During the call today, we may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They are based on current assumptions and opinions concerning a variety of known and unknown risks. Actual results may differ materially from those contained in or suggested by such forward-looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements is included in the press release for our first quarter 2026 results, as well as our most recent annual report on Form 10-K and quarterly report on Form 10-Q, including under the captions "Safe Harbor and Cautionary Statements" and "Risk Factors." We may also discuss certain non-GAAP financial measures during the call today.
You may find the most directly comparable GAAP measures and a reconciliation to GAAP for these measures in the press release for our first quarter 2026 results or in our most recent Form 10-Q. The press release for our first quarter 2026 results, as well as our Form 10-K and Form 10-Q, can be found on our website at www.mklgroup.com in the Investor Relations section. Please note this event is being recorded. I would now like to turn the conference over to Tom Gayner, Chief Executive Officer. Please go ahead.
Thank you so much. Good morning, Bailey, and good morning, all. This is indeed Tom Gayner, and I'm joined this morning by my teammates, Brian Costanzo, our Chief Financial Officer, and Simon Wilson, the CEO of our insurance operations and Executive Vice President of the Markel Group. Andrew Crowley, the President of Markel Ventures and Executive Vice President of the Markel Group, is also with us and available for questions. Thank you all for joining us today. Our headline is that we continue to do more of what's working and less of what's not. I'm deeply grateful to my colleagues who continue to adapt and improve our operations throughout Markel Group. We all look forward to sharing our progress with you this morning. We're also delighted to take your thoughtful questions and for your ongoing interest in Markel. First, I'll make a few opening comments.
Brian will run through the financial results. Following Brian's comments, we'll turn the bulk of the call over to Simon, who will address our ongoing actions in our insurance operations and our progress to date. Insurance is our largest business and the one where the most change continues to be underway. As such, it's appropriate to focus and allocate the most time there. Following Simon's comments, we will open the floor for questions. Continuing to do more of what works and constantly learning and iterating is not a new idea at Markel. It's been a hallmark of the company for nearly 100 years. As we state in our cultural statement that we call the Markel Style, we look for a better way to do things.
That means being creative, adapting to changes in technology, up to and including those being brought about by the development of AI and every other form of change and progress underway. Internally, we control what we can control. We've taken extensive steps to focus on serving our customers, improve efficiency, develop new products and services, expand our geographical reach by opening and developing new markets, and continuously improving and refining our operations in every nook and cranny throughout the company. I'm beyond grateful to my teammates for their unrelenting actions to continuously learn and improve. Our financial results show that our actions are working. Brian will give you details and explain some of the nuances from one-off events and business mix changes from last year. Net net, we're confident that we are making progress and that it is showing up in our results.
Externally, outside our four walls, we continue to see cyclical pressures and softness in some end markets. For example, property-related insurance coverages and certain industrial end markets like transportation equipment and residential construction continue to show normal signs of cyclicality. Longer term, those markets provide ample opportunity for good returns on our capital and continued growth, but they do not do so in straight upward line. Curves are involved, both up and down, and that is normal. In aggregate, our businesses continue to produce healthy amounts of adjusted operating income, cash, and long-term growth. Your company contains diverse, resilient, high-quality businesses designed to produce all-weather returns and cash flows. That is the design of the Markel Group. With these cash flows, we enjoy a 360-degree set of reinvestment opportunities to put that cash to work. We continue to deploy that cash with patience and discipline.
Each incremental dollar goes to the highest and best use available. Sometimes that means funding incremental growth in one of our existing businesses. Sometimes that means adding to our investment portfolio of publicly traded securities. Sometimes that means acquiring new businesses, and sometimes that means repurchasing our own shares. Sometimes that also means building up our liquidity and optionality for future opportunities, something we've been emphasizing of late. We maintain a strong balance sheet. We believe balance sheet strength will provide timely and unique advantages to grow and long-term stability to our operations. As we observe the broader investment landscape and participate in conversations, we are observing more data points about global conflicts, supply chain disruptions, low consumer sentiment, and softening job markets. Despite those factors, the animal spirits in the financial market seems largely unfazed. As such, the number of external opportunities that appear attractive to us remain limited.
Fortunately, as we've demonstrated over the last several years, we can and are continuing to repurchase our own shares. In 2023, we repurchased $445 million of our own stock. In 2024, we made $573 million in repurchases. In 2025, we did $430 million in share repurchases, as well as redeeming $600 million of preferred stock. We've done that largely with cash from operations and not by levering the balance sheet. So far in 2026, we've repurchased $134 million of our own shares, and we remain highly attentive to opportunities to continue to do so. At this point, we've reduced our share count by roughly 10% from the peak of nearly 14 million. It's taken slightly more than five years for that 10% reduction to occur.
At current prices, I would expect it to take us less than five years to purchase the next 10% of the share count. The math suggests that repurchasing our own shares makes sense as our number one on the list of capital allocation choices right now. We remain disciplined and methodical as we do so. That should help us to persist through thick and thin, and we think that that consistent behavior will serve our owners well. We also continue to have a balance sheet which keeps us in good shape to pursue opportunities when it makes sense to do so. We enjoy a strong degree of optionality. We maintain the flexibility and ability to play offense in a wide variety of environments, not just the one we see today. While we are reporting our quarterly results to you today, we manage this business with a longer timeframe.
