Q4 2021 W R Berkley Corp Earnings Call
The forward looking statements can be identified by the use of forward looking words, including without limitation beliefs expects or estimates. We caution you that such forward looking statements should not be regarded as a representation by us that the future plans estimates or expectations contemplated by us will impact to be achieved.
Please refer to our annual report on Form 10-K for the year ended December 31, 2020, and our other filings made with the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results.
W. R. Berkley Corporation is not under any obligation and expressly disclaims any such obligation to update or alter its forward looking statements, whether as a result of new information future events or otherwise I would now like to turn the call over to Mr. Rob Berkley. Please go ahead Sir.
Hi, Josh. Thank you very much and good afternoon, all and I would echo Jonathan's comments welcome to our fourth quarter call.
Joining me are co hosting with me is also a bill Berkley, our executive Chairman and rich <unk> Our group CFO .
Follow a similar agenda to what we've done in the past.
I'm going to hand, it over to rich in short order and he's going to walk us through some of the highlights.
In the quarter and the year and then he'll hand, it back to me I'll offer a couple of quick thoughts and then we'll quickly move on to the Q&A session.
But before I do hand, it over to rich I did want to make.
A couple of very quick comments.
I guess number one is I think anyone who has had an opportunity to have a look at the release you would have recognized that it was a great year and it was a great way to finish off.
Off with a strong quarter.
This doesn't happen on its own and I just wanted to take a moment to both thank and congratulate my colleagues. This is very much a team sport.
No.
The appreciation goes to everyone throughout the organization.
Let me pivot also to a couple of macro observations, we can obviously get consumed by the results of the past 90 days or the results for the year, but we also spend a good deal of time thinking about what the business.
It's going to be doing going forward, how we are positioned for the environment that we see coming our way and quite frankly, we are very encouraged on multiple fronts.
We start by examining the underwriting side of the business.
The growth that you saw throughout the year, including the fourth quarter remains very robust.
It's coming through in both exposure as well as rate.
And we really do not see that losing momentum and rich and I will be talking a little bit more about that later on but again as we see the growth will continue and the rate increases there's nothing that leads us to believe that we will not continue to be able to get rate increases that outpaced trend by something that would be measured in the hunt.
Grids of basis points.
So again, a very promising on that front pivoting over to for a moment to the investment side of the business again, we have it.
In my opinion taken a very disciplined approach for an extended period of time and keeping not just the quality high but the duration short as we've discussed in the past this has come at a price.
But we think that we're going to be rewarded for that discipline going forward as you see interest rates moving up.
We're going to see an opportunity for us too.
Invest at higher rates and Youre going to see an opportunity for us to under those circumstances take the duration back out or extended.
Both of these circumstances on the underwriting side and how we are poised there as well as how we position on the investment side are going to have a very meaningful impact on the company's economic model.
And as this unfolds I think it's going to be quite consequential, what it's going to mean for the earnings power of the business.
Let me pause there and I will hand, it over to rich and I'll be back once you're through with his comments with a few other observations and then we will again as promised.
It over to Q&A rich.
Thank you Robin obviously I'll be focusing on the financial side here. So.
The company had another terrific quarter as Robert alluded to with a number of areas, reaching record levels on a quarterly basis as well as on a full year basis.
Operating income increased 64% over the prior year's quarter to a record $284 million or $1 53 per share on a full year basis operating income reached a record $952 million of $5 10 per share.
Key contributors are related to record underwriting results for the quarter and full year as well as strong net investment income.
The positive momentum in the business continued throughout the year with growth in quarterly gross premiums written of 24, 5% to almost $2 8 billion, bringing us to a record $10 7 billion for the full year. Similarly, net premiums written grew 26, 6% quarter over quarter to about two <unk>.
$3 billion and a record full year of approximately $8 9 billion.
On page seven of the earnings release Youll see net premiums written by line of business for the comparable periods. All lines of business grew in the insurance segment, including workers' compensation, albeit from increasing payrolls.
The total for the segment amounted to $2 billion with the growth of 25, 8% over the prior year, the reinsurance and Monoline excess segment also grew in all lines of business totaling $273 million and growing 33% for the quarter.
