finally, our CFO, Brian Costanzo, Nebraska native, is up on the stage. He will join us for the Q&A that follows the presentation. With that, let me turn it over to Mike.
Wow, wow, wow, wow. Thank you, Tom. Thank you, everyone here. I'm just filled absolutely from head to toe with just gratitude as I look at familiar faces, supporters, our shareholders. It's just, you can't imagine the privilege it is for us to sit up here today. Tom talked a little bit about our roles. Thank you for that, Tom. He talked about this sort of back of the house, front of the house thing. This is how it's going to go for the next few minutes. I'm going to spend a couple of minutes here demonstrating to you why it is that I usually stay in the back of the house. And then I'll hand it over to Andrew. In all seriousness, Tom also talked about that steady exchange of ideas that happens quite frequently between the two of us.
There has been a lot of that leading up to this presentation, mostly focused on how to balance two things. Tom alluded a little bit to that as well. On the one hand, we have been really, really intentional about how we have set up the company over the past two years. We have a lot of excitement about the changes that we have made. On the other hand, we are still learning and open to change, especially as we go through that review process that Tom mentioned. I guess this question that we have been asking ourselves over and over again is how do we express today with you both conviction on the one hand, but flexibility at the same time. Here is what we have decided. Today, we want to describe the reasoning behind how we have set up the company. That serves two purposes, really.
First, it sets the context for what it is that we've been reviewing. Secondly, it begins to address candidly an early piece of feedback we heard from some of you even who sit in this room, which is that we could do a better job communicating clearly. If this morning you walk away with a clear understanding of the thinking behind the path we've been on for the last year without getting the impression that we're rigid or unwilling to adapt, then we've succeeded. To that very point, we absolutely welcome your feedback on our thoughts today. Please, please, they are a welcome, welcome part of our learning process. With that, I'm a big, big, big believer in simplicity. I love simplicity. In fact, I think it's vastly, vastly underrated. Steve Jobs was probably the master of it, maybe better than anyone else we've known.
Here's how he described the power of it. Simple can be harder than complex. You have to work hard to get your thinking clean to make it simple, but it's worth it in the end because once you get there, you can move mountains. I have learned that power of simplicity from up close. I have been so privileged for almost my entire career to be able to work firsthand with many successful businesses, some of them within my line of sight here today, just the most Apple people you can imagine. Over and over again, what have I observed from the very best of these? Over and over again, they have one thing in common: a simple, powerful idea that everything aligns to. That is how they get every person rowing in the same direction and how they create a clear standard.
Getting back to those conversations that Tom mentioned that he and I started having a few years ago as opposed to the ones over the last few weeks, these are the ones where we talked a lot about how our business needed to improve. More often than not, those conversations came back to the same idea and our need at various levels of the organization to rally around simple, clear missions and standards. We have been working on that for a while. Can I tell you we have been working on that for a while? And 2023 was when we really started to move on this. We reshaped leadership, we reestablished full accountability, and we realigned around a clear strategy. That is three really important re's. As for that latter re, I would like to articulate for you in the simplest terms I can. Think kindergarten level of simple here.
The foundation of that strategy. A different way to say that would be, what exactly is a Markel Group? Here it is. Here is Markel Group. It is a holding company, the triangle at the top. The holding company plays four roles. We call them culture, capital, leaders, and essentials. Culture means holding up that banner across the whole organization of over 20,000 people, letting every one of our teammates know this is what it has got to look like if you want to be part of Markel Group. Capital means putting capital anywhere in the business where we believe it can earn outstanding returns. Leaders speaks to our role in ensuring that we have great leaderships running each of the businesses within the group. Essentials includes everything else, everything else that we just have to do at the center.
That would be things you could probably guess: tax returns, compliance, SEC filings, things of that nature. Beyond those four things, we seek to be as hands-off as we possibly can with our businesses. Let's get back to our illustrations. We've got Markel Group at the top. Below Markel Group, the triangle, we have a row of diamonds. What does each diamond represent? Each diamond represents a business. That's really it. Is that simple enough? That's really it. Markel Group is made up of businesses. How's that? Let's add a few more important details. We don't want to overcomplicate it too much, but let's add a few more here. There are many diamonds, not just a few. There's this really special center diamond that sits at the center. We call it Markel Insurance. It's by far our largest business.
It's central to everything we do, and it's connected to all the rest. It provides and depends on capital from the whole system. The other diamonds span many industries. On the left, we have a few other insurance-related businesses. We have manufacturing companies, construction companies, and more. On the right, our ownership interests in publicly traded businesses are represented. Now, sometimes we like to call these stocks. But as our great teacher, Mr. Buffett, put it, he said, "It was Ben Graham who got me thinking that a stock is not something with a ticker symbol that wiggles around." He taught me to look at these as businesses. Well, we look at them as businesses too. And what about that triangle at the top? What is that triangle at the top?
