Greetings and welcome to the Markel Corporation second quarter 2009 earnings conference call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Steve Markel, Vice Chairman for Markel Corporation. Thank you Mr. Markel, you may begin.

Thank you, operator, and I would like to thank all of you who have joined us this morning for Markel’s second quarter conference call. During our call today, we may make forward-looking statements. Additional information about factors that could cause actual results to differ materially from those projected in the forward-looking statements is described under the caption Risk Factors and Safe Harbor and Cautionary Statement in our most recent Annual Report on Form 10-K and quarterly report on Form 10-Q. Our quarterly report on 10-Q, which is filed on our website at www.markelcorp.com, also provides a reconciliation to GAAP of certain non-GAAP measures, which we may discuss in our call today. I think overall our quarter was pretty good. It sound like it always has been better. On the underwriting side, we continue to report profitable underwriting results, although not as good as we would like. The market is continuing to soften and we did have a couple of minor surprises which adversely affected the underwriting side. But our disciplined underwriting approach I am extremely proud of and we are writing business at improper prices and we are starting to see some traction in improving rates. And the message is clearly out in our office is not to write business where we can't make a good return on our investment. On the investment side of the business, things are looking much, much better. Tom will get into that in a few minutes. But the second quarter investment results were very gratifying and the markets continue to be kind to us in July and we’ll hear more about that later. Our format today will be the same as always. Richie Whitt will lead off with a financial review focusing primarily on the six month numbers. Paul Springman will discuss the insurance business around the horn and what each of our acquisitions is doing and Tom will follow that up with an investment report. I will moderate questions and answers when they are through. With that, Richie, I’ll let you get on with the business.

Thank you, Steve, and good morning to everybody. I am going to follow the same format as in past quarters, as Steve said. I will focus my comments primarily on year-to-date results, start with discussing our underwriting operations, follow that with a brief discussion of investments and then obviously Paul – Tom will follow-up with more specific comments in each of those areas. And then I will finish up by bringing the two together with a discussion of our total results for the six months. Through the first six months of 2009, economic conditions and strong competition continued to negatively impact our gross written premium volume. However, on a more positive note, financial markets showed signs of stabilization and returns for the overall market and more importantly our portfolio were significantly positive through the first half of the year. Starting out with underwriting, gross premium volume decreased 16% to $992 million in the first six months of 2009. This was partially due to the U.S. dollar strengthening against other currencies over the past year. Excluding the impact of foreign currency movements on our London market business, Markel’s gross written premiums were down approximately 13% in the first half of the year. And this really could be summed up based on three factors. The first, reduced business activity as a result of the recession has led to lower premium volume on new and renewal business. And example here would be our contractors’ book of business. We have a very large book of contractor business and obviously that activity has slowed significantly with the recession. Second, Markel made the decision back in the fourth quarter of the year to hold rates in certain lines of business, increase rates. Many of our competitors continue to be more aggressive on pricing and as a…

Thank you, Richie, and good morning everyone. You’ve just heard Steve’s opening remarks and Richie’s report on our numbers from the first half of the year. And in a few minutes Tom Gayner will take us through the investment results. But today it’s my pleasure to give you a report from the operational side of our business and to update you on two or three important fronts. The results from the first half clearly represent a mixed bag with continued competitive pressures from the marketplace. Our combined operating ratio for the six months, as Richie mentioned, is 97%. While this fell short of our ultimate goals, it is nonetheless an underwriting profit. And I can assure you we’ll do everything within our control to improve that number in the second half of the year. My report today is an abbreviated one primarily because market conditions are relatively static since our last visit during the conference call in May. If we were to go back to last fall as we began our planning process, we had hoped for a market change or some signs of improvement in the pricing environment by the middle of this year. Although we budgeted conservatively and did not factor in those market changes, we are nonetheless disappointed that the marketplace remains as competitive as ever. Competition continues to emanate from standard carriers with extremely aggressive pricing principally focused on large commercial accounts. Continued expansion from both Bermuda based reinsurers and London syndicates in the U.S. domestic marketplace and our normal day-by-day competitors fro the specialty and excess and surplus lines areas. Last quarter I reported that Markel’s pricing levels had begun to move up and we began moving prices late last year. Most of our products are now reflecting single-digit price increases and are clearly headed…

