Q1 2025 WR Berkley Corp Earnings Call
Speaker Change: Good day and welcome to W. R. Berkley Corporation's first quarter, 2025 Earnings Conference Call. Today's conference call is being recorded.
Speaker Change: 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.
Speaker Change: 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 be in fact be achieved. [inaudible]
Speaker Change: Please refer to our annual report on Form 10K for the year ended December 31, 2024 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.
Speaker Change: W. R. Berkley Corporation is not under any obligation and expressly described any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: I would now like to call, like to turn the call over to Mr. Rob Berkley, please go ahead.
Rob Berkley: Christus, thank you very much and good afternoon, good evening all, thanks for dialing in and let me echo Christus, warm welcome to our Q1 call.
Speaker Change: So in addition to me on the send of the phone you also have executive chairman Bill Berkley as well as principal financial officer Rich Baio
Speaker Change: We're going to follow our typical agenda where, momentarily, I'll be handing it over to Rich, she's going to run you all through some of the highlights from the quarter. I will follow behind him with a couple of additional observations and then we'll be very pleased to open it up for Q&A.
Speaker Change: Perhaps Stating the Obvious, or not perhaps actually Stating the Obvious. I think the world is chock-a-block full of volatility these days, these weeks, these months, and perhaps this year and maybe beyond.
Speaker Change: Seems to be presenting itself in a variety of different ways, political, social, economic, and certainly natural catastrophes as well.
Speaker Change: But it is, without a doubt, a moment where the realities of risk adjusted return.
Speaker Change: Come into very sharp focus and from our perspective it applies to both of the business activities that we participate in that being underwriting and investing.
Speaker Change: The resilience of our business model was once again demonstrated over the first quarter.
And, we feel as though it is another example.
Speaker Change: of how this organization is not just built to perform well during moments where there is a tailwind or smooth seas, but in fact it is built to continue to.
Speaker Change: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change: Excel or succeed during more challenging environment circumstances.
Speaker Change: From our perspective, it's very important to not lose sight of the goal of the exercise. The goal is to create value.
Speaker Change: And in our opinion, it's not just about the steps forward you take, it's also about the steps backwards that you avoid.
Speaker Change: So, as we talk about the quarter, there is going to be no butt fours, there is going to be no lipstick on the pig or any other analogy. We're going to talk about what the results were with cat activity and with a variety of other events and how we managed to navigate through it. We're going to talk about what the results were with cat activity and with a variety of other events and how we managed to navigate through it.
Speaker Change: It is the reality again that when it comes to value creation and the power of compounding what that means for value creation, avoiding steps backwards.
It's very controversial.
Speaker Change: So with that, I will hand it over to Rich. Rich, if you want to run us through the highlights, please. And I apologize every now and then if you hear a call for a sneeze here in the Northeast, it is very much peak allergy season. Richie over to you. Great. Thanks Rob. Appreciate it. Good evening everyone.
Rich: As you saw, the company started 2025 with a strong first quarter, reporting net income of $418 million or $1.04 per share, and an annualized return on beginning of your equity of 19.9 percent. [inaudible]
Rich: Despite significant industry-wide catastrophic activity led by the California wildfires, we continue to demonstrate stability and underwriting earnings and continued growth in that investment income.
Rich: Operating earnings were $405 million or $1.01 per share, yielding an annualized return on the beginning of your equity of 19.3%.
Rich: The calendar year combined ratio was 90.9% and the current accident year combined ratio, excluding cat losses was 87.2%.
Rich: The driver for this difference with cat losses of 3.7 loss ratio points, or $111 million, representing an above average cat quarter, primarily attributable to the California wildfires.
Rich: Carrier development was favorable in the current quarter by approximately $1 million with small offsets between segments.
Rich: Accordingly, the current accident-year loss ratio of excluding caps was 59.4%, representing a 30-basus point increase over the prior year, largely due to business mix.
Rich: The expense ratio of 27.8% continues to benefit from the gross and net premiums earned which grew to a record $3 billion.
Rich: In addition, the 80 basis point improvement over the prior year quarter includes a non-recurring compensation related benefit of approximately half of this amount.
Rich: We believe the expense ratio should be comfortably below 30% for the full year as we continue to invest in our newer operating units and make investments in our infrastructure.
Rich: As it relates to premium production, the company grew net premiums written to a record of more than $3.1 billion. The insurance segment grew 10.2% to our second best quarter of $2.7 billion with growth in all lines of business.
Rich: The reinsurance and monoline excess segment grew 8.2% to a record quarter of $439 million with growth and property and excess workers compensation partially offset by a small decrease in casualty.
Rich: Turning to investments, net investment income increased 12.6% to $360 million.
Rich: on our growing sixth maturity portfolio, along with strong operating cash flows in the quarter of $744 million. And second, higher investment fund income arising from transportation and financial services related sectors.