Looking out over the next five years, I think it's reasonable to expect that our insurance operations will grow and earn healthy returns on equity. I expect the same from our industrial consumer and financial operations. I expect our public equity portfolio to compound at healthy rates and for our fixed income operations to provide appropriate interest income while protecting and preserving our capital. All of our businesses will face natural ups and downs, but I am confident in the direction of travel. Those increasing amounts of earnings and cash flows should end up being divided by fewer shares. We think that you, as our fellow owners, will be well rewarded with those results. In our equity operations, we continue to invest with discipline and patience, keeping with a long-standing four-part investment discipline.
We invest in profitable businesses with good returns on capital and not too much debt, run by people with equal measures of talent and integrity, with reinvestment opportunities and capital discipline at fair prices. There are no changes to that process. In fixed income markets, interest rates increased during the quarter. The good news is that we remain matched in currency and duration to our insurance liabilities and largely hold our fixed income securities to maturity. The other good news is that amidst rising concerns about credit quality, our portfolio remains as high quality and pristine as we know how to make it. There were no credit losses in our fixed income portfolio in the quarter, and I do not expect any going forward.
Our public equity portfolio declined 5.2% in the first quarter compared to a 4.4% decline in the S&P 500 amid broader market volatility. Our approach is designed to withstand equity market volatility. We believe our public equities portfolio will continue to produce strong returns for our shareholders over the long term. In many ways, we've gone through a healthy amount of change in recent years at Markel Group. At our core, though, we remain unchanged in the enduring things that matter. We remain dedicated to relentlessly compounding your capital. Our specialization and diversification, which we talked about in our very first annual report as a public company in 1986, remains just as relevant today as it was then. As time has shown, it works. I believe that will continue to be the case. Our values build value.
With that, I'll turn it over to Brian.
Thank you, Tom. Good morning, everyone. Before reviewing our first quarter results, I want to briefly remind listeners of the reporting and disclosure enhancements we implemented beginning in the third quarter of 2025. These changes were designed to improve transparency and better align our reporting with how we manage the business. We now present operating revenues and adjusted operating income as key performance metrics, both of which exclude unrealized investment gains and losses, as well as amortization expenses. We also now report our results across four operating segments, Markel Insurance, Industrial, Financial, and Consumer and Other, while providing a divisional view of our insurance businesses, organic growth for our industrial, financial, and consumer businesses, and annually providing capital metrics for all segments. With that, let's turn to the results. Starting off with Markel Group's consolidated results for the first quarter of 2026.
Operating revenues, which exclude net investment gains, were $3.6 billion or flat when compared to Q1 2025. Operating income, which includes unrealized gains and losses, was a loss of $273 million compared to income of $283 million in Q1 2025. Net investment losses were $728 million compared to net investment losses of $149 million in the first quarter of 2025. Adjusted operating income, which excludes net investment gains and amortization expenses, totaled $498 million, a 4% increase versus the first quarter of 2025, driven primarily by improved underwriting performance in Markel Insurance, offset by the non-recurrence of a gain from our investment in Velocity in the financial statement in the first quarter of 2025, and to a lesser extent, lower margins in the industrial segment.
Operating cash flow for the quarter was $16 million versus $376 million in Q1 2025. Operating cash flows for the quarter were net of payments totaling $108 million made to reinsure our exposures on our Hagerty business as part of the transition of that business to full fronting. Also reflect lower premium collections resulting from the runoff of our Global Reinsurance business, along with higher payments for income taxes. Comprehensive loss to shareholders was $340 million versus comprehensive income of $348 million in Q1 2025, driven largely by unrealized movements in our investment portfolio. Moving to Markel Insurance.
Adjusted operating income for Markel Insurance in the first quarter 2026 was $369 million compared to $282 million in the first quarter 2025. Markel Insurance underwriting gross written premiums were $2.2 billion, a decrease of 21% for the quarter versus the first quarter 2025. This was driven by the expected impact from our exit of Global Re and the transition of our Hagerty program to a fronting model, which together totaled $797 million in underwriting premiums in the first quarter of last year compared to just $23 million this year.
As I mentioned on last quarter's call, the exit of our $1 billion gross written premium Global Reinsurance business and the transition effective January 1, 2026 of our partnership with Hagerty to a pure fronting model will decrease underwriting gross written premiums for the full year 2026 by approximately $2 billion. A significant portion of the Global Reinsurance premiums were written in the first quarter of last year. We expect these changes over the long term to benefit our combined ratio, adjusted operating income, and our returns on equity. Adjusted underwriting gross written premiums, which excludes the impact of the exit of Global Re and the Hagerty transition, grew by 10% in the first quarter versus Q1 2025.
This increase was driven by our International Division within our professional liability and marine and energy products, and our Programs and Solutions Division driven by growth in personal lines and programs, partially offset by a decrease in premium volume in our Wholesale and Specialty Division due to declines in property driven by a softening rate environment and in general liability due to our continued underwriting actions and remixing of the casualty portfolio. Earned premium decreased 2% to just under $2 billion in the first quarter of 2026. The combined ratio for Markel Insurance was 93% compared to 96% in Q1 2025. The improvement in the combined ratio was driven by improvements in our current accident year loss ratio.
First, we had lower catastrophe losses this year with $35 million or 2 points of losses from the Middle East conflict this year versus $66 million or 3 points of losses from the California wildfires in the first quarter of 2025. Second, we had a 4-point improvement in our attritional loss ratio, driven by no losses on our CPI product line this year, a lower loss ratio within our international division and our U.S. property and general liability lines, and the exit last year of our risk-managed D&O book within our wholesale and specialty division. The Global Re division reported a combined ratio in the first quarter of 114% as we continue to build margins and solidify reserves. The results from the runoff of our global reinsurance division unfavorably impacted the insurance segment's combined ratio by 2 points.