The growth in exposure and compounding rate improvements in most lines of business will continue to earn through the income statement.
In the three most recent consecutive quarters total net premiums written had an average increase of almost 26%, which has contributed to the acceleration in net premiums earned of 17% for the full year.
Pre tax quarterly underwriting income was a record $261 million, surpassing two other quarterly records this year.
On a full year basis record pre tax underwriting income of $845 million was more than twice the next closest year, which occurred in 2019.
The company continued to demonstrate its management to cat exposed business and despite heightened cat activity such losses did not materially impact our earnings we reported cat losses of $49 million or two two loss ratio points compared with $42 million or two three loss ratio points in the prior year.
The current accident year loss ratio, excluding catastrophes improved one loss ratio point to 58, 2%, primarily driven by rate improvement.
Our year loss reserves developed favorably by approximately $1 $3 million in the current quarter.
That brings our reported loss ratio to 64%.
The expense ratio continued to improve over the prior year, representing a benefit of one eight points to 27, 8%.
The growth in net premiums earned continues to be a major contributor to the improvement in our expense ratio as it outpaced expenses by seven 4% in the quarter.
Our newer operating units continue to grow their portfolio, adding scale to the business and moving closer to a more normalized expense ratio.
We continue to make investments in the business as evidenced by the three newly formed operating units and we look forward to their future prospects.
We anticipate that our expense ratio for 2022 should be in the range of 28% to 29%.
Closing out the underwriting performance our current accident year combined ratio, excluding catastrophes was 86% for the quarter compared with 88, 8% for the prior year quarter.
Turning to investments net investment income was $165 million for the quarter.
The alternative investment portfolio, primarily investment funds provided strong results.
Our core portfolio improved despite the low interest rate environment on.
On a full year basis, our investment income.
$672 million is only a few million dollars lower than our record reported in 2018, we continue.
To maintain a highly liquid portfolio with a duration of two four years and maintained a high credit quality of double a minus.
Operating cash flows remained strong throughout the year with a record level of almost $2 2 billion for the full year.
Pre tax net investment gains in the quarter was driven by increased unrealized gains in our equity portfolio contributing to the full year results of $107 million. The full year realized gains included the sale of a private equity investment and real estate property sales.
The effective tax rate was 17% in the current quarter, which largely benefited from a lower foreign effective tax rate and investments in tax exempt securities and dividend paying equity securities along with closing certain examinations with tax authorities and truing up our prior year tax accrual.
Stockholders' equity increased to almost $6 7 billion.
As of yearend after returning capital of $200 million in the quarter and $478 million for the full year.
The company repurchased 175 million shares throughout the year at an average price per share of <unk> $69 85.
Book value per share before dividends and share repurchases increased 3% in the quarter and 12, 5% on a full year basis. The annualized return on beginning of your equity for the quarter was 18, 7%.
16, 2% for the full year.
With that I'll conclude my remarks, and turn it back to Rob.
Rich thank you very much so.
A couple of quick observations for me and I promise, we'll move on to the Q&A, but clearly the top line continues to be very healthy.
Any measurement, we like the balance that we see between rate versus exposure growth that one third two thirds I would tell you that.
What it all adds up to when we put all the pieces together, but we look at this at a very granular level, we're looking at it by line by <unk>.
Exposure by territory.
Again, we're trying to make sure that we have the right balance there long story short really.
Essentially across the board we have the.
It's all about specialty business. These days and we have the right people with the right expertise, whether it's on the commercial line side admitted or not.
Non admitted whether it's domestic or international or certainly would not want to leave out.
Colleagues on the high net worth side.
And firing on basically all cylinders.
Also on the topline and rich touched on this I'll just mentioned we do.
Sensitivity to the Workers' comp line, we think there still are opportunities there, but one needs to be very cautious the growth that you see in that line as rich commented is really being driven by payroll growth.
Across the board everywhere else.
It's pretty much just really healthy growth as a result of the broader environment.
The loss ratio rich covered this I would just add my two cents to <unk> 64, or the 58 to <unk>.
If you want to flip on the rose colored glasses.
That's fine, but I think one of the things that we work very hard at is making sure that we we peel back a few layers and really understand what's going on in the business. So one of the things that I know we've talked about this in past calls that I wanted to flag for people and that is the paid loss ratio.