Thank you, Paul. Good morning. Well it is sure more fun and now I will be bringing you some good news on the investment front after what seemed like a couple of dog years of (inaudible). Through the second quarter our total investment return was a positive 5.1%. The elements that comprised that figure were equity returns for the six months of negative 1.1%, fixed income return of 4.8%, and foreign exchange translation benefits of 1.2%. In reverse order, I would like to comment on each of those components. First, the foreign exchange. When I reviewed my comments from last quarter, I see that the FX effect was a negative 0.3%. As I mentioned at the time, it was important to remember that whatever FX you see it is only part of the picture. Negative effects on investment returns are largely offset by gains in underwriting results, which we run as match to book as possible. Today, we have a positive FX effect to report of 1.2% addition to our investment results. That positive just like last quarter’s negative remains only half the story. Our underwriting results were penalized during the quarter by a roughly offsetting amount. In short, as always, please take out the FX effects, whether they are positive or negative. FX is a teeter-totter with investing on one side an underwriting on the other. We work to match our investment assets to our insurance liabilities such that they economically offset one another and neither contribute nor detract from the real vale of Markel. In fixed income activities, we enjoyed another quarter of positive returns. For the year-to-date we earned a total of 4.8% and we are happy to see the improvement in overall credit markets take place. The crisis environment of the last year appears to be…

Thank you, Tom. As I think most of you know, Markel thinks about our business and manages it with a view towards the long term future success. We are focused on both the underwriting side as well the investment side of the business and we seek to mange both intelligently. I am extremely proud that our underwriters are showing discipline on the underwriting side of the house letting business go away where we cannot reach our price levels that we need to have. We are confident that both the markets -- the insurance markets, and the economy will improve, which will drive future volume. In the mean time, we will stick with our (inaudible) and do what makes a lot of sense and underwrite profitability. Business coming on our books at combined ratios at or above 100 absolutely makes no sense and so it’s not in our interest to write premium volume just to have premium volume. We believe that the progress we are making with One Markel is very, very good that One Markel will kick in the next several quarters and we will be much more effective in the marketplace. And at the same time there is no doubt that most of our irrational competitors will not be able to continue, at least not be able to continue to be irrational. On the investment side, we are seeing markets improving and you heard Tom’s comments. Additionally, as the markets improve and as the insurance environment improves, we’ll start to think about moving some of our excess liquidity into longer term and longer duration assets, which will meaningfully improve the current yields on some of those securities. At the current time, we continue to have and will have a fortress balance sheet, so that’s not any instant solution, but…

(Operator instructions) Thank you. Our first question is from the line of Michael Nannizzi with Oppenheimer. Please state your question, sir. Michael Nannizzi – Oppenheimer: Thank you. Steve, could you talk a little – or Paul talk a little bit about the E&S business and you know you mentioned not writing business at unattractive margins that – and I just want to understand you’ve got a loss ratio of about 70% looks like 71% on a calendar year, 73% on accident year in the second quarter. Can you just kind of talk about that a little bit more your outlook is for pricing in that segment?

Yes, I will make the first statement and I’ll let Paul pick it up after I am through. There are two or three different elements of that and I think the one area probably that has had, in terms of our premium volume dollars, may be a disproportionally larger impact is our concern about the pricing in the cat exposed areas of the marketplace, both wind in the Gulf and on the Florida coast as well as earthquake exposure in California and the Northwest and other places. Our view is that we need to make an underwriting profit over a long period of time and earn 20% return on the capital that we invest in those businesses. In any one year, you can write earthquake or wind exposed business at ridiculously cheap prices and look like a hero. If there is no earthquake next year and you wrote a ton of business, penny is on the dollar. You still would look like a hero. It makes no sense in our opinion to do that. And when we run our models and establish rates that we think are appropriate for those exposures we are simply not willing to make stupid bets about the frequency or severity of those sorts of events. And today, broadly speaking, the marketplace has much more optimistic view and I think is driven by a desire to sort of gamble that this year might be a good year. And so in those areas we’ve seen probably – we’ve taken a view that we need significant price increases to go where we want to go. The market is still very, very competitive. And unfortunately, we are losing business. It’s not that our asset types for catastrophe exposed business is any lower. Our appetite to do silly things is…