Prior year releases were 5 points in the current quarter versus 7 points in the first quarter of last year, down slightly due to lower takedowns this quarter within our International professional liability lines. At a divisional level within Markel Insurance, starting with International, gross written premium of $861 million was up 28% versus Q1 2025. We grew across the International division, driven by strong growth in professional liability cyber. Combined ratio of 90% compares to 89% in the first quarter of 2025, with the first quarter this year including 6 points of losses from the Middle East conflict and the first quarter of last year including 6 points of losses from the California wildfires.
Within our wholesale and specialty division, gross written premium of $673 million declined 9% versus Q1 2025, driven by a softer property and marine premium rate environment and decreases in binding contractors and casualty. The combined ratio improved to 93% in Q1 2026 versus 100% in Q1 2025, with the largest impact coming from lower loss ratios due to our underwriting actions and the exit of the risk-managed D&O book last year. Within our programs and solutions division, gross written premium was $656 million in Q1 2026 versus $806 million in Q1 2025. The 19% reduction was driven by the previously announced shift of our Hagerty program to a full fronting arrangement, which reduced gross written premium by $220 million.
Excluding this impact, the programs and solution division gross written premium was up 12%, driven by personal lines property programs and growth in our Bermuda platform. Our programs and solution combined ratio improved to 91% compared to 97% in Q1 2025 due to improved loss ratios, primarily due to 3 points of impact from the California wildfires in the first quarter of last year and more favorable development on prior year loss reserves. Moving now to the consolidated investment portfolio. Net investment income for Q1 2025 totaled $256 million, up 8% from Q1 of last year. This reflects higher interest income on fixed maturity securities and higher dividend income on equity securities due to higher yields and higher average holdings in 2026 compared to 2025.
These increases were partially offset by lower interest income on cash and cash equivalents, driven by lower average cash and cash equivalent holdings and lower short-term interest rates in 2026 compared to 2025. Fixed income portfolio yield during the quarter was 3.7% and reinvestment yields averaged 4.1%. Within the public equity portfolio, losses totaled $728 million versus $149 million last year. We made net purchases of $28 million during the quarter. The portfolio ended the quarter with a market value of $12.3 billion and pre-tax unrealized gains of $8.2 billion. Moving to the industrial segment.
Industrial segment revenues for the quarter were $883 million, a 6% increase versus Q1 2025, including 4% organic growth, driven by increases in sales in precast concrete products, partially offset by lower revenues from sales of car hauling equipment due to softening demand within the auto industry. Adjusted operating income was $49 million, down 16% versus Q1 2025, driven by a lower segment operating margin due to changes in the mix of business. Turning to our financial segment. Financial segment revenues were $162 million for the quarter, representing a 9% decrease versus Q1 2025, driven primarily by a $31 million contribution in Q1 of last year from a gain related to our minority investment in Velocity, offset by an increase in revenue from both higher investment management and program services fees.
Organic revenue growth for the segment was 10%. Adjusted operating income totaled $36 million versus $80 million in Q1 2025, reflecting the $31 million one-time contribution from Velocity last year and a $14 million impairment of an equity method investment in an asset management firm in the first quarter of this year. We're aware of the recent story regarding State National's fronting operations and potential credit exposure to a capacity provider. While we acknowledge a current shortfall in collateral against our total exposure, management is actively pursuing all available recourse options under our contracts to obtain additional collateral. We do not believe this situation will have a material impact on Markel Group's earnings or capital position. Moving to our consumer and other segment.
Revenues for the consumer and other segment were $281 million for the quarter, a decrease of 3% versus Q1 2025, driven primarily by slower demand for new housing, partially offset by the contribution of our acquisition of EPI. Organic revenue growth for the segment was down 6%. Adjusted operating income was $40 million compared to $32 million in Q1 2025, with the increase driven primarily by the acquisition of EPI. Finally, regarding capital allocation, during the quarter, we repurchased $134 million of common shares, reducing total shares outstanding to 12.5 million. With that, I will turn the call over to Simon.
Thank you, Brian, and good morning, everyone. It's pleasing to share another solid quarter for Markel Insurance. As Brian outlined, the overall combined ratio for Q1 2026 was 92.8% and more than 3-point improvement versus the comparable period, and in line with the steady progress we reported in the previous two quarters. Our reported 93% combined ratio included a 2-point drag from our now exited Global Reinsurance. While the combined ratio showed material improvement over last year, GWP growth at first glance looks to have declined significantly. The two main drivers of this reduction were the strategic decisions to exit reinsurance and a change to our Hagerty program, where we now provide services for a fee versus taking underwriting risk. Excluding these two items, year-over-year GWP growth was 10% in the first quarter.
Our primary financial goals at Markel Insurance remain sustaining underwriting profitability and maximizing our return on equity. The decision to cease writing new business in Global Re is a clear example of this commitment. The old adage that top line is vanity, bottom line is sanity is and will remain a core mantra in this business. Our focus on the bottom line will be challenged in the softer insurance cycle. In more challenging markets, our underwriting teams are given clear direction. Always stay focused on profitability and growing businesses where we have a sustained competitive advantage. That said, I'd like to think of Henry Ford's famous remark that we should always remember that the airplane takes off against the wind, not with it. We are present in more than a 100 product areas and operating in 16 countries.
