Q4 2023 W R Berkley Corp Earnings Call

[music].

Good day and welcome to the W. R. Berkley Corporation's fourth quarter and full year 2023 earnings call Today's conference call is being recorded.

The speaker's remarks may contain forward looking statements. Some of the forward looking statements can be identified by the use of forward looking words, including without limitation believes expects or estimates.

We caution you that such forward looking statements should be it should not be regarded as a representation by us that the future plans estimates or expectations contemplated by us will in fact be achieved.

Please refer to our annual report on Form 10-K for the year ended December 31, 2022, 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.

Sarah Thank you very much and good afternoon, all and welcome to our fourth quarter call and for that matter full year 23 call.

Rick <unk>: In addition to me you also have Bill Berkley executive Chairman on the call as well as Rick <unk>, Our Chief Financial Officer of the company.

Rob Berkley: We are going to follow our usual agenda, we're very shortly I'm going to hand, it over to rich he is going to walk us through some highlights from the quarter. Once he has completed his comments I'll offer a couple of thoughts of my own and then we will be pleased to open it up for Q&A.

Rick <unk>: Before I hand, it over to rich I did just want to offer a thought or two and for some participants is probably won't be new.

Rick <unk>: Yes.

Rick <unk>: Discussion that we've had in the past.

Rich Smith: For our organization there is without a doubt amongst all of us colleagues a shared recognition.

Rich Smith: The goal of the exercise is value creation.

Rob Berkley: We approach this through a lens that we've again touched on in the past, but I'll flag it again.

Rich Smith: Lens that we referred to as risk adjusted return.

Rich Smith: All returns are not created equal one needs to consider the type of risk that you're taking on in order to achieve that return and then contemplating that risk one needs to consider a volatility as a component of that.

Rich Smith: One needs to ask themselves. The question am I getting paid enough for that risk and of course, considering that what role volatility plays.

Rich Smith: In the fourth quarter of 2003, there should be many market participants that reported good numbers.

Rich Smith: But I think that one needs to look beyond just a quarter one needs to look at the year one needs to look at the past several years.

Rich Smith: When it comes to value creation, it's not just about a step forward.

Rich Smith: It's about consistently taking steps forward and it's about avoiding taking steps backwards.

Rich Smith: When you look at the results of our quarter without a doubt they are very strong very robust by any measure.

Rob Berkley: But I would encourage people to look at the full year and look at the past many years and our ability to create value taking into account the risk that we are accepting in order to achieve those returns is really the cornerstone why we've been able to build value for shareholders. So success.

Rob Berkley: Italy over many years this quarter and this year is no exception.

So to that end before I hand, it over to rich I would like to thank and congratulate my colleagues throughout the organization.

Rich Smith: A really outstanding quarter outstanding year, and yet another year of a job very well done also on behalf of by colleagues I would like to thank our shareholders for allowing us the opportunity and the privilege for managing capital on their behalf.

Rich Smith: I will pause there and rich over to you what do you have for us.

Rich Smith: Thanks, Rob appreciate it and good afternoon, everyone.

Rich Smith: The company continue to report record setting financial results in the quarter, leading to an outstanding full year net income increased to $397 million or $1 47 per share compared with $382 million or $1 37 per share in the prior year quarter.

Rich Smith: <unk> return on beginning of your equity was 23, 6%.

Rich Smith: Operating income increased more than 21% to $392 million or $1 45 per share with an annualized return on beginning of year equity of 23, 2%.

Rich Smith: Our extreme ownership and maximizing risk adjusted return in everything we do contributed to our record full year underwriting income net investment income operating income and net income.

Rich Smith: Our top line growth accelerated throughout the year with the fourth quarter, reflecting a 12% increase in net premiums written to more than $2 $7 billion, bringing the full year to a record of almost $11 billion.

Rich Smith: On a constant foreign currency exchange rate basis, the quarterly and full year growth was adversely impacted by approximately 50 basis points due to the weakening U S dollar.

Rich Smith: On a segment basis insurance grew 12, 3% to more than $2 $4 billion in the quarter from rate improvement and exposure growth.

Rich Smith: The reinsurance <unk> Monoline excess segment increased 10, 2% to more than $300 million.

Rich Smith: This marks a record level for full year gross and net premiums written for each segment.

Rob Berkley: Turning to underwriting performance.

<unk> quarterly pre tax underwriting income increased eight 2% to $316 million, representing a calendar year combined ratio of 88, 4%.

Rob Berkley: Current accident year catastrophe losses were flat at 1.2 loss ratio points for the comparable quarters with $32 million and $30 million reported in fourth quarter, 2023, and 2022, respectively.

Rob Berkley: Or your development was favorable by $1 million, bringing our current accident year loss ratio ex cats to 58, 8% the.

Rob Berkley: The improvement over the prior year's quarter of 50 basis points was primarily due to business mix and lower Attritional property losses.

The expense ratio increased 60 basis points to 28, 4% in the current quarter flat to the 2023 full year.

Rob Berkley: The increase from the prior year's quarter is consistent with our prior communication that being lower ceding commissions, resulting from business mix and reinsurance structure changes over the past year in.

Rob Berkley: In addition increased compensation costs and startup operating unit expenses have also contributed to the small increase.

Rob Berkley: We expect that our 2020 for full year expense ratio should be comfortably below 30% taking into consideration investments in such things like technology and data and analytics as well as new startup operating unit expenses.

Rob Berkley: So in summary, our current accident year combined ratio, excluding catastrophes for the quarter was 87, 2%.

Rob Berkley: Record quarterly pretax net investment income increased more than 35% to $313 million, bringing the full year to more than $1 billion for the first time in the company's history.

Rob Berkley: Combination of our short duration and record level operating cash flow of more than $2 $9 billion in the full year has positioned us well to invest in securities with higher interest rates.