Simply put, the triangle at the top is a home for these businesses, a home with very intentional design and architecture. I don't know that we can adequately appreciate the potential that exists inside that little box. This home is special. It's designed to grow and grow and grow and grow. Guess what? As that home grows, this pertains to you, your capital grows and grows and grows and grows. I promised you it was going to be kindergarten. In a moment, I'll turn it over to the smart people to get into a little bit more. Before I do that, though, if you remember this, one thing today, if you remember one thing today, let it be this: Markel Group is a home for businesses designed to relentlessly compound shareholder capital across decades. That's what we're here to do. This is such an important point.
We should explore it a little bit deeper, even though we're trying to keep it simple. My teammate, Andrew Crowley, is well qualified to do this. He spent almost his entire career in the business of compounding capital. He's going to discuss the design elements of our home that help us compound your capital. Afterwards, I'll share a few thoughts on how we begin to measure their effectiveness. With that, I turn it over to you, Andrew.
No pressure. Smart people, huh, Mike? Thanks. That wasn't in your rehearsal. Thanks, everybody. Good morning. Both Tom and Mike already said it. It brings us so much joy to be in the room with each of you.
I'm not someone that stands still very well, so I'm doing my best at a podium, but I did have the chance to walk around and see many familiar faces this morning, and it just made me happy. Thank you. As Mike said, Markel Group is a home for businesses designed to relentlessly compound your capital over decades. Easy to say, harder to do. Before we go into specifics about how we've designed your business, let's take a moment and honor Charlie Munger by inverting, asking ourselves, what gets in the way of a business's ability to compound capital over the long term? A few things immediately come to mind. It lacks quality. Earnings may be strong for a period, but competitive advantages erode over time, and earnings follow suit. It lacks diversity.
Too much emphasis placed in one area, tying the fate of the overall organization to a single person, product, or market. It lacks financial strength. That capital that supports the business becomes a tool for stretching earnings, not supporting them, introducing fragility. It lacks financial strength. Sorry. It has friction. Ownership mindset shifts to that of an agent. Drag in the system disrupts the force of compounding. It has no place to reinvest. Optimization prevails over optionality, limiting a business's ability to deploy its capital. Return of capital is favored over return on it. Over the next few minutes, we will highlight how your company is built with diversity, with quality, with financial strength, with minimal friction, and with ample opportunity to reinvest.
We won't cover everything, but we hope you will walk away with greater appreciation for what makes your business poised to compound your capital for the long run. Now, we recognize quality means different things to different people. For us, it means durable competitive advantages, many of which are afforded by strong market positions. This is not new at Markel. The Markel style asks us to seek to be a market leader in each of our pursuits. It is an ambition we've pursued since the beginning. When citing examples in our home, the big diamond, Markel Insurance, is a natural place to start. Our specialty focus places us in the best markets for insurance underwriting in the U.S. and around the world. Within those markets, we aim for leadership positions. Add it all up, and our underwriting operations rank number four in the U.S.
E&S market and amongst the most respected P&C carriers in the world. Looking across the group, we have similar positions in other markets as well, including the number one U.S. grower of ornamental plants in Costa Farms, the number one U.S. fronting carrier in State National, one of the largest building products distributors in the United States in Lansing Building Products, and an Inc. 5000 award winner 15x over in CapTech, just to name a few. Quality does not only apply to our controlled businesses, but to the ownership we have in public companies as well. That portion of our home includes businesses such as the number one credit card provider in Visa, the number one home improvement retailer in Home Depot, the number one manufacturer of agricultural equipment in John Deere. I think you get the point, and many, many more.
If quality is the first step in compounding, diversity is a natural second step. Looking back over the last five years, one of the ways your business demonstrated its breadth is through the contributions of its various component parts to adjusted operating income. At first glance, the $7 billion of adjusted operating income earned over the five-year period came from three areas: insurance, investments, and Markel Ventures. However, that does not provide a full picture of the breadth of your business. Looking closer at the exact same data, we see that greater than $1.9 billion came from insurance underwriting operations, $800 million from other insurance-related activities, including State National in the fila, $1.8 billion from fixed income securities made up of high-quality U.S. Treasuries and municipal bonds, greater than $600 million earned on cash and short-term investments, and $2.1 billion from the 21 companies comprising Markel Ventures.
Adjusted operating income is not the only way we show breadth. There are several other ways we do as well. First, our public equities add both dividend income and long-term appreciation to the compounding of your capital. Over the last five years, that portion of your company has returned 12.8% per year. More equities, more earnings power. Second, during the same timeframe, operating cash flows exceeded operating income by $5 billion, mostly due to the power of increasing insurance float. More float, more earnings power. Lastly, when appropriate, we will repurchase shares. In fact, over the last two years alone, we have repurchased greater than $1 billion. Less shares, more earnings power per share. High-quality and diverse businesses need a solid foundation, the financial strength of a stable and efficient capital base. At Markel Group, there are several elements that provide these underpinnings for your company.