In no market do we have a share greater than 2%, and in most territories our share is less than 1%. When people ask me, "Where does the opportunity lie?" My response is that we have potential everywhere. We need to remain disciplined about which opportunities we take. We are looking forward to the challenge and remain confident we will find areas of profitable growth. Recent improvements in our financial results are important and provide clear evidence of progress. The transformational changes we've made to the organization over the past year will drive our future success. After 1 year into the CEO role, allow me the opportunity to outline how the business is positioned across our 5 core pillars, strategy, structure, oversight, operations, and culture. On strategy, our goal is simple. We aim to be the preeminent specialty insurer on the planet.
We win in the market by focusing on four key areas. Number 1, customer focus. We obsess over the customer. Everything we do must provide something that the standard market does not. Number 2, market-leading expertise. We build local expert teams across the globe who deliver deep capability in every product that we sell. Number 3, speed. We make decisions and serve customers at speed, all enabled by leading technology and local empowerment. Number 4, consistently doing the right thing. We honor long-standing commitments, act with integrity and fairness, while providing dependable claim service. On structure. Competing successfully in many different areas of the specialty insurance industry across many geographies requires us to operate a business of businesses. In this model, specific leaders have clear responsibility for and control over their P&L.
Today, we have 14 distinct business units across Markel Insurance, each with a single leader and a discrete P&L. These business units are grouped under our three ongoing divisions to ensure proximity to executive leadership. Clarity of business ownership and simplicity of decision making sit at the heart of the new structure. Each P&L leader is responsible for selecting their teams, producing their strategy, agreeing to their business plan, designing their product set, and overseeing their expenses. Their total compensation is aligned to the long-term profitability. A second key structural change was shifting most resources from the corporate center to the business units themselves, aligning capabilities with business needs and giving leaders greater control over the resources that they use. On oversight. Our new structure empowers P&L leaders to build market-leading businesses with clear accountability.
By shifting ownership into the organization, executive management can focus on setting expectations and monitoring performance at both the financial and strategic levels. Our financial reporting and management information now fully align with this structure, giving us much clearer visibility into performance and enabling us to quickly identify and address issues where they arise. On operations, technology, and AI. People often ask me, "What are we doing with technology? What does our tech stack look like?" More recently, "How are we approaching AI?" I want to make 2 things clear. I have a great deal of personal interest in this subject. I truly believe that the winners in our industry will be the companies that develop exceptional operational capability and maintain a culture of continuous improvement. Every leader at Markel Insurance is expected to aim for excellence in operations and technology.
Second, with our business of businesses structure, there's no single answer to what we are doing around technology and AI. Our products span highly diverse markets from excess casualty to workers' comp to global war and terrorism across multiple geographies. A single technology solution for this breadth of business doesn't exist. What are we doing in operations and technology and AI? A lot. More specifically, each of our 14 business units have developed a strategic plan outlining how they will invest to become best in class in their respective markets. These plans are tailored to distinct customer groups and include core system modernization, enhanced data and analytical capability, and AI deployment. We are committed to investing in operational excellence and technological excellence. Within Markel Insurance, the current state of our technology is mixed. For example, our London market data and analytics capabilities are outstanding.
Our growth in U.S. personal lines has been driven by exceptional operational leadership. We need to bring our U.S. wholesale and special operations up to the required standard. Our operational investment is occurring at a time where we stand to benefit from rapid advances in AI. Historically, the specialty nature of our businesses made it hard to find a market-leading technology tailored to our needs. Scale was insufficient, forcing us to build bespoke systems or to heavily customize off-the-shelf solutions. Both these types of systems are costly to maintain and typically struggle to keep pace with broader technological advancement. AI changes that. We can now develop cutting-edge solutions for our specialized businesses far more quickly and at a significantly lower cost. AI is helping us serve our brokers faster and policyholders more effectively.
AI is helping us create new value, provide more quotes more quickly, which supports premium growth. We also see AI augmenting underwriting judgment and claims adjudication with the potential to improve loss ratios in selected classes of business. We do not believe AI threatens the core economic value we provide, including risk transfer onto a balance sheet with a customer focus. Instead, it expands our ability to serve our customers and helps us assume more profitable risk. For example, we deployed Harvey AI into our London market warranties and indemnities business last year and extended it to our U.S. financial institutions and environmental lines in the first quarter of this year. We also partnered with Cytora to build a data ingestion system for our U.S. wholesale and specialty business that will significantly accelerate our underwriting analysis and speed to quote.
In parallel, we are building a new operating model from the ground up to revolutionize our competitiveness in the harder placed U.S. small and mid-size U.S. wholesale market. Operational excellence is something that I expect from our leaders. We're fully embracing AI across the organization. Our businesses model is an asset, allowing individual units and their leaders to deploy AI quickly and locally without having to wait in a centralized prioritization queue. We are on the road to transforming our operational capability. On culture. The culture that permeates Markel Insurance is one which encourages leaders and their teams to build businesses that will endure over a long period of time. We expect our business leaders to act like owners. We talk about how to win, not doing work. We have a respect for authority, but a disdain for bureaucracy.
The clarity of our structure and its alignments with the new P&Ls provide a strong degree of transparency and accountability. There is a building sense of excitement for what we can achieve. In short, the Markel Style written 40 years ago is alive and well. In conclusion, for the past year, I've emphasized what we're doing to bring clarity to Markel Insurance's strategy while simplifying the structure underpinning it. These changes aim to empower great leaders to go out and build great businesses. Markel Insurance is now positioned to do just that, and to return to the very top of the global specialty insurance marketplace. Achieving this goal will take time, but we're on the right path. With that, I'll pass you back to Tom.
