assured and supported by assets, prudent use of debt can be higher. Bias though is on low debt. One of lessons learned from financial crisis is that there's much more leverage in the system than you realize. SM - Markel uses prudent amount of debt in its own port, so that extends to its investments.
Q: View on financial equities.
TG - Have done well with insurance. Haven't done as well with banks, so have very limited exposure
Q: Which qualities of other insurance companies are so negative that you would you be short them. Which other two insurance companies in the industry do you admire most.
TG - Admire underwriting profitability and reserve development. Travelers and Chubb are two competitors they think highly of. BRK is also their largest position. SM - Progressive and mindset of identifying and serving niche markets in personal auto space. Geico in terms of marketing. Power of renewals. What allows you to grow from 2%-10% is trying to manage EPS. Increasing marketing cost negatively impacts combined ratio. But, if you keep a client for 10 years, you get a much better return on that investment. Retention of business is really important element of building insurance company, particularly property and casualty. Progressive also were hawks an making sure insurance reserves were more than necessary. P&C insurance companies 25, 10 and five years ago. There have been very few long-term success stories.
Q: What are you seeing in underwriting markets today.
SM - Trend not great. Relative pricing in 2013 was good. Rate increases quarter after quarter for last 2-3 years. Cumulative impact over time is quite good. Level of pricing pretty strong overall throughout industry. Toward end of last year, into 1Q, particularly in property (especially casualty) that is starting to change. Hard at this point to judge magnitude. Have let some business go away because they're not willing to compete at that pricing. If peers want to cut prices and have underwriting losses, then Markel won't try