Rob Berkley: The book yield on the fixed maturity portfolio continued to advance throughout the year to four 4% on a 12 month basis.

Rob Berkley: Our net invested assets increased approximately 10% in the past year Thomas $27 billion.

Rob Berkley: The credit quality of the portfolio remains very strong at double a minus with a duration on our fixed maturity portfolio, including cash and cash equivalents of two four years.

Rob Berkley: The investment funds improved from the consecutive quarter to $11 million, although declined from the prior year in large part due to market value adjustments in the real estate fund area.

Rob Berkley: As a reminder, the investment funds are generally reported on a one quarter lag.

Rob Berkley: Foreign currency losses in the quarter related to the U S dollar weakening relative to most other currencies.

Rob Berkley: It's worth, noting however that the net effect to stockholders' equity is negligible since the improvement in our currency translation adjustment more than offset the amount reflected in the income statement.

Rob Berkley: Stockholders' equity increased to a record of almost seven $5 billion.

Rich Smith: Careful capital management throughout the year resulted in three special dividends of 50 cents each per share plus regular quarterly dividends totaling $501 million. In addition share repurchases in the quarter of almost one 6 million shares contributed to a total of more than $8 seven.

Rich Smith: <unk> million shares repurchased during the year amounting to $537 million or $61 69 per share Sarah.

Rich Smith: So our capital management during 2023 aggregated to more than $1 billion. The most we've returned to shareholders in one year, while growing shareholders' equity more than 10% and maintaining more than adequate capital to support ongoing growth in the business.

Sarah: Value per share increased 11, 6% and 25, 5% in the quarter and full year before dividends and share repurchases.

Rob Berkley: And Rob with that I'll turn it back to you.

Rob Berkley: Rich. Thank you very much pretty attractive picture and even a conservative CPA.

Rich Smith: <unk> make it sound anything other than encouraging.

Rich Smith: So a couple of <unk>.

Rich Smith: <unk>.

Rich Smith: And obviously the top line growth, we're pleased with the progress that we're making relative to the past few quarters. I think this is unfolding exactly as we suggested.

Rob Berkley: Just calling out a few pieces of that puzzle clearly some of the things that we have talked about as far as.

Rob Berkley: Portfolios that we were separating from much of that is through the Python.

Rob Berkley: The specialty market in general continues to be particularly attractive I would highlight E&S, especially.

Rich Smith: Furthermore, I don't think that party is over when we're looking at the submission flow we continue to be quite encouraged.

Rich Smith: The other hand certainly.

Rich Smith: Within the professional liability space and I'll call out public D&O is perhaps one of this extreme examples.

Rob Berkley: It is.

Rob Berkley: Delicate and treacherous and as you can see in the numbers in our release, we are treading thoughtfully as you'd expect.

Rich touched on the rate coming in at 8%, which.

Rich Smith: Based on our assessment, it's pretty clear that we are comfortably exceeding any reasonable assumption around loss cost trend.

Rich Smith: And we are encouraged by that I know that there are a couple of chicken littles out there that are sort of hanging on the rate number that we share on a quarterly basis and some might say well Gee. This is down below where it was in the third quarter and that is a factually correct statement that having been said.

Rich Smith: Would caution people to please understand that is really driven by mix of business and not just product line, but we have more than 60 different businesses under the group umbrella.

Rich Smith: At any moment in time, some are growing more than others and right opportunity is not equal amongst all of the businesses in the group and obviously all product lines as well and just as a point of reference you'll recall this time or fourth quarter 'twenty. Two we got six nine points of rate ex comp so.

Rich Smith: Again, we are comfortably above where we were a year ago and we are confident again that we are exceeding trend by a meaningful margin.

Again, Richard talked about the losses.

Rich Smith: Not going to get into that the only thing that I will flag is that.

Rich Smith: The paid loss ratio for the quarter came in at 48 and change and I don't know how many quarters that is at this stage, it's just sort of float and between 46% and 49, which I think is really just a reflection of the rate action along with the underwriting discipline and focus of our colleagues.

Rich Smith: Allowing us to be arguably writing business.

Rich Smith: Got a pretty healthy margin to say the least.

Again rich touched on the expense piece, so I'm not going to rehash that other than I will make the one comment that for purposes of 24, we have some businesses that we started prior and those are going to be impacting our expense ratio, though even with those coming into the expense ratio.

They are in business for a full year.

Rich Smith: The fact of the matter is that's going to be a relatively modest drag going the other way as far as benefit goes youll see what happened with our written premium in Q3, and certainly in Q4, and we all know how thats going to trickle through and impact the earned.

Rich Smith: In 'twenty, four which will clearly be a positive.

Rich Smith: Last comment on the investment portfolio rich touched on that as far as the book yield.

Rich Smith: As far as we're concerned the new money rate for us still today, even with all of the humming along about where interest rates are going we still can put money to work at five plus percent. So we think that there's opportunity there.

Rich Smith: As rich mentioned the duration to four years, we are looking for the window of opportunity to nudge that out we are not in a rush.

Rich Smith: We have a slightly different view than much of the world as to where interest rates are going and when the window of opportunity presents itself, you will likely see that too for moving from here.

Rob Berkley: So again I think it's exciting that we had a good quarter, it's rewarding and encouraging that we had a good year end top of Goodyear in 'twenty, two and so on but I think the most encouraging thing is when you look at where our I.

Rich Smith: Should say how would the table is set for 'twenty four and beyond we are in a very good place and not only on the underwriting side, but on the investment side. So I believe in 'twenty four and likely beyond you are going to continue to see this economic model firing on all cylinders.

Rich Smith: So.

Rich Smith: I, probably wasn't as brief as I promised but it was relatively brief for me and I'm going to pause there and Sarah we would be very pleased to open it up for questions. Thank you.

Rich Smith: Thank you if you have a question. Please press star one on your telephone keypad to withdraw your question simply press Star one again.