Yes, Michael, I would like to give you real-life example that just came to my attention this week that sort of encompasses both the property cat exposure as well as what’s going on in the liability side. We had a relatively modest restaurant insured in Miami Beach, Florida, six mile from the coast, so clearly in Zone I. And I don’t recall exactly if it was $1.5 million or $1.6 million of property value and a $1 million companion liability policy to go along with it. We felt that the property was probably slightly under-priced. We wanted to take our property price from $25,000 to $32,000 and take our liability price from $21,000 to $22,000, making the overall total of $54,000. And the client was able to find in this marketplace three different proposals for less than $40,000. So, in this market, what happens is not only do we lose the property catastrophe business because we are pricing it to what we think is a reasonable return, we lose the liability business that goes along with it because the appetite from a lot of the competitors is much stronger than what we believe right now. And we are seeing that sort of compounding effect especially in coastal areas where we are writing property and liability cover that both – when one leaves us, they both leave us. And that’s part of the reason for the premium shortfall is. As far as your comments on the loss reserving side, I think Steve covered it in terms of our inherent conservativism with our more recent years. Michael Nannizzi – Oppenheimer: Right. Well I mean if I can just follow-up a little bit then, I mean totally understand I mean you have lower top line and your expenses aren’t as nimble as the top line that you will see the combined start to creep up. But I guess my question is the loss ratio is higher and so it makes it – I would think it will make it tough at a 71 or 73 loss ratio to earn an underwriting profit on just current year business. And so I am just trying to understand I mean it sounds like all of those things make a lot of sense and those are controls that you put in place to make sure that you don’t write business that’s not profitable. But I am just wondering about the business that is on your books and whether or not I am thinking about that correctly.

I think probably the answer to the question would be that in the 71 loss peak [ph] we are assuming those factors are in place. Where others may be writing the exact same business and not making those assumptions and making initial selections that could be 10 points lower. Michael Nannizzi – Oppenheimer: Okay. Got it.

No way to measure that precisely. But our reserving is very, very conservative and is based upon trying to make -- as close to the worst case assumptions that makes sense. Michael Nannizzi – Oppenheimer: Got it. Okay, thank you very much.

Thank you. Our next question is from the line of Sam Hausman [ph] from Lincoln Square [ph]. Please proceed with your question, sir.

Good morning. I just have a couple of quick questions. Can you comment on what percentage of your reserves come from contracting business roughly and also what the loss ration and the combined ratio is booked on that business?

We wouldn’t have those. Don’t have those in the room right now. We can probably look into it and give something back to you.

Yes, I think generally the segments that we report are about as much detail as you get as it relates to a specific line of business. But I think it’s fair to say we do write a meaningful amount of contractors’ business, the volume is disproportionately adversely affected because of the lack of activity in the industry. And so we are seeing a decline in premium volume because of the decline of the activity in the industry. Converting that to the outstanding claims is a little bit more complicated and our loss experience historically has been generally good with contractors. And it’s certainly going to be affected by the same things that I made comments to before relative to inflation and the like. But our percent of reserves for contractors wouldn’t be disproportionately higher or lower than the amount of business we like.

Okay. My second question is can you comment on how much excess capital you are maintaining relative to what you think you needed and also related to that I think there was something by S&P that was announced that you may have been put on some type of negative outlook or watch. And to what extent that’s going to require to keep more excess capital and also maintain the level of equity investments in your investment portfolio lower than you might otherwise keep it?

Yes, I think I will try to deal with several of those parts and Richie can pipe in specifically with regard to S&P. Today, we have $800 million excess of cash and liquid securities at the holding company, which is a multiple of two or three times what we would normally and historically have had of excess cash at the holding company. We have capacity to take dividends out of the regulated subsidiaries. And so the number of excess capital depending upon how you defined it will be plus or minus something relative to those numbers. The more practical answer to your question is that as of – as we are looking at the marketplace today and given the economic downturn and given some of the irrational behavior we are seeing in the marketplace, it’s our view we are going to have some very interesting and exciting opportunities to put that capital to work. And so if you were to ask me how much of that $800 million is excess, I would say none because I believe every single penny of it is going to find its way into an opportunity sometime in the next 12 or 24 months in terms of either expanding our business, acquiring something, or doing something else it’s pretty exciting to build value in the organization. As it relates to Standard & Poor’s, they did release in the last couple of days a review. Standard & Poor’s does not follow or cover Markel’s insurance companies and does not give Markel a claims paying rating. We decided sometime ago that we would sort of allocate the money we spent for ratings judiciously. Our view is that the rating agencies should charge us nothing in fees for their services. The Standards of the world require that you…

Okay. And finally you had a – you benefited from a lower tax rate in the quarter. Can you give us some guidance as to whether the tax rate will revert to the historical I guess 26% to 30% or whether this is a new run rate?