To provide stability, we apply an appropriate degree of conservatism in everything we do. Strength and flexibility in our balance sheet supports long-term decision-making. Today, we maintain cash and short-term investments that far exceed the fair value of our debt. High-quality and liquid fixed income investments with 98% of our portfolio, AA or above. Strong insurance reserves, where our philosophy is and will always be to be more likely redundant rather than deficient. This has been true for each of the last 20 years. In the spirit of efficiency, our public equities serve the dual purpose of capital for our insurance operations and as standalone investments. I think you heard this from Berkshire yesterday as well, allowing those dollars to generate equity returns and underwriting income simultaneously.
Additionally, the diversity of the cash flow from our business positively impacts our financial ratings, reducing the capital required to maintain them. Quality, diversity, and financial strength provide a great base for compounding. One way we seek to maximize our potential is to minimize the friction between your capital and the returns it generates. This seemingly small point can be the difference between great and average or average and poor. We operate with three key features designed to reduce drag in the system. First, as you also heard yesterday, we do not charge fees to you, our partners. A private fund manager may charge 200 basis points on committed capital and an additional 20% performance fee above a hurdle. As just one example in our family, Markel Ventures operates at 40 basis points per year, including all costs allocated and direct.
This means hundreds of millions of your dollars have continued working that could have otherwise been paid out in fees over the last 20 years. Second, capital in our system works every single day. Much is written about high fees, but far less on the cost of idle capital. We estimate that over a five-year period, committed but not deployed capital can cost you, investors, up to 400 basis points per year in a private fund structure. Outside of share repurchases, which we view as just another capital allocation option, your capital remains in the home, relentlessly compounding every single day. Lastly, as full taxpayers, we would rather your capital be working than paid out in taxes, where prudent. Over the past 10 years, we have grown the unrealized gain on our equity portfolio from $2 billion - $8 billion.
Assuming a 20% tax rate, that $8 billion unrealized gain allows $2 billion of your capital to be working rather than being paid out in taxes. We expect that to grow over time. As you can see, we are built with many of the necessary criteria for success. We need an abundance of reinvestment opportunities to continue deploying your capital at high rates of return to keep going. A few data points that speak to that runway. Although Markel Insurance is a leader in specialty insurance around the world, we only have a few percentage points of market share today. Our equity portfolio stands at roughly $12 billion. Most of you would know that would only represent less than one-one-hundredth of a percentage of the total market cap for global equities around the world.
Within Markel Ventures are 21 businesses, many of which have significant runway to grow. As just one example, VSC, led by Tommy Clements, who's in the room today, is a leading provider of fire and life safety equipment. That market share for VSC is only a few percentage points of the $23 billion market for U.S. fire protection today. Since we partnered with VSC, the market has grown at roughly mid-single digits per year. VSC has meaningfully outgrown that as part of our family. Let's not forget the thousands of privately held businesses who find our long-term home attractive. Last year alone, we connected with nearly 100 companies who fit our approach and had an interest in Markel. Thanks to many of you today for those introductions. With these experiences, we not only have opportunity, we're uniquely positioned versus the competition.
We are able to make long-term investments and see them through, receiving the full benefit over time. As yet again, one example, in 2024, we celebrated the opening of our new world-class facility at Cottrell, one that enables our teammates to carry on the company's success for decades and decades to come. We have a front-row seat to a variety of businesses. This ability to share information across the group provides each business with an advantage, particularly when making long-term decisions. We are not reliant on capital markets for funding. I think Jason Zweig may have written an article this morning talking about this. The timing of flows can significantly decrease an investor's opportunity set and its associated returns. Just one study would highlight the underperformance of mutual fund investors versus the fund themselves, noting that they are as much as 20% lower simply due to poor timing of flows.
We have the ability to pivot. Whether due to a weak market or the underperformance of one of our businesses, we can move your capital around with minimal friction. Most importantly, we are a company others want to do business with. Whether customers, suppliers, trading partners, publicly traded companies, or privately held ones looking for a home, people want to do business with Markel Group. Our goal is to be a company where everyone who comes in contact with us is better off for having done so. With high-quality businesses, diverse earnings streams, financial strength, minimal friction, and plenty of room to run, our structure enables us to consistently generate earnings, to productively redeploy them, and to keep going. Markel Group is a home for businesses designed to relentlessly compound your capital over decades. Thank you. With that, I'll hand it back over to Mike.
That was fantastic. What a great list of strengths. I hope as you sit and listen to those as shareholders, you appreciate the strength of this company that you've supported and allowed us to build over the years. That begs one really important question, which is how do you get some sense as to whether or not all those things that Andrew talked about are working? Let me give you just a really preliminary flyover of how we start to think about how they're doing. As a reminder, just to sort of get a sense of target, we've long said that we aim to compound shareholder capital at double-digit rates over long periods of time.