Thank you very much, Simon. With that, Bailey, we will now open the floor for investor questions.
Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If you are using speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then one again. The first question comes from Mark Hughes with Truist. Your line is open.
Thank you very much. A very strong growth in the international insurance business. I think you've talked about professional lines, marine and energy. How sustainable is that? I know you've put some new initiatives in place to drive the top line. How do you think about the longevity of that market opportunity?
Let's have the man who was running that international insurance business speak to that.
Actually, a lot of things happened just after my tenure as well. Credit to Andrew McMillan over there in London and the rest of the world. It's an important question, Mark. There is a number of specific initiatives and growth areas that we put in place around about the start of the second half of last year. We bought an MGA called MECO in the 1st half of last year. That started putting premium in the book from the 1st of July forward. We opened up in Italy, which was a new measure. We took part in some structured portfolio solutions, which are like London market facilities, which were new to us during the course of last year. A number of things.
There are new initiatives that have taken off, which is, probably new things that will not have as big a growth increases during the remainder of this year. There are also a lot of things where we invested in people, in technology, in teams, in new product, which are now coming to critical mass, I suppose. This time last year, they were still getting going, and now we're seeing some real momentum building behind those. There is some natural growth underneath it. I think, to be honest, 28%, which we struck this year, will be at, very much a high point. I'm pretty confident that we'll see for the duration of the year, you should, you know, expect decent growth from International, probably in low to mid-teens of the, you know, sort of from a GWP perspective.
Yeah, 28% was a terrific start to the year. We genuinely believe, and this is the most important point, that that is profitable growth with our international operations because they're finding new places to go and compete with new and high quality teams that we're bringing into the business.
In a related point, the favorable development in international was very strong. Was there, I won't say one-timers related to that, but was there anything unusual or is that, you're just seeing good underwriting performance emerge in that line?
Yeah, Mark, this is Brian. I would say this quarter was a pretty quiet quarter on the reserving front. Really no kind of chunky increases, chunky decreases. Pretty much our normal kind of just releases of kind of our margin and what we do on a regular quarter-over-quarter basis, coming through in the period. Certainly the one kind of thing year-over-year is we did have some bigger releases a year ago in that international professional book. That book is still holding up very well. It just is not quite as big of a release this year as it was a year ago.
Yeah. On, on the other side of the coin, GL, a lot of talk about the kind of re-underwriting. Declines in GL premium in the U.S. Can you give us an update on that? How much of that is Markel? How much is maybe inflation, loss inflation? How much progress have you made on those initiatives, and when might that return back to positive growth?
Thanks, Mark. It's Simon. I think from a US GL, we did a lot. This is the area of the book of business where we've probably done the most work to re-underwrite. The 2 major things where we've re-underwritten, the first is to lower our average limits quite significantly, probably north of 20%. If you think you were writing, $15 million lines are now $10 million lines. $10 million lines quite often now are $7.5 million or $5 million. We've spread the portfolio more broadly, and we've lowered the limits per risk that we're taking quite materially, especially in excess areas of that particular book of business. What that does is protects us a little bit more from what we call a frequency of severity problem.
What I mean by that is what we're seeing in the U.S. is that when we see cases going to court or being settled, those numbers are often a lot bigger now than they were maybe eight, nine, 10 years ago. You know, people call that social inflation. The way that we and several of our peers have dealt with that is by reducing limits. If one of our insureds were to have a claim against them, our net loss and gross loss will be lower than it would have been, say, seven, eight, nine years ago. That takes time to bring that down, but I think we're in a much better shape in terms of our limit profile over the whole book of the business.
Because we're not writing as much limit, that will have a slightly depressing effect on the amount of premium you take in. I'll take that trade any day because I think it helps profitability. The second thing we've done in that book of business, which is material, is reduce the proportion of construction-related business that we're writing from round about, I think it was 40%-45% of that book of business, down to around 20 and maybe slightly below 20 now. We saw a lot of impact on our book. When we took some of the reserve strengthening a few years ago, it was really that construction part of the book of business that was causing us issues. We've moved pretty hard and fast to reduce that proportion within our book overall.
Again, that hurts us on the top line, but benefits us on the bottom line. That's absolutely the mantra that we're running. Now that we've gotten into a position where we feel much better about the shape of the book and the way in which it reacts in the circumstances we see ahead of us, we can now start to look for opportunities. There are still opportunities within the U.S. casualty market for us to look into the way in which we choose to go and underwrite that risk and market to it. I would signal 1 note of caution on that, though, in that clearly the trend, the claims trend in U.S. casualty business continues to run in probably, we think, the low double digits at the moment.
Where we did see very good rate increases probably for the past year or so, we've started to see those rate increases come under a bit of pressure in the last, I would say, two to three months. Perhaps one of the reasons for that is as the property market has become more competitive, some of those underwriters are now looking for alternative ways to deploy capital, and they're moving into the casualty market. I will say this, and I can't tell you how much I mean it. We will not follow a casualty market down, and we will not lose discipline in that area. It's so critical to us that we keep that casualty portfolio in a position which we've got, gone into it now and start to go into it.