Well, the issue with the tax rate really is with the lower pre-tax. We continue to increase our allocation to the municipal portfolio, which is tax advantaged. And so as muni income makes up a bigger portion of our pre-tax income that’s going to drop the rate. So, through the first six months of the year, we were below sort of what we would have budgeted from that for a pre-tax income and that drove that rate down. To the extent we have a better second six months in terms of pre-tax income, that rate will start to come up as that municipal investment income becomes a smaller percentage of the pre-tax. So, we’ve historically been in the 28 to 30 range and I think we were 22 through the first six months. If we do what we plan on doing, which is increase the pre-tax income in the second half of the year, that rate will start moving towards the 28 to 30. I don’t know that we’ll completely get there by the end of the year though.

Thank you.

Thank you. Our next question is from the line of Meyer Shields with Stifel Nicolaus. Please state your question.

Thanks. I guess let me start – I don’t know if this is for Paul or for Steve, but you talked about the architects and engineers and lawyers seeing enough taking claims activity and that affected loss ratio. If you are expecting the same sort of uptick because of the economy in general and special liabilities, would should that have affected loss ratio as well?

Well, we have seen a slight increase in frequency, Meyer, and we are addressing that with increased pricing in virtually all of the professional liability lines. Architects and engineers and lawyers, in particular, have had some unusual activity over the last couple of quarters. But we’ve seen an increase in frequency in our employment practices liability claims. When people lose their job for whatever reason and more importantly can't find a comparable job in three months or six months, they have a tendency to turn around and look to their former employer that it was their former employer’s fault, not their own. We’ve seen a slight increase in some of our medical claims in terms of frequency. People just seemed to be getting injured a little bit more frequently today and it’s not surprising that a lot of people that present medical claims are people that are unemployed as well. So we can do the example after example, but we’ve addressed virtually all of the lines with the appropriate pricing increases where needed. And I would like to remind you that this historically has been one of our most profitable segments inside of Markel for a number of years and we continue to have a high degree of confidence that overall the professional lines will produce healthy margins for us again in 2009.

Okay. That’s helpful. A question for Tom. You’ve always focused on quality of management teams when you make your investments. Can you sort of share with us your thoughts on Berkshire because some of the noise from the management changes there seem to imply that they are planning for the – for a succession to Warren Buffet?

I am sorry, you broke up a little bit at the end.

I am sorry. I guess just with the movements of putting David Sokol in charge of that, I am just wondering how you are looking at possible management succession?

Right. Well in terms of quality of management, I think you would be hard pressed to find a better example of quality managements in Berkshire. You will say the proof of the pudding is in the eating. The results that they have put on the books over the years are as good as they get. The culture the company has and continues to build throughout the organization is certainly something I am entirely comfortable with. It’s our largest holding and continues to be so. And I would expect that would continue to be the case.

Okay that’s it. Thanks so much.

Thank you. Our next question is from the line of Jay Cohen with Banc of America. Please state your question, sir.

Thanks. Most of my questions have actually been answered but may be just a follow-up with Tom. If you could talk about going forward some of the industries that you find attractive from an equity standpoint that might be interesting.

Yes, Jay, I think the main thing that I am looking for these days is a steady eddy and in fact in making the presentation to our Board, I talked about what I call the silver medalist strategy and what I am looking for is not the person who is going to get the gold, but the person who is going to – or the company and the type of industry that is likely to win the silver medal. And what I mean by that is that I think that the dispersion of possible outcomes is very, very wide right now because either you can get – you can think about logically a situation where the economy gets better, you have a real inflation, dynamics start to take place with everything that’s going on with the government. Or on the other hand, you can – people can and do argue fairly cogently and intelligently that there are deflationary forces at work that are still very, very large and out there in a big way. And under both of those macros environments, there are very, very different winners and losers. Because if you’ve got inflation and you need to – you are going to have inflation, you would want to own a bunch of gold, commodities, natural resources, things that had pricing power. And the last thing in the world you would possibly want is a government bond. You are going to get killed with long term government bonds in an inflationary environment. On the other hand, if you have deflation, the gold medal winner are going to be government bonds. That is which you would want the most. And natural resources commodities and things like that would be absolutely killed. So give the fact that it’s impossible to know with precision who would be the gold medal winners in either one of those scenarios, the more important thing is to make sure that you don’t have what would be a big loser in either environment. So what that reduces to for me is companies that have pricing power and the ability to pass through whatever cost they have, which protects you in inflation, but are necessary good, viable, durable businesses that are going to continue to do business even if during a slower economic environment. What I read about specifically and it’s one of our large holdings is Wal-Mart. As I have talked about, nobody goes to Wal-Mart because they dream of going there. They go there because Wal-Mart sells what people need. And that will happen no matter what the economic environment is. And they have a low cost system to deliver those goods into the hands of people all around the world. So, that’s sort of the connecting theme is to look for the silver medalist that’s not going to win the gold in either one of those environments, but sure is going to be there close at the finish line and not running risks of life out.