Sarah Smith: Your first question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.

Sarah Smith: Good afternoon.

Hi, Thanks, good afternoon as well.

My first question, Rob probably picking up kind of.

Sarah Smith: Ending with your comments.

Rob Berkley: AUM growth picked up right in the third and the fourth quarter ending at 12% in the fourth quarter.

Rob Berkley: Do you think out to 'twenty four.

Rob Berkley: Is that kind of the baseline would you expect.

Rob Berkley: Quarters at 24 to all be 12% or greater just given the momentum that you've been highlighting on the call.

Rob Berkley: I appreciate that you and other colleagues are trying to build models and making certain assumptions.

Rob Berkley: But.

Rob Berkley: The truth of the matter is that tell me what market conditions are going to be.

Rob Berkley: And I can give you a thoughtful answer to your question there is nothing that I see today.

Rob Berkley: Leads me to believe that there isn't meaningful opportunity before us.

Rob Berkley: And again do I think the 12% number is a reasonable number to use yes, do I think it's possible it could be better than that it certainly is possible.

Rob Berkley: Again tell me what the market conditions will be and then I can give you a more thoughtful answer as opposed to bumbling around on this end.

Rob Berkley: Well, maybe sticking with that market thought right. We've heard a lot of conjecture about whether we start to see.

Rob Berkley: Broader strengthening of the casualty market.

Rich Smith: And so where are you on that do you think we'll start to see more broad based pricing momentum within casualty lines.

Rich Smith: We go through 2024.

Rich Smith: I think I think you should.

Rob Berkley: From our perspective, obviously, one of the big drivers there is social inflation and as far as we're concerned it's alive and well in addition to that.

Rob Berkley: As far as another pressure point, I think youre, starting to see the reinsurance marketplace, particularly on the treaty side, but across the board starting to wake up and really recognize some of the challenges that the liability market faces.

And the kind of pressure that you saw the reinsurance marketplace, but the property line I think while it may not be to the same extent I think youre going to see them start to really focus on.

Rob Berkley: Some of the liability lines and I think that will perhaps introduce further discipline into the casualty market.

Rob Berkley: Frankly, if you go back in time, we've sort of been standard on our head and jumping up and down talking about social inflation for many years.

Rob Berkley: And we started pushing on the rate pretty pretty early and it's been good to see more recently.

People showing up to the party and recognizing what that loss trend is recognizing what that means for loss cost and taking action. So long story short I think that there is some more legs.

Rob Berkley: Two the liability market, particularly umbrella auto liability GL and there's a lot of the excess market overall.

Rob Berkley: And then one more you guys said 1 million and I think a favorable development in the quarter.

Sarah Smith: I know, we typically get.

Sarah Smith: More color when the K is filed but.

Sarah Smith: Any any movements within lines, our accident years that were more significant and more significant nature in the fourth quarter.

Sarah Smith: Nothing Thats, particularly Earth shattering I always say, it's kind of more of the same.

Sarah Smith: But if you are looking for more detail I'd encourage you to do.

Speaker Change: Karen or rich a call and if you can't get one of them does give me pause.

Speaker Change: Okay. Thank you.

Speaker Change: Your next question comes from the line of Mark Hughes with Truest. Your line is open hi, Mark good afternoon.

Speaker Change: Hello, Rob Good afternoon, Hello, Richard.

Speaker Change: Yes.

Richard: What are you seeing in terms of loss development on some of those older accident years, particularly.

Richard: Casualty lines.

Richard: Change in trajectory this year compared to prior years.

Richard: Yeah.

Richard: I would suggest that some of the older years are beginning to.

Richard: Show signs of petering out at.

Richard: And I think some of the more recent years that look, particularly encouraging as they.

Richard: Season out more we will be more inclined to.

Richard: Recognize the good news.

I think at this stage.

Richard: When you look at the average duration of our loss reserves or the average life of our loss reserves, which is three five plus years, just shy of four years at this stage.

We have our arms around I think a lot of the years that we're particularly frustrating where I think the industry may have gotten caught a little flat footed and ourselves are not completely insulated from that with social inflation. I think we may have gotten on top of it a little quicker than some but nevertheless, 16 through.

Rich Smith: <unk> 19 is not without its challenges that having been said I think some of the more recent years are encouraging but I think 16 through 19 are.

Rich Smith: Slowing considerably and certainly the earlier of that group I think of maybe not fully played out but are pretty darn close.

Rich Smith: Yes, very good.

Rich Smith: On the workers' comp.

Rich Smith: Some growth in that.

Premiums written this quarter, how are you thinking about that.

Rich Smith: That was primarily due to payroll.

If you will just wage or wage inflation, if you like.

Rich Smith: Yes, and anything any update on.

Rich Smith: We still have reservations.

Rich Smith: The product line, we're pleased that we participated in the market. We think our colleagues that are in this space.

Rich Smith: <unk> expertise in managing the capital well.

Rich Smith: By and large if there is a little bit more of a certainly neutral to defensive posture at this stage I think as we've talked about in the past.

Rich Smith: Think that the medical trend is going to prove to be challenging.

Rich Smith: As.

Rob Berkley: Far as obviously the U S comp market is both broad and deep.

Rob Berkley: And from what I hear from my colleagues that are far more knowledgeable than I.

Sarah Smith: I would keep an eye on California for leading the charge as far as a market bottoming out.

Sarah Smith: I appreciate it thank you.

Sarah Smith: As for the question I have a good evening.

Sarah Smith: Your next question comes from the line of Mike Zaremski of BMO capital markets. Your line is open.

Sarah Smith: Good evening.

Hey, good evening.

I guess, just if we wanted to reflect on.

Sarah Smith: In the past.

Sarah Smith: 12 to 18 months.

If you could discuss it a bit but that was kind of a pivot downwards and growth for a bit.