We believe, just to be a little more specific about that, that compounding within a range of 10-15%, 10% being very good, 15% over years and years being about as good as it gets, we believe that to be very achievable with the model that we've built. How do we assess that? I'll give you three primary metrics that you can start with. First, an obvious one, total shareholder return. You've seen this chart or some version of it before. Since going public, our stock has compounded at over 15% annually, an unbelievable result. At the end of 2024, our five-year compound annual growth rate was 8.6%. That is a result that is below our long-term target range. We can see early indications of progress from the changes of the past two years.
Someone on the team, I won't name names, couldn't resist looking as the week came to a close. I think if we got the math right, the five-year compound annual growth rate at the end of the week was something like 17% or just over 17%. Making progress. The second primary metric is intrinsic value growth. Over long periods of time, our stock price will follow the growth in the intrinsic value of the company. To track progress in intrinsic value, we introduced last quarter an intentionally simple, albeit imperfect, proxy. It roughly estimates, as of the end of 2024, a five-year compound annual growth rate of 18%. The third primary metric, as you begin to assess how the company is performing, is operating income. Andrew spoke to this. And it's a key driver of intrinsic value.
Operating income is a proxy in effect for the earnings of the business. In fact, when we came up with that simple formula, we took the three-year average of operating income from our majority-owned businesses. That would be the big diamond in the center and all the diamonds off to the left. The public ones, we add in because there's a mark on them. Take all those businesses for which we are a majority owner. Here's what those numbers look like over the past few years, the three-year average. 2019, $615 million. 2020, $784 million. $992 million. $1.2 billion. $1.5 billion. Finally, $1.7 billion as a three-year average at the end of 2024. You know, we're not perfect, but we feel pretty good about that trend. Operating income grows intrinsic value. Intrinsic value over time will drive stock performance.
That's the beginning point of our assessment framework. As part of the review, we're working to make disclosures around these metrics and others more easily accessible to you so you can better track our use of capital. You can expect changes on this before the end of the year. Regardless of what metric you look at, there is one thing that is absolutely certain. Our insurance business, that great big orange diamond, I don't know if you missed it. I think that's probably obvious enough, the big orange diamond in the center. It is central to our future success. Going into our review work, this was our highest priority. We know that our core insurance business has not reached its full potential. To deliver on our promise to you, it absolutely must. We began working on this several years ago.
Again, speaking candidly, we had to begin by mopping up a few messes in the aisleway, so to speak. More recently, we've set the path for a future of profitable growth with a new leader or a new focus. We also welcome John Michael to the board to bring fresh insurance expertise. Simon is going to share more in just a minute, and I could not be more confident that you will feel encouraged. Thanks for listening. I hope you don't mind if I close with a bit of a personal story. As I said, in the conversations that we had coming up to this meeting, we clearly wanted to get sort of the ideas that were in our heads on paper so that you had an understanding of them and had an understanding of the work to come.
As I sat at my desk a couple of weeks ago, I thought, you know, we really want to share more with you than just the ideas. Somehow, we wanted to capture for you the sense of the air in the building, so to speak, the sentiment, which really adds a richness to those ideas. As I sat there at my desk, thinking and thinking, thinking, a story popped into my head from my childhood. My guess is this is the kind of story where everyone in this room has their own version of it. You know, it's the kind of story that I think we tend to forget sometimes as adults. It's the kind of story that we really need to go back and remember.
My story started with my father, and he showed up at the front door after work one day with a couple of giant boxes full of these computer punch cards. Now, there are a bunch of you in this room who have no idea what a computer punch card is. Let me educate you. Computer punch card was the predecessor to the five-and-a-quarter-inch floppy disk. Now, there are a bunch of you in this room who do not know what a five-and-a-quarter-inch floppy disk is, the predecessor to the three-and-a-half-inch hard disk, and on and on and on. Let's just say it was sort of like the prehistoric version of the cloud. The important point is not that. These things were cards, and they were stiff and rigid and really easy to bend and to form into shapes and in particular blocks that we could use to build.
We loved building with these things. All over the house, we were stacking up these houses and apartments and miniature cities and things of the like. One day, as my sister and I sat there playing with these computer cards, I cannot remember which one of us, but one of us said, "I wonder, I wonder if we could build a tower that went all the way to the ceiling." I know to us, those little kids, that ceiling in that room felt as high as the ceiling in this room feels to us. We said, "Let's do it." We started stacking, and we built this giant foundation across the entire room and fortified it and layer after layer after layer. We built and built and built and climbed and climbed and climbed and climbed.
There we were standing on tops of chairs and tables, and you could just almost, almost, almost reach the ceiling. Right as we were about to get there, after hours and hours and hours of doing this thing, we heard it. The sound of the door opening and the family dog walking into the room, maybe running into the room. I do not have to tell you or explain to you the sensation that my sister and I felt in that moment. That joy, that sheer joy of creation and possibility mixed with the reality of potential setbacks. That is something we have all felt. That is something this team up here for the past few years, as we have gone about this work, have felt.