The paid loss ratio for the year.
'twenty one was a 45 point too and maybe you can give you a couple of other data points. If you go back to 2017 that was a 56 $9 18 was 57 519 55 to <unk> was 51 nine and then of course, you can see the meeting.
For progress.
21, and again that was pretty stable quarter to quarter.
Expenses rich touched on that.
We still are getting some benefit if you will from the.
The lack of travel as a result of Covid, though that is starting to pick up a bit.
I would say really whats driving it more than anything else is there.
Growth in earned premium.
And as the business continues to grow we're going to see the benefits on multiple fronts.
Including the expense piece.
So long story short the underwriting is looking really good and as I commented earlier, there is a lot of momentum and as we look at January and we're looking at submissions and where it looks like things are coming out. There is nothing that leads us to believe that the environment is not stable or perhaps improving and were very.
Encouraged by that.
We've touched on already enriched offered a few comments on the investment portfolio, but I would just again.
Flag for those that are interested not to underestimate the leverage that exists in our economic model.
We have again been very disciplined on many fronts, including the investment portfolio and the duration as rates move up and we take that duration out and the book yield moves up I think one should not underestimate what that means for the earnings power of the business and of course that alongside with the underwrite.
The margin and the health of that and the scale of the business overall, I think bodes well for the foreseeable future.
So I am I'm going to pause there and let's see.
But over to Q&A and talk about what you all would like to talk about Josh.
Josh if we could please open it up for questions.
Certainly if you would like to ask a question at this time. Please press star followed by the number one on your telephone keypad.
And your first question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.
Good afternoon.
Hi, Thanks, Good evening My first question on <unk>.
Going back to the rate versus trend question.
Like the rating.
In 'twenty one surpassed your expectations that you guys were pretty conservative sticking with your desired Moss with you throughout the year. So as you go through the budget process for 'twenty. Two does that give you some room to bring down those design lossmaking off more significantly when we think about the underlying loss ratio improvement.
You could see over the coming year.
Look from our perspective, we think there are a lot of variables out there.
Mostly I think we've talked.
On these calls in the past we've talked.
Offline, if you will about our sensitivity around social inflation, and then of course financial inflation. So do I think we are in a comfortable spot.
Generally speaking I do but do I think those trends continue to move up and one needs to be very careful not to take their eye off the ball without a doubt so I think that.
We're playing close attention to it we're comfortable with our margins today.
You do the math arguably we may be being some I'd say cautious others might say measured and thoughtful to the tune of.
A point or two.
Plus or minus yeah, but given the level of uncertainty and the leverage around those we think it makes sense to be measured but yes. We are comfortable with the rates that we have been achieving and we look.
At it through the lens that trend continues to move up and we have every intention of keeping up with it or more.
Okay. Thanks, and then my second question, the corporate expenses I didn't say around $64 million in the quarter.
Which is you know pretty high relative to where they had been trending was there something one off in that and then could you just help us think about how to model that line going forward.
Do you want to offer a thought on that please.
Of course at least.
The biggest contributor to that is on the compensation side in particular as it relates to the special dividends that we paid out in the fourth quarter.
So for those folks that have received <unk> use that are vested they receive dividend equivalent and that winds up going through compensation expense as opposed to through a reduction in equity.
So you can see this trending back down I guess.
And the first quarter.
Okay. Thank you yes.
Yes Youre welcome.
Your next question comes from the line of Mike Zaremski with Wolfe Research. Please go ahead.
Good evening.
Hey, good evening.
Maybe we can touch on the paid loss ratio.
Thank you.
<unk>.
We talked about earlier.
I think it's not just berkley, although I may be barclays' paid loss ratios are down more so than others.
We'll be able to unpack that when others report, but it feels like a lot of peers have also.
Been showing lower paid loss ratios, maybe you can kind of unpack, what's driving that I know we've talked in the past about kind of some core closures, but is there also kind of a business mix shift that's driving.
Paid loss ratio is lower or is it just.
Simply a lack of of losses coming through the pipes.
And some conservatism.
Well I think what it really is just the impact on higher rates and other underwriting activities that we have.
Over the past year.