Sarah Smith: Did the what was the was the pivot more.

Sarah Smith: The marketplace changed in terms of competition or was it more so a function of what <unk> been talking about hey loss costs are.

Sarah Smith: When you do a bit of a true up.

Sarah Smith: And.

Sarah Smith: You have got that pig through the Python now.

Sarah Smith: The.

Sarah Smith: It's kind of nice.

They are sailing from here I'm, just kind of curious how much was kind of more you think.

These specific versus just market forces and the competitors doing their thing.

Sarah Smith: So the way I would characterize it mark is I think that the market is changing every day and if you go back.

Sarah Smith: Call. It two years ago professional liability D&O as an example was in a different place than it is today.

Mark: So you have that for us on the other hand, clearly two years ago property was in a different place than it is today. So you have all of these pieces that at any moment in time. Some things are firming. Some things are softening and obviously that instructs how we feel and how strong or not our appetite is.

Mark: In addition to that I think as we may have flagged in some earlier calls there were a couple of what I would describe as media relationships scale wise.

Rich Smith: We came to.

Rich Smith: A shared understanding that we agreed to disagree as to what.

Rich Smith: Appropriate rate need is and what action was required and as a result of that.

Rich Smith: We wish to each other well or at least we wish them well.

Rich Smith: That played a role in that.

Rich Smith: In addition to the earlier comments.

Rich Smith: Do I think that the 12% is this like phenomenal number thats a one off the answer is no.

Rich Smith: I think that there were some things in.

In the first half of the year that served as somewhat of an extreme drag and what youre seeing now is a lot of that.

Shift away has been processed.

Rich Smith: Okay. That's helpful context, clearly the ROE for the year.

Rich Smith: Ended up being excellent. So I guess, just switching gears a little bit I think you mentioned the reinsurers.

Rich Smith: The thing we should be thinking about maybe within your expense ratio guidance or just as the euro.

Rob Berkley: <unk> in terms of the reinsurers are able to successfully garner.

Rob Berkley: Higher pricing.

Ceding commissions or whatnot on.

Rob Berkley: Charge their counterparties, such as Berkeley for for casualty reinsurance.

Rob Berkley: I know you guys have a reinsurance arm, obviously too. So there is an offset but just curious if there is.

Rob Berkley: Yes.

Rob Berkley: We've taken from one pocket and hopefully we're getting it back and then some of the other pocket I think one of the things that.

Rob Berkley: Do I think it's possible that youre going to see some of the reinsurance marketplace trying to take action for example, exceeding commissions, yes, I do the good news for our organization as we've discussed because of our limits profile and how the business is operated with approximately 90% of our policies that are legally allowed to.

Rob Berkley: Limits, having a limit of $2 million or less.

Rob Berkley: That makes us less reinsurance dependant.

So consequently, we have the ability to pivot and think about what we buy perhaps differently than some of our peers and we also.

Rich Smith: The shift structurally so as rich mentioned earlier around the C. Part of the reason why the.

Rich Smith: Gives me around the expense ratio, partly has to do with feed where people wanted to cope.

Rich Smith: Ceding conditions, maybe we switch to an <unk> structure that made sense to us given the rate environment.

Rich Smith: That worked out so.

The punch line is this Mike.

Rich Smith: A hardening.

Rich Smith: Reinsurance market when it comes to the casualty lines net net will be very good for us as an organization because it will force further discipline and consequently pricing power for the primary market and in addition to that my colleagues on the reinsurance side I'm sure we'll be right in there.

Rich Smith: Using the opportunity.

Rich Smith: Okay. That's helpful and maybe if I can sneak one last one and if bill thinks it's.

Rich Smith: A question worthy of his wisdom.

Rich Smith: Presidential election year to the extent.

Rich Smith: The outcome is for a change of the guard is there anything market wise investment portfolio wise or just interest rate wise you guys are thinking of in terms of.

Rich Smith: Powder dry or pivot if if if if.

That is an outcome.

Rich Smith: Late this year.

Rich Smith: Before I answer that I think we may need to read the safe Harbor again.

Rich Smith: So I think the bottom line is.

We've got a two trillion dollar deficit.

Rich Smith: 692% of the world countries as deaths.

Rich Smith: There is going to be enormous demand for money.

Rich Smith: Number two.

Rich Smith: We are the only significant.

Rich Smith: Democratic countries.

It doesn't have.

Rich Smith: Any kind of.

Rich Smith: Nashville.

Rich Smith: Sales tax.

Rich Smith: We have some flexibility.

Rich Smith: However.

Rich Smith: You have to look at every time theres been.

Rich Smith: Need to come to conclusion Democrat or Republican the conclusion has been both parties spend more money.

Sarah Smith: So what that tells you is.

Sarah Smith: Spending money and not having taxes go up.

Sarah Smith: Our cornerstone of the policies both parties.

I've chosen to follow.

Sarah Smith: At some point.

We're going to have to decide.

Speaker Change: Some of it is going to have to pay for what we're doing.

Speaker Change: And.

Okay.

Whether that's a value added tax.

Speaker Change: Or increasing income taxes or whatever.

Speaker Change: We are going to have to do something that's going to happen.

Speaker Change: During the next presidential period, or social security and Medicare Medicaid.

Speaker Change: We're going to be in jeopardy.

Speaker Change: So I don't think it matters who's elected that's a problem we're going to face.

It won't happen till after the election.

Speaker Change: Whoever is elected.

Speaker Change: Matter.

Speaker Change: Good.

Speaker Change: I think that's going to be there as well.

Speaker Change: We're going to have some pressure on inflation pressure.

Speaker Change: Pressure on government spending.

Speaker Change: And.

Speaker Change: I don't think that means good things.

Speaker Change: Interest rates can be down I would expect interest rates.

Speaker Change: First we'll be flat I think people are biased by the fact that we added extended period with extraordinarily low interest rates I don't think interest rates are going to go crazy, but I don't I don't think were going to see them.