Just be in areas where we feel confident that we can make an underwriting profit over a long period of time. Casualty has been a huge lift. Credit to the people that have been involved in that. It hasn't been easy at the front line in the market 'cause we've had to say no to a lot of brokers that we used to say yes to, and you can imagine how that might go down from time to time. The heavy lifting, I think, in many respects, has been done, and feel very, very good about where the portfolio is at the moment.
Then one more, if I might. You talked about the collateral issue and your potential exposure. Any numbers you can share related to that situation?
Yeah, I mean, as we sit here today, Mark, you know, we acknowledge we've got a shortfall in the collateral. A lot of work's going into that. You know, weeks ago, we engaged an outside actuarial firm to kind of take a look at this for us at another level, get another opinion in the door. We're not gonna share a number today or anything forward, but we certainly believe that that is not material to our operations and capital position.
Understood. Thank you.
Your next question comes from the line of Andrew Kligerman with TD Cowen. Your line is open.
Hey, good morning, gentlemen. I, my first question is around book value per share. It sequentially in the quarter came down to 1,553 from 1,566, and it was in part due to a loss on the equity portfolio of about $58. I'm wondering now, with the S&P 500 Q to date up, I think more than 9%, where would that book value be now, you know, assuming that equity gain? Could you help out with that in the equity portfolio?
Yeah, Andrew. It's Tom. It would be higher. We would do mid-period calculations on that, but your math would be correct, and the number would be higher. That first quarter equity-
Market volatility is something we've had decades of experience with. It's this normal mark-to-market stuff. Those changes were unrealized gains and losses, not anything realized.
Okay. I would think materially higher. Anyway, two quick housekeeping ones. One, the $14 million impairment on an asset manager, could you clarify what that was? Then on the industrials, 6% revenue growth, but 16% operating income decline due to business mix change. What was that business mix change? Two kind of just clarification items.
I asked my partner, Andrew Andersen, to chime in as well. On the industrial market, again, almost like the equity markets, that's just normal volatility. It's a relatively soft overall GDP kind of environment out there. The K-shaped economy that people talk about, well, we've got both pieces of the K's going on out there, and I think the economist description of that is real. I'll ask Andrew Andersen to chime in from that point.
Andrew, on the financial question first, you know, from time to time, we test business units for impairment around here. That's part of normal GAAP accounting procedures. Sometimes there's triggering events that cause us to do that on a shorter term basis. In a small business unit within there, we felt like the carrying cost was not appropriate. We tested it for impairment, and we concluded that an impairment was the case. However, if you step back and you think about the cash earnings potential of that segment, there is no change. That performance was already baked into results you've seen in recent quarters. I think you need to separate out the non-cash charge versus the cash potential of that business going forward. As it relates to your transportation question, you're right.
We mentioned mix in the quarter, and the transportation being a drag there. One, I think Tom hit it on it today, and just now again. Two, if you recall, four or five quarters ago, Brian actually laid out a nice narrative around these are cyclical businesses, but they produce great returns on capital over time. Just to add a little data for you, with dry van shipments, which is one measure of industry volume, have declined from all-time highs a few years ago to multi-decade lows today. There's a whole host of factors contributing to that: oversupply during post-COVID years, weakened freight rates, higher financing costs, and now elevated fuel costs, at least temporarily.
The good news is this equipment must be replaced over time, and as the economy grows long term, so does the demand for this equipment. Our businesses operating in that segment are market leaders. They operate with no debt, they're led by industry veterans, and they maintain a long time horizon for each investment that they make, and we continue to believe we're still well-positioned to capitalize on growth in the future.
I'll close and appreciate Andrew, just one second. Andrew Crowley, I appreciate the detail. Let me add one bit of color to your comments about the amplitude of the cycle this time around. In the immediate aftermath of the onset of COVID, there was a super cycle of demand. These businesses were wonderful and produced sort of above long-term trend line results. We're now in a period where that equipment's out there, it's part of the inventory, it's getting used up. We're through a soft part, but the size and scale of the amplitude of that wave has been bigger this time around than normally has been the case.
Last thing I'll say about it is, if we had the opportunity to buy those businesses again at the price we paid for it, we would do it in a New York minute, because they've produced wonderful returns on capital measured over meaningful periods of time. We have every expectation that'll continue to be the case, and we would love to find more of them as we could.
Maybe real quick on the impairment, Andrew. It's a little bit different than the normal impairment. Here we're talking about a single equity investment that goes through an impairment calculation. That's a little bit different in the accounting world, not to go too deep into that, in terms of the evaluation and what's done on an individual security that we hold versus a business impairment. They run through different parts of the financials. The impairment on an equity investment, you see that go straight to adjusted operating income and our kind of reoccurring earnings. Whereas if you had an impairment on a business unit, it would go into the amortization, kind of below the line section. We're talking about the former here, not the latter, in terms of the evaluation we did.
That was, that was very helpful. just two last hopefully real quick ones. Simon, love your comment about vanity, insanity. As we look at the rates from a backdrop in the release, you talked about notable rate increases in personal lines and general liability and notable decreases in property, cyber, and energy. Any quick numbers you could share with us? Then I have I'm sorry for so many. One more quick one.
I'm turning to Brian's notes on this. He might be able to.
Yeah
give you a bit more detail on that.
If you look at kind of where we are, I mean, property, you know, as you would expect, kind of what we're seeing there, from a rate decrease across our portfolio, I'd say high single digits across the gamut, from a decrease standpoint. That varies dramatically depending on the size of accounts. The larger accounts, we're seeing a lot more of that. That's where we're doing probably more judicious underwriting. Smaller SME accounts, not as large. It does vary based on the spectrum. Maybe the other place I'll go, you know, casualty, Simon talked about that and just kind of what we're seeing, you know, our view on trend in the low double digits.