Here's and it's coming through and we're seeing the benefit of again higher earned premium or more premium per unit of exposure as well as underwriting actions that we've taken that are leading to better outcomes.
Certainly.
I'm, sorry, I guess, that's yeah, that's what I meant by that conservatism is that what you mean is that giving you kind of the confidence in your answered Felicia's question about maybe you're being a little bit more cautious to the tune of about a point or so is to pay a lot of I think we're I think we're being measured I think we acknowledge the fact that social inflation is real.
We acknowledge the fact that financial inflation.
Is here and we are in the business of selling our products oftentimes years before we actually write the check or the product is the cost of the product is fully known.
So we are being I think.
Thoughtful about it is how I would characterize it.
Okay, great maybe touching on on social inflation.
Do you at Berkeley kind of bifurcate between frequencies and severities I guess some.
Hum.
Some participants in the industry have said that you know frequencies have them and as a as high as expected, but severity has continued to come in hotter, which is leading them to death. So we absolutely were looking at both frequency and severity and quite frankly, we look at it.
At other dimensions, if you will of that situation as well.
I would tell you that there is no doubt that severity continues to tick up at a notable rate.
Far as frequency goes I think that.
The industry needs to be very careful.
That they do not lose sight of what the consequences of Covid and how that created a pinch point in the legal system.
And that could lead one.
I believe the frequency dropped and perhaps it did but one needs to understand that was likely a temporary phenomenon as opposed to something that's more permanent.
That's helpful. Lastly.
Based on your commentary it sounds like still plenty of momentum on the topline.
Yes, yes, yes.
We get kind of the.
The guidance is for the expense ratio I know Elyse rightly pointed out that there were some higher corporate expenses.
Expense ratio is still the kind of.
Probably not improved further improved a lot but is there also some potential conservatism in the expense ratio with the market conditions.
Well.
There are a couple of pieces there first off I think you need to understand that as rich pointed out the expense ratio was impacted by special dividends.
As you may recall or be aware of.
A component of them.
Compensation for.
Senior officers is restricted stock that gets deferred and as a result of that.
The dividends as rich said, we expense those so the one time special dividend. In addition to that there are certain there are other aspects of deferred comp like our long term incentive plan that is driven off of the return of the company.
Obviously as the performance of the company improves.
There is more expense associated with the remuneration that all having been said.
From my perspective, as I suggested I think and we've talked about in the past Theres, probably 30% to 50 basis points of positive impact as a result of people not traveling as much as they do in normal times, we certainly see the earned premium will continue.
Continued to grow.
And we have a variety of other moving pieces I think we should also mention that we have some new businesses as we referenced in the release and rich touched on that obviously when they are brand new they don't have a lot of earned premium they have expense.
So long story short we talked about it.
Rich being the good.
Measured CPA that he is came up with the 28% to 29, two I think that there is a chance that we can do better than that yes, I think there is.
Okay.
Thank you very much.
Yeah.
Your next question comes from the line of Ryan Tunis with Autonomous Research. Your line is open.
Hi, Brian Good evening, good evening How're you.
Yes, just I guess digging a little bit more on the expenses one thing I'm a little bit curious about is what.
So we're in a hard market I mean, how much it's going to take a look inside the organization.
What is investment looked like over the past year or so have you guys hired a head count up a ton.
Or are you in a lot of ways kind of doing all of this on the chassis that you had built.
Coming into this in 2020.
So it's a little bit of both certainly are we always looking for talent without a doubt and are we certainly can.
Instantly.
At the moment there is no exception, making what I would define as meaningful investments and particularly data and technology, yes, we absolutely are.
And I haven't been set as we also discussed in the past.
A lot of the growth in the business over the past couple of years.
Much of it has come from rate.
So as we are charging more for a widget and it's the same work as before Theres meaningful leverage in that in addition to that we have many businesses that have not fully scaled to their credit. They are maintained at a level of underwriting discipline and when market conditions Werent there they did not.
Lean into the.
Marketplace.
But now that they are a meaningful number of pockets within the industry or the broader market quite frankly ex comp that is providing more attractive market conditions. Those businesses are scaling and we're seeing the expense ratios as they scale drunk. So we're seeing growth across the board.