Speaker Change: Consequentially lower than the R&M, probably a little higher.

Speaker Change: I appreciate it.

Speaker Change: Thank you Mike.

Speaker Change: Your next question comes from the line of David Modem maiden of Evercore ISI. Your line is open.

Speaker Change: Hey, David Good evening.

Speaker Change: Yes.

Rob: Hey, Rob good evening.

Rob: So I just had a question on the rates that you guys are seeing now in liability lines, if we exclude comp and exclude financial lines.

I'm wondering if you're starting to see evidence of those rates accelerate.

Rob: In the quarter in the fourth quarter I'm, just trying to get a sense for if we were to adjust for the mix dynamics that you just mentioned in your in your opening remarks, if we're actually starting to see those rates.

Rob Berkley: Move higher in response to the environment.

Rob Berkley: So generally speaking we don't.

Rob Berkley: Great.

Rob Berkley: Right data out by by product line.

Rob Berkley: But I guess to give you a little bit of color I would tell you that we are very happy with the rate increases that we're achieving.

Rob Berkley: And much of the liability market to say the least we are comfortable that.

Rob Berkley: Putting aside.

Rob Berkley: <unk> had some challenges within the professional liability space. The rest of it we think that we are keeping up with trend and then some are clearing trend by a meaningful margin.

Rob Berkley: Are things better in Q4 than they were in Q3, I don't really have the specific numbers in front of me at the moment, but just from having my finger is somewhat on the pulse I am very comfortable that the underwriting environment further lines.

Rob Berkley: You're referring to is every bit as healthy in Q4 as it was earlier in the year, possibly better and there is nothing that leads me to believe that that momentum is going to diminish.

Rob Berkley: And quite frankly, it's just simply being driven by loss costs.

Rob Berkley: The environment, which appropriately I think is making people focus on it more and more.

So we feel like we're in a good place.

Rob Berkley: Okay, great. Thanks, that's encouraging and then maybe if I could just move to the accident year loss ratio ex cat.

Rob Berkley: So if I if I look at the improvement.

Rob Berkley: Year over year.

Rob Berkley: I was wondering and I know this is getting a little bit granular but.

Rob Berkley: I think the prior period had some.

Rob Berkley: Fire losses in there.

Rob Berkley: What is the improvement really just the absence of those fire losses and are we sort of at a clean baseline here going forward.

Rob Berkley: Rich do you want to speak to that.

Rich Smith: Sure Rob.

Rich Smith: I would say, yes. It is.

Rich Smith: <unk> is certainly part of the reason for the change quarter over quarters, we certainly over the last.

A few quarters as Rob has alluded to I think on some of the earlier calls been making some changes with regards to re underwriting some of the property risk side of things and so yes. There has been an improvement certainly.

Rob: Much progress has been made can't say that it's completely.

Rob: <unk>.

Rob Berkley: Completed, but certainly do I anticipate.

A better position going forward.

Rob Berkley: Understood. Thank you.

Rob Berkley: Thank you David.

Rob Berkley: Your next question comes from the line of Ryan Tunis with Autonomous Research. Your line is open.

Yeah.

Brian: Hey, Brian.

Ryan Tunis: Just a couple from me.

Ryan Tunis: How many insurance growth standpoint, first one just on professional lines.

Ryan Tunis: I guess I was kind of hoping that as we started lapping some of those comps from.

Ryan Tunis: When this first started a year ago, maybe we'd see a little bit better growth.

Ryan Tunis: And it looks like.

Ryan Tunis: Growth was down again, even after being down last year in the fourth quarter.

Ryan Tunis: All of them.

Ryan Tunis: Is that not the right way to think about it is this alignment based on where market conditions are.

Ryan Tunis: Okay about about professional sorry, Ryan professional lines, yes, I'm, just trying to understand yes.

Ryan Tunis: Yes, there's plenty on that at least through my opinion is the D&O market, particularly public D&O market has been from a pricing perspective and somewhat of freefall.

Ryan Tunis: Rates went up considerably and now Theyre coming back down and then we have a view as to what rate adequacy is and ultimately while we're sorry to see it go if it goes it goes we're not going to chase it down the drain in addition to D&O a couple of other product lines that I'd call out would be.

Ryan Tunis: Medical professional specifically hospital professional liability, where the lack of discipline in that product line over the past quite frankly, a couple of years I think has given reason to pause to our colleagues credit. They also there have been operating with the discipline.

Ryan Tunis: No.

No: That's quite frankly, having an impact on the top line as well.

No: Other areas that I would flag, maybe one other would be architects and engineers with some of the larger accounts, where again, we have found that the market's willing to do things. We don't think makes sense and the pricing has come off so professional liability extraordinarily broad category.

No: Just trying to give you a little bit of a flavor with some of the bigger pieces of that puzzle, but yes. There are some areas within the professional space that we still find notably attractive, particularly non standard and then there is some big chunks of the professional lines some of which I just referenced that.

I think should be giving any one who is responsible and disciplined real reason to pause.

Ryan Tunis: Got it and then I guess, just a follow up on the short tail lines.

Gross.

Ryan Tunis: Full year it was like around 20%.

Ryan Tunis: I'm just trying to understand.

Ryan Tunis: How much is the composition how much of that.

From a composition standpoint did that change this past year was it was it more than normal because of the rate environment or was most of that growth.

Exposure in rate action on on stuff you would already have been writing in 2022.

Ryan Tunis: So it's a combination of both as you would expect we're pushing pretty hard on the rate front.

Ryan Tunis: And then sticking.

Ryan Tunis: In addition to that as we see.

Ryan Tunis: Rate adequacy more and more attractive.

Ryan Tunis: And then we're going to lean into that.

Ryan Tunis: You would take note the growth for example in short tail lines are specifically property and the reinsurance business during the 23 year.