Rates are still in the double-digits, but they are weakening a little bit from where we would've been in the low teens a year ago, now into the lower double-digits range. On the personal lines side, I mean, a lot of products in there, but most of that book is in our, in our personal lines property space, not nearly under the same amount of pressure there as the general property market. We write that on an E&S basis. It's very customized in terms of the coverage and what's out there. Those rates are more flattish compared to the broader property market.
Got it. I guess lastly, stock looks like it's trading off about 7% this morning. It looked like, you know, some pretty stellar property casualty results. A little mixed elsewhere. What do you gentlemen think it takes to kind of get the stock moving up north from here?
Performance. I think we've demonstrated a few quarters of doing that. If the market disagrees with the performance that's happening, we'll continue to repurchase shares. We are price sensitive in our repurchasing, so when the stock price is going down, we buy more.
Thanks very much.
Again, if you have a question, press star and the number one. Your next question comes from the line of Andrew Andersen with Jefferies. Your line is open.
Hey, good morning. On the collateral discussion, if I look at some statutory data related to this reinsurance relationship at year-end, it looked like the collateral relative to the recoverable was near 100%. I guess my question is has there been some loss development on this relationship, or is the collateral shortfall that you're thinking about in a low single digit million range?
Yeah, sure. Andrew, it's Brian. We evaluate loss ratios on all of our programs every quarter. You're right. If you go to our annual statement, we would have had a loss ratio where the collateral was sufficient. We did increase that loss ratio a little bit here in the first quarter, as we react to incurred claims trend. That is what creates the shortfall that we're looking at today. Like I said, we're getting an independent actuarial review with a third party, bringing in some other data, bringing in, you know, more robust data to really refine that estimate a little bit better than what we've got today.
That's kind of our next step in the process, along with the State National team, that's done this for a long, long time, continuing to pursue all their avenues under the contract to get additional collateral and offset against where we sit today.
Okay. Thank you. Simon, I think I heard you mention underlying claims severity running low double digits. How should we think about your implied reserve margin today, and how much conservatism remains embedded in those carried reserves?
Yeah. I, when I made those comments, I sort of, it was a general comment about the industry. Claims trend. If anyone knows what the claims trend is in casualty, if they could tell the industry, that would be fantastic. I think that is genuinely a, you know, that is obviously what we get paid to do, to try and have a view on that. You know, coming back to that, how do we feel about the reserves? We have been extremely conservative in our reserving of that GL portfolio because we saw this start to happen three and four years ago. I think, you know, looking back on that, I would say Markel were one of the first canaries in the coal mine to really see these trends developing.
Therefore, when we've looked at those reserves over the last, I would say 18 to 24 months, we haven't had to touch the GL reserves a great deal specifically to strengthen those ones up. I feel with the re-underwriting that we've been doing recently and the way in which the portfolio as a whole has performed against those GL reserves that we've got, look, from what we can see, I feel quite good about that. What we will be watching for, though, is this pricing dynamic, which I mentioned in comments earlier. If people start to get ultra-competitive in U.S. casualty, that is where things go badly wrong in this industry.
I am concerned, and I'll say this on the call, about a number of kind of new entrant MGAs in this space backed by sidecars, you know, and private capital effectively, which in some areas are being very competitive in areas that we know have caused significant losses in the past. That is where people might get hurt, certainly financially, I think over the next few years. We're going to be staying out of those games, and we're going to keep focusing on the areas where we know we can perform and bring some tremendous value. From a reserve perspective, from my perspective, everything we've done on that, doing that conservatively early has put us in a nice position to start producing the results that we've done the last few quarters.
To Tom's point around performance, that's exactly what we're focused on for the next few quarters as well. Brian, you might have some extra detail on that.
Yeah, couldn't agree more with what you say, Simon. Maybe one thing I would add on the casualty space specifically, we've talked about this a little bit before, is we do have a reinsurance protection that we started, pseudo call it, 2019 and forward. It's a risk attaching treaty, so it's not perfect to that. That is a stop loss treaty in terms of how it functions. That also gives us a backstop if we were to have to strengthen reserves. We've done some nominal strengthening of the gross since we have took our charge in 2023. Not very much of that falls down to the net, but overall, as Simon says, we've been able to.
We took a big crack at it, you know, over a couple of quarters in 2023 and then a big swing at it the end of 2023. We have not had to do so much with that since that time, which is what we had intended to do when we did all the deep dives, brought in third-party firms, took a really long and hard look at the construction trend.
What is that construction defect, kind of tail risk factor and longer tail than maybe the industry had projected there? You know, that drove a lot of the re-underwriting actions we were talking earlier about, is kind of what we saw coming out of some of those reserving observations and being out in front of that and really adjusting the portfolio to the areas where we feel we can compete and do well from a profitability standpoint. Great. Thank you for the answers.
Your next question comes from the line of Mark Hughes with Truist. Your line is open.
Yeah, thank you. I think you've touched on this, kind of some sense of what you think the non-insurance business profitability might be in coming quarters. Tom, you pointed out how the, you know, you're just looking at some cyclical pressures in certain end markets and these businesses have certainly created a lot of value. When we think about kind of profitability through the balance of the year, it sounds like insurance, good. Then, how should we think about those non-insurance businesses?