And it's not that we're not investing in the business both in people and technology, we are and we're doing that heavily at the same time, there's a lot of leverage in the model.
Yes, it's good that you get operating leverage and then.
I guess from others.
I heard the comp comp pricing has softened a bit this quarter.
<unk> been cautious in the past I think on on severity and now we're seeing a little bit of inflation just any updates to you.
You know kind of what you're seeing from a loss trend standpoint on the comp side, Rob. Thanks, Yeah look I think that.
We have is as you pointed out.
I've been watching the comp line very closely for some period of time now.
The action that state rating bureaus have been taking for what would be measured in years.
I think it's been pretty heavy handed I think there are some people that may have lost side of the if you will one time benefit around comp claims activity that occurred during COVID-19 .
And we don't think that people are paying an appropriate level of tension to the severity trend.
That's not enough not only are we seeing some folks being very aggressive on the pricing. In addition to that to add insult to injury. We are seeing people starting to lean into it through commissions.
They are raising commissions on on the product line, both the regional players as well as the national carriers. So we're watching very carefully we continued to like the line of business, but like in all of our activities. We like the exposures at rates that we think makes sense.
Thank you.
Thanks for the question.
Your next question comes from the line of Alex Scott with Goldman Sachs. Your line is open.
Hey, good evening, Thanks for taking my call good evening Alex.
First one I have is maybe just to follow up on workers' comp I'd just be interested in any commentary you could provide on sort of where we're at with the exposure recovery from payroll and workers comp and my understanding is that somewhat lagged, but I mean.
Are we most of the way through that at this point or do you still have quarters Ed.
Well I think that a lot of it depends on the health and robustness of the economy and how we see payroll is expanding.
So I mean, that's what's really driving it and certainly driving our growth as Richard touched on and I echoed.
Yeah.
If it.
It's really all about the workforce and how employers are bringing people back based on the needs as they see it and meet their customers' needs.
Got it.
And then my follow up question is I guess just in terms of the admitted specialty lines.
It seems like that's a pretty nice opportunity for you all and we hear a fair amount about the E&S market and the volume growth that's been seen there, but could you help us think through some of the admitted specialty lines that youre growing in and how the outlook for that is looking in 2022.
Obviously were very meaningful player in the E&S space as well as the admitted specialty space.
And the.
The growth that we're experiencing on the non admitted side.
As you know.
Again quite robust, but our admitted specialty business is running right alongside of it at a similar clip as far as the particular product.
Product types of exposure on the admitted specialty side that we see the best opportunities and with all due respect that.
Detailed that we typically get into.
Understood. Thanks.
Thank you for the questions.
Yeah.
Josh or are there any other questions.
Your next question comes from the line of Mark Dwelle with RBC capital markets. Your line is open.
Great. Thank you good evening Mark.
Yes, good evening.
Just a few that hasnt been hit on already could.
Could you provide within your catastrophe total what portion of that might have been COVID-19 as compared to just regular natural catastrophe losses.
Oh.
12 million Bucks I believe rich right.
That's correct and it's 0.6 loss ratio points of the two point to that we have.
Our sense is that.
I Wouldnt I don't want to say anything that I live to regret, but I I think that that's pretty pretty well digested at this stage, there could be a little bit but likely not.
Much more okay.
I appreciate that.
The second question.
I know this isn't a very big line item, but the revenues from your non insurance businesses increased pretty substantially I was curious whether that was just something seasonal or the earnings did as well or was that just something seasonal or did you acquire something additional in that segment.
Generally speaking it's.
Wholly owned entities that are part of our investment portfolio and Theyre, just theyre doing very well and as the economy has been opening back up they're benefiting from that and in addition to that there does very well run businesses.
The small item did have a couple of two or three cents a share compared to normal. So good good good news on that.
The question that I had.
Got it.
Go ahead, I'm, sorry market excuse me.
The last question that I had.
Setting aside for a moment social inflation.
People have asked about.
What where are you really impacted by ordinary financial inflation.
Cost of goods wages et cetera, wages, obviously on workers comp.
I would think that you are not actually terribly exposed to most forms of financial inflation.
Well certainly as the cost of things go up we have that.
Particularly on some of the shorter tail lines.