Ryan Tunis: Of course, we had meaningful growth on the property front.

Ryan Tunis: In the E&S space as well both through our domestic businesses as well as through our London operation.

Ryan Tunis: Got it so.

I guess, how is your outlook for the type of Cat exposure you have is that changed at all.

Ryan Tunis: Not not not meaningfully when the days all done I mean.

Ryan Tunis: As I said, a few moments ago. The majority of our growth is driven by rate. So there is a lot of things, where our exposure hasn't changed but we're charging considerably more.

Ryan Tunis: Also that has led to opportunity to write some additional business as well.

Ryan Tunis: But I don't have a specific breakout on the 20% rate versus exposure, but if you'd like you're welcome to follow up with US Tomorrow. We can give you some more context.

Ryan Tunis: Appreciate it.

Ryan Tunis: Thanks for the question.

Ryan Tunis: Yeah.

Ryan Tunis: Your next question comes from the line of Mayor Shields with <unk>. Your line is open.

Ryan Tunis: Good afternoon or evening.

Ryan Tunis: Yes.

Ryan Tunis: Good how are you.

Ryan Tunis: Alright.

Ryan Tunis: We've talked about.

Ryan Tunis: Hello, Brian question, we've seen growth in commercial auto accelerate over the last two quarters and I was wondering if something changing in rates there or is that a change in exposure.

I think primarily what's driving it is we're just charging a lot more we're getting.

We are insisting on a lot more rate.

Driver no pun intended.

Ryan Tunis: And then taken no thats helpful.

Ryan Tunis: Second I know that you've talked about sort of waiting for let's say accident years 2020, and subsequent to mature a little bit I'm, hoping to get a little bit of a peak in terms of what youre seeing even before you take any reserve actions on those years.

Well.

Ryan Tunis: I would.

Yes, you look at the paid loss ratios I would also say because that's a reality and.

Ryan Tunis: In addition to that I would encourage you to have a look at how much <unk>. We are carrying relative to case for some of those years and further I would encourage you to look at how much <unk>.

Ryan Tunis: Carrying relative to our total reserves.

Okay for those helpful and and I think that Directionally should give you.

Ryan Tunis: Something to hang your hat on.

Ryan Tunis: Perfect and if I can throw in one other question really quickly.

Ryan Tunis: When you look back at the experience you had as you sort of expanded modestly into property cat in 2023 does that leave you wanting more or less exposure in 2024.

Ryan Tunis: Okay.

Ryan Tunis:

Ryan Tunis: The answer is I think that 2024 at least so far based on what we saw at one one is likely to continue to provide a very good opportunity is it going to be quite as attractive as 23, perhaps not but I think that even if it isn't that doesn't mean, it's no longer.

Ryan Tunis: <unk>, an attractive opportunity so we as far as property cat goes in a very measured way.

Ryan Tunis: Continue to be.

Ryan Tunis: Bullish on the opportunity, but as I said earlier, we are doing a bit more but the growth is really driven by the rate I don't think youre going to you would not see a dramatic shift in our.

Ryan Tunis: Risk profile.

Ryan Tunis: Okay understood. Thank you so much.

Ryan Tunis: Your next question comes from the line of Brian Meredith with UBS. Your line is open.

Rob Berkley: Good evening Rob.

Rob Berkley: Good evening.

Rob Berkley: A couple of things here first one just on that just.

Rob: Just a clarity here, so obviously a big growth in property reinsurance what did you all do it at one one.

Rob: Assuming we won't see the same type of growth in 2024 that we saw in 2023 and that in that area.

Ryan Tunis: I know you were pretty opportunistic in 'twenty three.

Ryan Tunis: Yeah.

I'm, sorry, as far as our property writings that property re property re are you James setting.

Ryan Tunis: Brian I think that.

Ryan Tunis: I think I'm happy to share that with you, but I want to check with our general counsel to make sure that I'm allowed to share that with you, but what I know I can share with you is that our general view on the <unk>.

Property cat market at one one was that it was still very attractive maybe not quite as attractive as it was at one 123 or said differently I think the market is still very attractive, but I also believe it is peak at least for the moment.

Ryan Tunis: Okay interesting and then I guess my next question Robin we talked a little bit about this earlier the ceded reinsurance program and your flexibility there.

Robin Smith: I'm just curious is this kind of the time in the market that maybe you do wanted to retain more of that business.

Robin Smith: Just because rates are quite adequate your operating leverage is still relatively low compared to history.

Robin Smith: Why would you kind of.

Robin Smith: Just lean in here and retain more of it.

Robin Smith: And.

Robin Smith: There are parts of the business that we are grappling with exactly those questions. It ultimately.

Robin Smith: The reinsurance marketplace from our perspective is that there are some people that are our partners through thick and thin and there are some people where it's much more of a transactional relationship those let our partners through thick and thin.

Robin Smith: We're not likely going to.

Robin Smith: Cut them off if you will those that are more transactional in nature, we come to the table recognizing we are renting their capital and we have a choice, whether we're going to use our own or whether we're going to rent theirs.

Robin Smith: And my colleagues are pretty good at doing the math and we try and figure out what makes sense. So are there parts of the business we're in.

Robin Smith: If the reinsurance marketplace, where to push us we might exercise that option of keeping more fruit.

Robin Smith: For exactly the reasons that you are flagging.

Robin Smith: Got you. Thanks, and then can I ask one big picture question.

Robin Smith: I'm just curious if I look at the industry and the commercial lines.

Robin Smith: And the combined ratios margins that companies have been reporting and you've been pretty consistent the last couple of years, but there are about as good as.

Robin Smith: They've ever been right I mean at least in 2025 years.

Robin Smith: So I guess my question then is what is the client pushback there was to broker pushback. When you are kind of trying to push for incremental rate and I get it that loss cost inflation, improving a little bigger but the returns the industry is generating right now are incredibly attractive.