Appreciate it, as usual, Tom. Thank you.

Thank you.

Thank you. Our next question is from the line of David West with Davenport and Company. Please proceed with your question. David West -- Davenport & Company: Hi and good morning. In you 10-Q you’ve talked about two unfavorable court rulings that went against you. I wonder if you could talk about those a little bit and what impact that had on your reserving this quarter.

Yes, Dave, I’ll talk a little bit about that and I don’t want to get into too much detail because both are still in litigation. But, there was sort of unusual events in two senses given that the size of them and just we don’t – we rarely see these sorts of things happen. So they were unusual in term of the size and just the fact that they don’t happen very often. In terms of their impact on the quarter, they were about $25 million in the quarter between the two of them. But as it says in there, it was litigation issues that went against us and we decided to take fairly conservative positions in terms of what we needed to reserve for them. David West -- Davenport & Company: And does this – was this largely seen in the higher loss rates in the E&S units?

Yes, it was. David West -- Davenport & Company: Okay, very good. Kind of tackling I guess the contractors comments a little bit more, could you – I know it runs across multiple lines of business for you, but is there any way to characterize your book in terms of largely residential exposure, infrastructure, commercial, something along those lines?

The majority of our book, David, are smaller artisan contractors anywhere from one to five person firms. We have over a period of time done some residential contractors, some commercial contractors, but it’s normally plumbers, electricians, window washers, tree trimmers, janitorial services, things like that, small independent firms as opposed to big international companies. We clearly have the underwriting expertise and the appetite to write larger, more complicated accounts but seems to where the competitive pressures are the strongest right now. Historically, we have done well on all of those classes of business. But a lot of it is – or the results are tied to the economy and the ups and the downs of what goes on in segments that we have absolutely no control over. David West -- Davenport & Company: Very good. I guess, Richie, this is probably one for you. The expense ratio overall came in a little less than I would have thought and I think you mentioned a lower profit-sharing contribution. Can you give us an idea of roughly in dollar size how much lower that was versus the prior year?

Versus the prior year it was I think $30 million, is that correct? Approximately $30 million less than prior year. David West -- Davenport & Company: Okay. And is this kind of a once-a-year true-up or is this going to have a continuing impact on these--?

We are going to look at every quarter. I mean clearly we are running behind what our goals were for the year. The year is not over, we still got six months and we can make up a lot of ground in the second half of the year. So, if the results start to get more in line with what we were looking for as we entered the year, we’ll start moving that number back up. But we look at it every quarter. And the $30 million, we were – we had some bigger-than-expected bonuses for the year before and so that sort of contributed to the size of that difference between the two years. David West -- Davenport & Company: Very good. And lastly, you’ve mentioned you may go ahead and pay off your $150 million on your line of credit perhaps in the next month or so. Could you remind us what the current is you are paying on that line of credit?

Roughly 1%. David West -- Davenport & Company: Big number there.

Yes, yes. David West -- Davenport & Company: Sure you want to give that back?

Well, for a little while. David West -- Davenport & Company: Alright. Thanks very much.

Okay.

Thank you. Our final question is from the line of Mark Dwelle with RBC Capital Markets. Please proceed with your question, sir.

Yes, good morning, I think Dave actually picked off all my last questions but for one. Tom, you had given the year-to-date return on the equity portfolio and I just missed that number.

Alright. Through June it was a negative 1.1%.

1.1%?

Correct.

Okay. That is actually all my questions. Thanks.

Thank you all very, very much. We appreciate you participation today. As always, if you have any further questions, don’t hesitate to call us here at our offices in Richmond, and we wish you a very, very good day. Thanks a lot.

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.