And on the liability front.
Damages quite frankly can be impacted by that as well as to how the legal system calculates damages.
Okay.
Okay.
The last thing Mark is that obviously it impacts again when people are thinking about damages just their state of mind.
Yes, I would agree I guess, my mind would put that as to being more ultimately kind of a social inflation, but I do understand where you're coming from on that.
Okay. Those are all my questions. Thank you. Thank.
Thank you.
As a reminder, if you would like to ask a question at this time. Please press Star then the number one on your telephone keypad.
Your next question comes from Brian Meredith with UBS. Your line is open.
Hey, Brian Good evening.
A couple ones here for you, Rob or large admitted carrier had some pretty good growth this quarter and talked about.
A an optimistic outlook for growth are.
Are you seeing any impact yet from standard carriers trying to kind of creep back in and take some of that E&S business.
Not yet.
Honestly the submission flow is.
Pretty overwhelming at this stage to tell you the truth.
Again, I don't have all the data at this stage, but there's nothing that we saw in the fourth quarter that led us to believe that it's not.
Healthy to say the least.
And even more recently January seems particularly strong.
No no.
Yeah.
I cannot opine on what other people are seeing but I can tell you that we are not seeing the opportunity erode at this time in any way shape or form.
And quite frankly, it's basically across the board.
And then second question Rob.
There's been a lot of talk at the one one renewals that you saw seeding commissions on casualty reinsurance.
Couple of hundred basis points I'm wondering if you just talk about what impact that could potentially have on you on your on your.
Obviously insurance business, because you do buy some reinsurance and then on the other side.
Any impact on your reinsurance business.
Well as you pointed out and thanks for raising it.
On the reinsurance side, you would have seen the growth in that segment of our business and as we find the right environment attractive.
We're very happy to.
Increase our participation on.
On the insurance side, where we are a sealant.
Certainly we're aware of the market conditions.
And the cost of capacity and where we are a meaningful buyer of reinsurance, but something to please keep in mind.
We are by and large a small account writer.
So we are not as compelled to buy reinsurance as many of our peers I think as we have shared with people in the past approximately 90% of our policies have a limit of $2 million or less so we are not as captive to the reinsurance market.
As others.
We're very happy to partner with some people throughout the cycle, but we have the flexibility for those that are looking to take full advantage some might even suggest gouge to be a buyer when it makes sense.
So that's how we think about it in addition to that we've created vehicles, one internally called lift and <unk> that we've talked about in the past that obviously also gives us some flexibility around how we buy reinsurance.
Got you Thanks and then.
Just last question here and just maybe some clarification and making sure I understand it so as we look at the first quarter coming up here.
It's my understanding that that's when you and a lot of other casualty company set your loss picks kind of pretty year on casualty is that correct and that's kind of when we should kind of expect to see the.
They kind of do the math to really have an effect.
Yeah.
Look we are we look at our loss picks on a regular basis.
Because we're not the kind of organization that is so fixated on this magic date, that's the only time, we move our picks we look at the information we look at the data regularly at a macro level at a micro level and try and make sure that what we're doing makes good sense.
So we certainly have our pick and place for 'twenty.
'twenty two year.
And it's based on a lot of knowledge and expertise from colleagues.
That having been said we are constantly looking out the front windshield for a new information that might lead us to want to refine our view.
Great. Thanks, I appreciate it Rob.
You for the questions.
Your next question comes from the line of Michael Phillips with Morgan Stanley . Your line is open.
Hi, Michael Good evening.
Good evening, Thanks, I actually was dropped for a while so I apologize.
One at the risk of not reaching anybody else's because of that.
And it's on your professional liability book.
Grown like otherwise growing quite substantially but that's the one we hear some concerns about what some other carriers and so could.
Could you just remind us how your book there is different and why those concerns maybe wouldn't apply to you and I guess it could be some of your prior answers.
Rise of accounts and limits and everything else, but that.
Line comes up a lot with concerns maybe just kind of speak to how your book is different there. Thank you.
Well thanks for the question and quite honestly, it's a it's a complicated one for a variety of reasons, but probably most importantly professional liability is as you can appreciate a very.
Broad space so.