Robin Smith: Yes.

Robin Smith: I'm not close enough to it but I think we are using a pretty broad brush.

Robin Smith: If you look back at some of the personal lines players or even some of the commercial line folks that.

Robin Smith: Right property books, it hasnt been necessarily a wonderful five years for them, maybe it's better today, but.

Robin Smith: When the days all done I think one needs to use a bit of a finer brush and really look at it our product line by product line I think as I suggested earlier.

Robin Smith: Think Q4 is going to be really attractive quarter for many market participants, but I don't think 2023 proved to be this remarkable experience for all carriers.

Robin Smith: So again do I think that.

Robin Smith: The industry is in a better place today, certainly for many product lines than it's been.

At other moments in time, yes, I agree with that comment, but I think if you look at the.

Robin Smith: Total results.

Robin Smith: For a lot of insurance companies for the 23 year not everyone's hanging our hat on a return that starts with it too.

Robin Smith: Makes sense. Thank you. Thanks.

Robin Smith: Thanks for the question Brian.

Speaker Change: Your next question comes from the line of.

Speaker Change: Josh Shanker with Bank of America. Your line is open Hi, Josh.

Joshua Shanker: Good evening Hi.

Joshua Shanker: Good evening, everybody. Thanks for taking my call at the end.

It's probably a rich question here I am.

Joshua Shanker: Looking at the traditional investment income and stepped up materially to $49 million in the third quarter and Youre about to 80.

Rich Smith: We havent 288 thinking change for this quarter, it's a pretty large step up in the implied yield stepped up a lot.

Rich Smith: Is there any one time type of coupons or onetime dividends in that number or is that a.

Rich Smith: Good approximation of where the yield on the book was through the fourth quarter.

Joshua Shanker: So we have seen a an increase Josh in the overall book yield I would say from our fixed maturity perspective, we certainly have.

Joshua Shanker: Have been able to deploy capital.

Rob Berkley: And reinvest at higher rates is as Rob was alluding to earlier in some of his.

Rob Berkley: Remarks in terms of where the new money rate is and where the roll off is.

Rob Berkley: Certainly that's been.

Rob Berkley: Big contributor to it we did have a little bit of an uptick if you will with regards to.

Rob Berkley: Some securities that we own in Argentina that are inflation adjusted as well so that did create a little bit of an uptick but I would tell you that.

The book yield in the quarter I would say core would.

Rob Berkley: Would be lower.

Rob Berkley: Around four 7%, which is certainly up from where we were at the end of the third quarter.

Rob Berkley: Thanks Ann.

You spoke.

Rob about the new money yield being in excess of 5% right now and given all the chatter and whatnot about rates and everything.

Rob: A lot may be even happened since the new year began is there any desire or action going on at the company duration still to four years.

Rob: Is there intention to crystallize some of the yield at these higher yields available in the market right now.

Rob: So.

Rob: Yes.

Rob: Our goal is if the opportunity presents itself to move that duration out a bit from here. If that is your question I want to make sure I'm understanding it.

Rob: Yes.

Rob: We're going to have it on a regular work too.

Rob: Same way different way of putting it.

Rob: Yes, so our desire is to move it out, but we're going to move it out when we see the window of opportunity. So would we like to see that move out to 2526 to seven over time.

Rob: Yes, we would but we're going to do that in a way that makes sense. So I would encourage you to stay tuned and.

Rob: <unk>.

Rich Smith: There is a lot of volatility in the world and when we see the things working with US, we're going to try and lean into that window.

Rich Smith: But.

Rich Smith: We're just trying to roll with the punches and again.

Rich Smith: <unk> volatility.

Rich Smith: And one last investment oriented question given the macro outlook for things at this point in time does it make sense to lean in and perhaps contribute.

Rich Smith: More of the portfolio to the investment fund.

Type of investments.

Rich Smith: Actually I think at this stage quite to the contrary, we're very pleased with what this just traditional fixed income portfolio is offering us and I think just as a.

A general mix, while we I don't see us exiting alternatives.

Rich Smith: I don't think that there is the same.

Rich Smith: Level of encouragement or it's not as compelling to look in the alternative directions as it once was given where fixed income rates still are.

Rich Smith: Thank you for all the answers and good luck in the new year. Thank you Sir you too.

Rich Smith: Yeah.

Okay.

Rich Smith: Your next question comes from the line of Yaron Qunar with Jefferies. Your line is open.

Rich Smith: Good evening.

Good evening, Thanks for taking my questions.

Rich Smith: First question just looking at the property market. So it sounds like maybe Keith, but salt pretty attractive returns there.

Rich Smith: Thank you guys have gone through some remediation efforts on the property book as well.

Keith Salt: I guess with that in mind as we look at 'twenty four if I heard your comments correctly youre still thinking of growing that book more through rates and through exposures is that correct.

Keith Salt: So.

Keith Salt: <unk> exposure.

Keith Salt: Draw distinction first off as far as things, peaking that comment was suggested that they may be PK in the property cat market and I'd like to draw a distinction between the primary insurance market versus the reinsurance market and in addition to that I would suggest that it's important to draw a distinction between the property cat market.

Keith Salt: Versus the property risk reinsurance market because they are clearly not one and the same.

Our opinion is.

Keith Salt: Far as our desire to grow the business look if we like the margin we're going to lean into it and I think that at the moment generally speaking we like the opportunity that continues to exist in the in the <unk>.

Keith Salt: Reinsurance marketplace.

Keith Salt: When it comes to property and we are certainly paying attention to a lot of the opportunity that exists in the primary property insurance space.

Keith Salt: Clearly as it relates to E&S in the commercial lines and of course not to be forgotten our colleagues at Berkeley won on the high net worth front.

Keith Salt: The opportunity for rate both on.