We are so excited, enthusiastic about the potential of your business and the things that we're building together, but we're very, very honest about the fact that we can't just stack our bricks haphazardly. We need to learn. We need to acknowledge mistakes. We need to adapt. We need to make adjustments along the way if we're ever going to make it to the ceiling. By the way, my sister and I, we made it. We made it to the ceiling. There is a picture in existence of this tower, and me and my sister, and I called my father to ask him if he would dig it out of the family photo album for today. As he flipped through the pages and dug and dug and dug, eventually he did find this picture.
He said to me, this is a quote, "My own father, are you sure you want to use it because it looks a little dorky?" I'm not sure it's that much better today, but the photo stays in the album. I just hope you can trust me that we did make it to the ceiling. At Markel Group, we are going to make it to the ceiling too. A friend once told me, "God created creators." I believe that. We, the people in this room, we are creators. The people in this room, we are builders. Together with you, not just beside us, with us, we are building something that will grow and endure and be of great value. With that, I'll hand it over to Simon. Thank you.
Hello, ladies and gentlemen. I thought that was absolutely exceptional from the group there. Now you've got the guy who's going to talk to you about insurance, right? We've got over 2,000 people in the room. I can see literally people on the edge of their seats. It's very exciting for me, and it's also a little bit weird. Thank you for being here. It's superb. I was often called at school. People used to tease me with the nickname Simple Simon. I never knew that was going to get me this job, actually. It was just fantastic. That's a win. You can always come back from defeat, Mike. You know, it's like one of those things. What are we going to talk about today? I want to give you a sense of my vision.
You know, I stepped into this role about four or five weeks ago about what this insurance business at the center of Markel can bring us. Now, Mike calls us the biggest diamond in the Markel Group. I'm not sure if you haven't seen Tony Markel's wife's engagement ring, actually. That's the biggest. But we're not bad. I'll take second place on that perspective. Right. Let's get a sense. The thing I want to share with everybody today is a presentation which is pretty much slide for slide what we went through as a group of associates in the past week. It was Thursday last week.
What I wanted to do was level set across the whole group about what we are, what we do, how we win, but also acknowledge the fact that we haven't performed to the level that I would expect over the last three or four years. I want a bit of a dose of reality. I'm going to share that with you today. I'm going to start in a fictional situation where we've got our friend John Smith. John Smith is a customer service agent working for ABC Insurance somewhere in the middle of America. ABC Insurance is a typical P&C insurer focused on auto, homeowners, and kind of small business commercial package. The phone rings. There's a chap on the other end of the phone that says, "Hi there. I'd like to buy some insurance." John Smith says, "You came to the right place.
How can I help you? What do you need insuring?" He says, "Well, I've got a boat." "Okay. Kind of a boat is it?" "Well, it's a container vessel. It's fit for about 20,000 containers. The problem is I need to take the boat from Shanghai at the moment to Port Said. I want to get there quick. If I want to get there quick, I have to go to the Red Sea then through the Suez Canal. Bit of a problem in the Red Sea off the coast of Yemen at the moment. These Houthi rebels are kind of pinging rocket-propelled grenades at a few of these boats. I'm worried about that.
Could you help me with some insurance?" Now, John Smith goes into his WhizAI system, and he's like, "Can I have some Marine War, Yemen kind of insurance stuff for a boat?" The system comes back, and he said, "The nearest thing we've got here, sir, is a high-net-worth yacht policy, but I'm not sure that's going to quite do the trick. I'll have to go and check somewhere else." John's a bit disappointed. He likes helping customers. The phone rings again. "Hello, it's ABC Insurance. Hi, I'd like to buy some insurance. You came to the right place. How can I help you? What product have you got?" "I'm a construction guy, specializing in wind farms." "Okay. We've been doing most of our wind farm development onshore, in southern parts of Spain, in the mountainous area there. We are going to move on.
We're going to do something much bigger. We've developed floating wind turbines, and we're going to go off the coast of South Korea, and we're going to deploy them there because the sea is so deep that we can't actually concrete them into the seabed. All right. John Smith's a little bit worried about the AI machine and what's going to come back. Any types, wind farm at sea floating South Korea. Machine comes back, triggers up. John looks at the words, and the machine just comes back and says, "Absolutely not." At least the AI's working for him, I suppose, in some way, shape, or form. Phone rings again. This is a gentleman from Richmond, Virginia. Go, Richmond. What does he have? He's a gas station owner. He's got about 10 gas stations in this franchise. Phones up and asks for his insurance.
He says, "Look, what I'm really worried about here is the pollution liability that I've got. A friend of mine had a bit of an incident. The oil seeps into the earth, and then it causes massive problems in and around the world." John Smith doesn't even bother using his AI machine. He's like, "We just can't help you with that, sir. It's been a bad morning for poor old John." He puts the phone down, feeling a bit depressed, goes and finds himself a cup of tea. There he goes. He's just scratching his head. He goes, "Who on earth would insure stuff like that?" The answer is Markel Insurance. This is what we are doing every single day. It's interesting, I picked these three examples. These are real live examples of things that we were doing over the past week.