I think the first quarter gave you a pretty good picture of just the conditions in the economy, and we have 20 some businesses out there arrayed through industrial and consumer. We've got some that are doing very well. We've got some that are setting all-time records, and we have some that are on the softer side of the curve. I don't really have an aggregate point of view other than that they have always done a pretty good job of coming through. I'm looking to Andrew if he would add a comment to that.
Yeah. Agree with what Tom said. I think if you simplify the 3 divisions together, 1, adding industrial to consumer and other, you start to see just more flat-ish. Within financial, we called out in our comments both a $31 million gain related to the sale of Velocity last year, as well as the $14 million impairment of an equity method investment within. If you take those 2 numbers and you simply appreciate the unique nature, and in one case, non-cash nature, financial is also flat. Overall, I think when Tom colors the first quarter, we are not a company that adjusts earnings, but I would encourage you to look at it through that lens and marry that with Tom's comments around it's a reasonable representation of the state of affairs.
Yeah. Let me conclude just by drawing back to the 80,000 foot level, if you look at Markel Group as a whole. First quarter's done. As we went into this year, here's the sort of back of the envelope math we were looking at. With the business plans that existed within our insurance operations, let's say in round, rough numbers, call it $700 and some million of underwriting profits that we think was a reasonable number. I think we're on track to hit something like that. If you add the industrial, commercial, financial businesses, that set of businesses last year made about $850 million, rough, rough. We fully acknowledge that we thought it would be down from that wonderful result last year, but not by major amounts.
Just in round numbers, so we can do math in our head, call it 750, something like that. You take the investment income, the recurring interest in dividend income, that's pretty solid. That rounds to $1 billion. We're on track on that. If you take the equity portfolio and just normalize returns, let's say we're at 8% total return normal expectation. We got 2% of that through dividends. Six percent of that would be the normal unrealized gain that would take place. That's another $700 million or $800 million. You add all those numbers together, and you get to a number of over $3 billion.
There's a $200 million of interest expense, and you have tax expense, some of which is deferred by virtue of the fact that we have the unrealized appreciation taking place in the, in the equity portfolio. You add all those kinds of numbers up, even on an after-tax basis, you get to double-digit returns on the capital we have, and we're continuing to divide them by fewer shares. Just to give you some numbers on that, it was interesting because I know the 3 of you who have asked questions, and Mark, I appreciate the fact you've asked a broader question, we oftentimes get compared against insurance company peers and not so much to some of the industrial company peers, and the holding companies that I haven't included.
Let's keep it within the yellow lines of insurance. I was looking this morning. With our share count at about 12.5 million shares, as I said in my comments, that's down about 10% from the peak of 14 million shares, and it's taken us about 5 years to do that. I'm going through the list of looking at things, you know, Allstate these days is down about 260 million shares, and basically you go back 5 years. They've bought in 10% of their shares in 5 years as well. Going in alphabetical order, American Financial Group has about 82 million shares outstanding. If you added 10%, that would be 90 million shares.
We have to go all the way back to 2011 to get to where they've taken out 10% of their share count. Go to Arch Capital, wonderful company, 359 million shares outstanding currently. Again, you go back about five years and they've bought in 10% of their shares as well. W. R. Berkley, a wonderful company, we have a lot of respect for, about 380 million shares. You have to go all the way back to 2014 to see them having 10% more shares than they do right now. Berkshire Hathaway, which obviously we admire and think a great deal of, you gotta go back to 2019. Six years it took them to buy 10% of their stock in.
Chubb, at 391 million shares, again, about 5 years since they were at a 10% increase to that. Same kind of timeframe we've done that. Fairfax currently at 22. Similarly, it would be a 5-year count to go back to get that 10% in. Hanover Insurance Company, 35 million shares. That's saying you gotta go back, 6, 7 years for them to have bought in 10%. Kinsale, you know, 23 million shares. They've just recently started buying in some stock, but the stock count has been going up. If I were them, I would do the same thing with their valuation. You look at us, again, it's taken us 5 years to do it. I think it'll take us less than 5 years for the next.
Progressive, 586 million shares. You gotta go back to 2010 for them to have had 10% more shares outstanding than they do right now. RLI, wonderful company, 91.8 million shares outstanding. You go back over the 17 years of data I'm looking at, they've never bought back a meaningful amount of stock. Again, RLI's been very well valued, so I think that's a correct capital allocation decision on their part. Travelers, 216 million shares. Again, it would be about just a little over 4 years for them to have bought in 10% of their shares. I think we're actually stacked up pretty well. Again, someone was asking about the stock price and performance. Well, again, actions speak louder than words.
You're seeing us execute. Even through some of the challenges that we've had over the last couple of years, which we've spoken frankly and honestly about all the way along, we still had enough money buying 10% of the shares and not add to balance sheet leverage to do it. That's been out of cash flows. I think it's a very strong statement. Given the conditions of the business right now, the people we have running it, I'm optimistic about how the next several years play out.
Thank you for that, Tom. Appreciate it.
Thank you. This concludes our question and answer session. I would like to turn the conference back over to Tom Gayner for any closing remarks.
Thank you very much. We appreciate your participation. We look forward to catching up with you. We've got the Reunion coming up on May 20th here in Richmond. We would love to see you there. It's a wonderful way to, instead of hearing from 3 or 4 of us, to hear from hundreds, if not thousands. We would love to see you here in Richmond on May 20th for our annual meeting, which we call the Reunion. Thank you.
This conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.