Keith Salt: On the admitted basis as well as just as a reminder, they are using non admitted paper as well as creating meaningful opportunity also.

Keith Salt: That's helpful. Thank you.

Keith Salt: And then my second question in.

Keith Salt: I'm not sure if you'd be willing to answer this at this stage, but yes.

Keith Salt: And I would ask.

Keith Salt: I'll try.

Keith Salt: The.

Keith Salt: When we see the 10-K and maybe even the schedule P. Later on in the year and.

Keith Salt: And we look at the results from this quarter, we see a similar trend to what we've seen so far year to date, namely <unk>.

Keith Salt: Maybe some strengthening in liability reserves of older vintages offset by favorable releases in 2020 through 22.

Keith Salt: I think Directionally, yes, you will see that do I think that we are very far are well on our way to having 15 through 19 behind US Yes, I do do I think that.

Keith Salt: It's done.

Keith Salt: Probably not but we take a different approach than some other organizations when it comes to monitoring our reserves and trying to make sure that we're getting it right. There are some folks that just ignore it for quarter after quarter year after year and then all of a sudden.

Keith Salt: This giant problem that they need to deal with and they take this massive charge.

Keith Salt: We take a different approach our view is we're looking at it every 90 days or more frequently and we're tweaking it to where we think it needs to be.

Keith Salt: And we think that's the more sensible approach.

Keith Salt: <unk>.

Keith Salt: Again, you'll see the information, but I think that we continue to be very optimistic about the more recent years and how that's going to play out.

Keith Salt: Clearly some of that good news has been used along the way as we've had some challenges coming out of the older years I think again those challenges are in the rearview mirror and shrinking by the minute and I think there continues to be a lot of encouraging signs as I referenced earlier around the <unk>.

Keith Salt: <unk> <unk>, we continue to carry and some of the more recent years.

Keith Salt: Thank you.

Keith Salt: Thanks for the questions have a good evening.

Keith Salt: Goodbye.

Keith Salt: We do have two more questions.

Keith Salt: Okay.

Keith Salt: Yes, why don't we go ahead.

Sarah Smith: Get to those two if we could please sarah thank you so much.

Sarah Smith: Thank you. Your next question comes from the line of Alex Scott with Goldman Sachs. Your line is open.

Alex Scott: Alex Good evening, thanks for taking.

Thanks.

Alex Scott: To you.

Alex Scott: I just have one quick one for you.

Alex Scott: You guys have been very good real estate investors over time.

Alex Scott: So to ask a similar question that when Mike asked you before us.

Alex Scott: What kind of opportunities are in real estate, obviously fixed income is a lot more attractive right now at higher yields but.

Alex Scott: Are you seeing any stabilizing trends in the real estate market.

Alex Scott: As far as real estate goes.

Alex Scott: Yeah.

Alex Scott: Clearly theres been a lot of opportunity residential has been.

Alex Scott: Reasonably.

Alex Scott: Stable and has been a good place to be.

Alex Scott: <unk> commercial on the office front has been more challenging Fortunately for us we own some very high quality assets and feel like we're in a very good place there both with the quality of the assets as well as the occupancy et cetera et cetera.

Alex Scott: Are there going to be opportunities.

Ryan Tunis: We're paying close attention, but when you look at where the fixed income market is the hurdle if you will for alternatives, including direct or indirect real estate is.

Ryan Tunis: That much higher so are we paying attention. If there was a great opportunity are we prepared to step forward, yes, but that hurdle is considerably higher when you look at where we can do with new money on the fixed income portfolio, which gives us.

Ryan Tunis: Good good yield.

Ryan Tunis: Good liquidity and this risk adjusted we like it.

Understood. Thank you.

Ryan Tunis: Thanks for the question having to.

Ryan Tunis: And your final question comes from the line of Scott <unk> with RBC capital markets. Your line is open.

Ryan Tunis: Hi, Scott Good evening Hi.

Scott Good: Yeah, just had two quick questions here, just E&S you talked about to be an attractive market here the submission count it sounds like it's pretty encouraging still.

Can you just can you comment more on the submission count.

Scott Good: For Q4 versus the past few quarters, how that's trended and where you're kind of seeing the most opportunity. There. If there is any any particular lines or areas.

It's changed much.

So the answer is that it remains as.

Scott Good: Give or take as robust as ever.

Scott Good: And we remain very encouraged as far as where the.

Scott Good: <unk>.

Most encouraging opportunities.

Ryan Tunis: It's something that we're going to be broadcasting I would tell you that our products liability has been an area that the standard market seems to continue to have an unquenchable thirst for.

Ryan Tunis: Okay I appreciate that and then just the last one is you mentioned some startups that you had during the year.

Ryan Tunis: How many of those did you did you have in particular in.

Ryan Tunis: Are you able to talk about what the premium is on those just just.

Ryan Tunis: If you don't have it now I can get it later I don't know if you give that out but is there is there anything more you can comment on that.

Ryan Tunis: Scott.

Rich Smith: Recommend if it's accessible to you is that you follow up with Karen and rich in.

Scott Good: I will have a better sense as to what we can share and what we can't I don't want to get all of us in trouble with the SEC someone else manner.

Scott Good: Alright fair enough. Thanks.

Scott Good: Thanks for dialing in and have a good evening. Thank you.

Scott Good: I will turn the call over to Mr. Rob Berkley for closing remarks, Okay. Sarah. Thank you very much and thank you to all of our participants we appreciate your time.

Rob Berkley: I think the quarter speaks for itself the year speaks for itself. The organization continues to perform at a high level and as suggested earlier, perhaps the most exciting news is how well positioned we are for not just 'twenty, four but likely 25 and beyond.

Sarah Smith: Thank you again for your time and we look forward to speaking with you in April have a good evening.

Rob Berkley: This concludes today's conference call. We thank you for joining you may now disconnect your lines.

Rob Berkley: April have a good evening.