It is absolutely part of what we do as our DNA. Now, we are doing about 100 products similar to this. The diamond analogy, the way that I see the way Markel Insurance is working, is a lot like Mike described that house with the diamonds within it. Really, we have kind of got 50 or 60 small businesses, small bits of people, bits of business, operating within this big thing called Markel Insurance. It is important for a number of reasons that we come to. Teams with an absolute laser focus on their customer and their area of the market that they know better than anybody else. Once you have hired those teams and once you have put them together, you have to trust them, and you have to empower them to get on with it.
The good news in Markel Insurance, over the last 50 or so years that we've been doing stuff like this, we've got two really important competitive advantages in the market. Number one, we've got lots and lots and lots of teams of people that know what they are doing in these areas. Even more important than that, in an industry which is completely based on trust, our customers and our broker distribution partners believe us to be a company and an organization that consistently does the right things, whether that's on a claims payment, in the way we trade, in giving advice. When we give advice, they trust that advice. That is huge. It cannot be replicated by other people overnight in both of those two areas. That's it. It's as simple as that. That's all we're doing. Here's the issue.
We've asked you guys, "What do you think about our performance over the past few years?" Mike alluded to it by putting absolutely no pressure on me in this job a bit earlier, saying, "We have been underperforming. Markel was considered best in class, but its underwriting performance and recent deals appear to have removed the shine." It's frustrating to see Markel not keep up. There's investment required around talent and technology. I look on it, as I said, I wanted to level set with our team and just say, "Well, where do we position ourselves in the market? How have we performed financially?" The first chart that we developed, which showed our performance over the last five years against the average performance in the specialty insurance marketplace.
I looked at that, and my response to it is, "I have absolutely no interest in what average people are doing in this marketplace. The only place we want to be is at the very top of the tree. So let's look at our performance against what I think are the best players in this part of the market that we're in." If you look at that, and many of you will know combined ratio, combined ratio is like golf. The lower the number, the better. One minus this percentage equals your profit margin. Kinsale, very, very solid business, actually based out of Richmond, Virginia as well, coming in at mid-70s combined ratio. That's almost astonishing. I think we heard yesterday at the Berkshire meeting that they were celebrating that 80-something combined ratio at GEICO.
These Kinsale guys have been doing that over and over again for a long period of time. RLI, where John Howard has come from, we're going to learn a lot from him as to how they produce. You can see it. We're looking at kind of mid-80s performance over that period of time. Markel, we're at a mid-90s. Now, we're honest about that, right? If we're doing 95% combined ratio on $10 billion of earned premium, and our competition is 10 percentage points margin better than us, that's a billion dollars in that year of lost profit against the best in the marketplace. There's a lot to catch up on there. This is a big job, and it's something that we're really, really having to focus on. What's caused it? Four things. Firstly, we've made some underwriting mistakes.
We are overweight in construction business in the U.S. That was a misstep that caused us a problem when social inflation came upon us and the law courts in the U.S. started handing out enormous jury verdicts to people who have been injured in the course of work. Construction was a bit of an issue. Risk-managed D&O and E&O insurance, again, things that have been running really, really hot in terms of performance. That's an issue. Thirdly, we have to admit the CPI error that we made a couple of years ago. The good news is, in each and every single area of that, where the portfolio has been underperforming from an underwriting perspective, a huge amount of work has been done before I got this job to clean that up. We've put the reserves up. We've taken our medicine, and that's what's been driving some of this underperformance.
I would expect that the benefit from those decisions, we will start to see during the course of this year and the next two years. It is one thing cleaning a mess up. You cannot cut yourself to greatness. We have got to start really pushing growth into this business again to get it to the very top of the tree. When we look at this as well, I would say that we have had a little bit of a misstep in our strategy. Underwriting is one thing, but core strategy is something that we need to think about. We have had a little bit of a grass is greener strategy for a few years. We have got this fabulous business at the center in U.S. E&S, wholesale, and specialty. We have almost taken them for granted that we will just continue to win in that area.
We have gone after other bits of the market, saying, "Oh, there is lots of premium over here. There is lots of premium over there." Meanwhile, Kinsale has gone right into that wholesale and specialty E&S market and started making money at a 70-something combined ratio. I think we have taken our eye off the ball of our bread-and-butter business a little bit strategically. Second, structure. As we have grown, we have become more and more complex.
We've fallen into that corporate trap of saying, "Let's go and do a matrix structure where we're going to have a head of a product and a head of a distribution channel and a head of geography and all those people reporting to slightly different bits of the organization." You say, "What went wrong?" You get that Spider-Man picture where three people are saying, "It's that person, it's that person, it's that person." A matrix structure in this business is very complex, and it slows down decision-making. The other thing that we've done is we've started to centralize our services that are provided to the various little diamonds that are around. That takes away decision-making power from the business leaders themselves, and I think it pushes costs up over time as well. From a structural perspective, we need to clean things up. Finally, cultural.