There are pockets within professional liability that we find exceptionally attractive and there are pockets of the professional liability space, where we are clearly as a result of our underwriting discipline.
Watching business.
Move away from us.
So look when the days all done there are.
There are parts of the business that we find attractive and we think that this is a great opportunity to grow.
No exactly what when you talk about other people and how they're thinking about professional liability I don't know how their book is put together.
But I would tell you that we feel very comfortable.
With what our colleagues are doing in the space and we have a great deal of confidence in their skills.
Okay, well. Thank you Linda again, that's all I had congrats on the quarter I appreciate it.
Thank you.
Your next question comes from the line of Meyer Shields with <unk>. Your line is open.
Good evening.
Hi, how are you Rob.
Great. Thanks.
I'm good. Thanks, I wanted to dig into one comment you made I want to make sure I understand what you're talking about being cautious and workers' compensation.
At this point in time and I'm wondering is there a difference in underwriting.
When you're looking to avoid what would be sort of an external.
<unk> medical.
Medical inflation broadly gets worse or the impact of wages going up is that a different underwriting process than when you're just I did find the.
The better performing risks in a more stable environment.
Well I think that they both get factored into the analysis by our colleagues.
Ultimately our colleagues looked at all the information both historical as well as what they see out on the Horizon, then they try and put it all together to come up with a view as to what loss costs are going to be.
And some of the things that you referenced obviously get factored into that.
As we I think we've mentioned on earlier calls that I believe we've touched on.
Evening that the severity trend is one that we have and continue to have our I V.
Very focused on.
And clearly the frequency trend continues to be a friend for the industry, but that severity trend is not one that should be.
Our opinion.
Ignored.
Okay. That's helpful. That's all I had thank you.
Thank you.
Your next question comes from the line of Ryan Tunis with Autonomous Research. Your line is open.
Yeah.
Yes, sorry, I just wanted to follow up Hi, again I wanted to follow up on Brian Meredith question, and you said it.
<unk> 22 loss picks are in place.
How.
Do those compare to 58 two did you use those this quarter when you reported a 58 two or.
Is that so another fitness.
Into next year.
<unk>, let rich walk you through the numbers that you saw.
And in the release or how we thought about the losses for the business during the fourth quarter. If you will of 'twenty one.
So we shouldnt use the 58 two to think about what your loss fix might be for next year.
I'm not telling you what loss pick to use I'm pretty sure I'm not allowed to do that but what I am suggesting to you is that you should go to a you should look at the data.
And you should look at our loss ratios and you should extrapolate based on your view around trend and rate.
And that should lead you presumably to.
Two an answer.
Great.
We'll stay tuned thanks.
Okay. Thank you.
There are no further questions at this time I will turn the call back to Mr. Rob Berkley for any closing remarks.
Okay well.
Thank you all very much for your participation and again I would just like to thank and congratulate all of my colleagues for the tremendous effort that led to these results and certainly very optimistic for all the reasons that we discussed earlier on.
What next year looks like but before we say Goodnight, let me hand, it over to our chairman.
Good evening everyone.
It was a really terrific quarter and a great year.
The results.
As Rob points out.
Come about because of everyone's effort, but.
Everyone's effort as.
Is it a reflection of our starting point, which is risk adjusted return.
And in this business.
That means looking at lots of things that you don't really know the answer to for a while.
So you make judgments you anticipate where things are going and what things are happening some of the most important judgments.
Our inflation.
Both social and financial.
It has to do with what you think are going to happen with interest rates.
Oh of the myriad of things that impact the business.
We have a much more tightly controlled company today.
Then we did 10 years ago, but we have to because it's a more complex company.
But we run our business in the same manner.
We're nimble.
We constantly are adjusting for changes we see in the future.
And while we're optimistic we're not naive.
Everything we see.
Leads us to believe that certainly.
2022.
Be an excellent year.
Looking beyond that difficult.
But the signs are positive.
And the team is prepared.
So.
We thank all of you for your support.
And we continue to be optimistic as to what we see in the future.
And how are experienced but nimble team will be able to deliver outstanding results.
Okay. Thank you all very much and we will speak with you in about 90 days have.
Have a good night.
This concludes today's conference call. Thank you for joining you may now disconnect.
Okay.
[music].