We are an entrepreneurial organization who believe in business leaders who can make decisions quickly. Because our strategy has become a little bit confused, and I think because our structure has got a little bit woolly, the ability for our entrepreneurial business leaders to get things done and make decisions has waned. As a result of that, people have lost a little bit of confidence to get things done and drive this business forward. What are we going to do? Three things. Absolute clarity on what we do. I spoke about that earlier. We are a specialty insurer, and we're going to put the hands of the driving of the strategy in the leaders who are closer to the customer and understand how their businesses are run. We're going to empower those people to get it done. Second, simplify structure.
We are going to call out P&Ls across the business, whether it be 60 units or probably slightly less than that. In those P&Ls, we're going to have a business leader, a clear set of accounts where you understand what it is that you're responsible for, and then we're going to hold people to account to make sure that those P&Ls make sense. We will become literally an amalgam of many, many of these different businesses with absolute leadership at the top of each one of them. The third bit is we're going to get back to trusting those leaders to go and get the job done.
I don't know about your experience, but in my experience, when you give someone a clear task to go and get done and the tools to go and do it, if they're good enough, nine times out of ten, they will get the job done, and that's what we're going to be doing here. In terms of our structure, we've just restructured. We've invited Wendy Houser, delighted to say, who's in the front row here, to take on our wholesale and specialty crown jewel, bread and butter, biggest diamond in the insurance business has gone over to Wendy. Alex Martin, who was previously the head of U.S. Specialty, is now going to run a business—and I'll outline that in a moment—called Programs and Solutions, both of those in that $3 billion line. International is the business that I was previously responsible for.
Absolutely delighted that Andrew's doing that now because he's way better than I am, so I can trust him on that stuff. He's an absolutely exceptional individual. Don Bahr continues to run reinsurance. Why am I excited about growth in each one of those new business units that we've created? This is Wendy's market. The U.S. E&S market is Markel's bread and butter. This is where we made our reputation, and this is where we are perceived by brokers to have the greatest strength in terms of what we do. That market, since 2019, has grown at a compound annual growth rate of 20%. Markel has not. The structural reasons for this growth are that customers who are buying these kind of special insurance products much prefer to get a tailored product that exists outside of the admitted market where you have to rate and file.
They prefer that, and once they've used it, they carry on using it. They tell their friends about it. The need in a more complex environment in the U.S. to get tailored insurance solutions is going up and up and up and up. That 20% compound, there's way more tailwinds in this going forward. The other element of it is that the brokerages that serve this market have become much more sophisticated and much more capable of making it easy to buy through this. I'm thinking about companies like Amwins, CRC, RT Specialty. Some big businesses there have done some superb work during this period of time. The opportunity, as we look forward, to get a much bigger slice of this is very, very, very significant for us, and it's absolutely in our wheelhouse to go ahead and do that. Next, we look at Alex's business.
Before, we had this big matrix structure. We could never really get into these lovely, discreet businesses that we've purchased in the main. It's been acquisitions over time. What could we do? Let's just look at the workers' comp section here. Workers' comp is a massive, massive area of the U.S. specialty marketplace. And it's actually, when you look at a lot of our competitors and where they've made their profit, they've been able to release reserves from that workers' comp space, often to subsidize the casualty reserves that they've been having to put up, right? Being bigger in workers' comp has certainly been better over the last five years. We've got a lovely business. This is very profitable, but it needs to be bigger. We've now called it out and saying, "Right, what is the strategy to develop that yet further?
Do we need a bigger product? Do we need a broader appetite? Do we need a new technology system? Do we need some more people? Probably a little bit of all of those things, but we will develop a strategy to grow that business way beyond the $480 million that it's at now. I hope for that to be more like $1 billion in the not too distant future. One other example, Surety. Surety typically runs in the low 70s, early 80s combined. Lovely, profitable business, quite difficult to have expertise there, quite difficult to get hold of the business in the first place. We bought that business, which was called SureTech, about six or seven years ago. It was a $70 million business. We've managed to get it to $190 million. There's no reason why that shouldn't be $500 million in a few years' time.
I could go through each of those boxes and say, "Look, if we are focused in that area, we've got the right leader sitting on top. We give it a bit of strategic capability. These are places where we can reinvest that capital that Mike and Andrew were talking about earlier." Finally, this is international, this business has been on a tear. The problems that we've been having in the insurance business have really been on the U.S. insurance side of it, less so in the international side of it. It's been growing at 15% compound growth, but look underneath it, the underwriting profit going down from about 99% combined ratio in 2019 to absolute stellar 77. I think I can't say that Andrew's going to do 77 every year, but it's very much in that kind of low 80s where absolutely top-end performance is being created.
What is really exciting about this business is really, for me, the map element here. You go back 10 years, and we had a London business and a U.S. business. Now we have people all over the world as we started to acquire businesses. We have built teams in these areas, and they are very, very fast-growing and exciting markets for Markel. In none of these markets do we have a market share of above 1%. The runway for growth in that international business is absolutely significant. We have put up a target for Andrew to take that business from $2.5 billion- $5 billion by 2030, and he is going to put Markel on the map to another level.
Finally, I talked about this concept of when you get a structure and you start to centralize services, what does that do as a business owner and a business leader? I'm sure many of you in the room and on the webcast today are business owners, and you understand how this works. I always think about this about allocated expenses. If you look at your P&L, there are services that are being done for you by the center, almost like the government to some degree. Back in 2006 to 2008, the proportion of our controllable expenses that were being allocated from the center was 17%. Last year, it was 46%. That is taking away the power to decide on what your business wants to do from the business leaders at the front line.
If we believe in empowering business leaders, and we do, and we want them to run a tight P&L, that 46 number needs to go back down towards that 2006, 2008 average. We've got to get back to basics. We've got to start pushing businesses and ownership down towards the customer. That's a big driving factor for me. In conclusion, four things and then one big thing. This remains a quality business. North of $10 billion worth of premium. We've stumbled a bit the last few years, but make no odds. Brokers want to do business with us. They think we are superb. They think we do have expertise, and they want to do more with Markel. The market, we talked about that U.S. E&S segment and the specialty market writ large, that is getting bigger. The world is getting more complex.
It needs expertise that Markel can bring to bear. We are going to simplify the way we trade. We are going to call out these P&Ls. We are going to put leaders on top of it, and we are going to get them to run their businesses. The shared service model that we have been building over time, we are going to federate that back down in the business so the business owners can drive that business forward. More than anything, this is what I believe. You get the right leaders, and you empower them to run those businesses. You do that 60x , and that diamond is going to get bigger, and it is going to get better. I think we can do that across the world in many, many areas.
I'm really confident as I stand here today to be a part of this team and actually start driving even more value through what we do in insurance. Thank you.
Thank you. Thank you, Simon. Again, just taking an extract from his presentation, he says, "International has been on a tear." He ideas why. The leader of our international business, who has put it on a tear, is now in charge of all of Markel Insurance, and I share a lot of confidence about our ability to make some very spectacular progress in that arena. Thank you, Simon. The leader of our Markel Ventures businesses, which has done spectacularly well also, is here with us, and I thank you, Andrew, for your comments this morning.
My co-leader in the whole thing, Mike Heaton, the glue that puts it all together, is here, and he explained his portion of that as well. Thank you all. What you just heard, you are three voices, but one ethos about what the Markel Group is and will do. If I can have one last slide to share before we finish up and turn it over to questions. This is a slide that dates back probably to the mid-1980s, and we think it sort of relates to some of the materials that were put together at the time of the IPO. I recognize this is an eye chart. We will leave it up. People can look at it in other circumstances and other minutes. I will cite just a few key phrases from it.
Markel organized in 1930, and then again to the 1980s, the time of the IPO. Fifty years later, I think that's a meaningful statement. Markel Corporation was formed as a holding company owning Markel Service and all its subsidiaries. I'll remind you, the holding company concept is not new. At the time of the IPO, we had an insurance underwriting business. We had a claims service business, and we had an insurance brokerage business. The holding company structure has been there for quite some time. Each company becomes a separate profit center. You've heard that, the P&L, individual with individual leaders. Markel Corporation plans to grow, which we have done. The expertise of personnel will always be more important than the product itself. People, experts, leaders who run business. Dependence on people. Emphasizing quality over quantity.
New products and new services will be developed to meet the ever-changing needs of clients. Innovation will always be a key factor. Increased diversification results in less dependence on any one market segment in a very volatile industry. I'll leave it out there for you all to read, but the point today and the story we're telling and the description of the Markel Group is not a new idea. It's how this company was built. It's how our insurance business went from a small regional carrier to a leading global specialty insurer. It's how Markel Ventures went from an idea 20 years ago to more than $5 billion in revenue and $500 million of operating income last year. It's how our public investment portfolio went from just a few million dollars after the IPO to more than $30 billion today.
Empowerment is such an important element of the Markel Group story. It's the fuel we will use to relentlessly compound your capital. You heard how Mike clarified that spirit in the terms of our structure and design. You heard Andrew make the case for what this structure means financially for you, our shareholders, that we're an operating model designed to relentlessly and reliably compound your capital over time. You heard how Simon is applying that spirit anew in our big diamond of insurance underwriting. What is your role in all this? You're a key part of how it all works.
As any student of Berkshire, as you are, or any student of Charlie Munger and Warren Buffett, as you are, or any disciple of the rule of 72 and the laws of compounding, as you no doubt are, knows the number one most important thing to compounding is to keep going. Keep compounding. You can't stop the compounding machine, whether that be the compounding of your character, your heart, or your wallet. You've got to keep going. For our system, the Markel Group, to work as you heard it outlined today, for it to continue empowering our people, all in the service of relentlessly compounding your capital, we need partners. Partners who share our time horizon and values. Thank you. Thank you for being here. Thank you for being our thoughtful, engaged partners forever and right now. With that, our live presentation, our live webcast now concludes.
Thank you all from the webcast world. There have been.