Rich: As a reminder, we report investment funds on a one-quarter lag, and with the recent volatility seen in the equity markets, you may expect some correlation between public and private equity markets.
Rich: Accordingly, we anticipate investment fund income may be at the lower end of our quarterly range of ten to twenty million dollars in the next quarter.
Rich: The criticality of our portfolio remains very strong at a AA-minus with a duration on our fixed maturity portfolio, including cash and cash equivalents, increasing from the fourth quarter of 2.6 years to the current quarter of 2.7 years.
Rich: Foreign currency losses in the quarter of $19 million related to the weakening U.S. dollar relative to most other currencies.
Rich: Offsetting this income statement loss is an improvement in the currency translation loss and stockholders' equity of $24 million.
Rich: The effective tax rate was 22.5% in the quarter, and we continue to expect 2025 will be 23% plus or minus.
Rich: Stockholders' equity increased by more than $500 million or 6.2% over the beginning of year to a record $8.9 billion.
Rich: Hope value per share before dividends and share repurchases grew 7.1% in the quarter.
Rich: And our balance sheet remains strong with cash and cash equivalence of more than $1.9 billion financial leverage of 24.2 percent to the lowest level in decades with no debt
Speaker Change: Rob, with that, I'll turn it back to you. Okay, Rich, thank you very much. That was great.
Rob Berkley: Let me offer a couple of additional comments just to piggyback on what Richard just shared. As far as the top line goes, you know, came in where we were up about 10% or to be more specific if I were a CPA, I would call it 9.9%.
Rob Berkley: But we're pretty pleased with that. Obviously, rates contributed to that. X-Comp coming in at 8.3%.
Rob Berkley: In addition to that, the renewal retention ratio continues to hang around 80%. I mean, it's like bowels to the ship. It just doesn't move around very much. But I think it's a relevant data point because it tells you as we continue to. [inaudible]
Rob Berkley: Push for a rate and making sure that we're getting paid, but we need to get paid. We are not turning the book
Rob Berkley: Drilling down a little bit more on the insurance front, particularly as it relates to market conditions.
Rob Berkley: And I would tell you that professional liability has become particularly competitive. We've been talking to you all about the D&O market for some period of time. I would add cyber as well as for as competitive. [inaudible] I would add that I would add that I would add that I would add that
Rob Berkley: and at the risk of being a little bit rude, which I apologize for in advance, I think transactional liability as far as the marketplace probably gets the stupid award.
Rob Berkley: As far as maybe one other data point, we've chatted with you all about some of our reservations around workers' compensation and medical trend, and you might look at our numbers in the release and some of the exhibits and say, well, how does that reconcile with the growth that they're seeing?
Rob Berkley: And let me again, similar to last quarter, flagged for you that the growth that we are seeing is really driven by specialty comp.
Rob Berkley: and what do I mean by that? Typically it's a little higher hazard in nature. There is less competition and you're not seeing both regional and in particular national carriers trying to play the game and leverage the multi-line offering to get the comp.
Rob Berkley: So that continues to be a good opportunity from our perspective.
Rob Berkley: Switching over to the other segment that being reinsurance and excess. I would call out here. I don't think we break out all this detail, but it'll be in the two and that is professional liability. I don't think we can break out all this detail.
Rob Berkley: as a component of casualty. So our professional liability book has it related to reinsurance for the down, a little over 25%.
That is really just a reflection of market conditions.
Rob Berkley: and, quite frankly, our colleagues have the discipline and the courage.
Rob Berkley: to do the right thing. So, we'll have to see, I've commented in the past how it seems like the reinsurance market just as it was some number of years ago, sluggish to respond to property particularly cat.
Rob Berkley: It seems as though yet again we're seeing something similar just in the casualty lines and in particular professional. So we will stay tuned and see how that unfolds. Rich covered the loss ratio earlier.
Rob Berkley: As far as the ex-can accident here, and how it picked up,
Rob Berkley: about 30 basis points. As he mentioned, that's really do the mix.
Rob Berkley: The only other comment I would make is we are paying close attention as you would expect.
to the terrace.
Rob Berkley: And it is a very fluid situation as everyone has an appreciation.
Rob Berkley: So trying to unpack that and figure out what it means for a lost cost that's something that we are working on actively and again as that comes into sharper focus that may be instructive to us as to how we think about both loss ratio as well as rate need
Rob Berkley: At this time, far as the expense piece goes, you know, I would echo Rich's comment about comfortably under 30.
Rob Berkley: The only other comment I would make, yes, he did flag that we had a bit of a benefit from an over a cruel from last year. So maybe that stewed it a little bit in the quarter, but arguably, and also meant that we overstated our expense ratio a little bit as it turns out last year. So it was actually a little bit better last year than we had reported. [inaudible]
Slippin' over to the investment component. Let's go with M.
Rob Berkley: The portfolio, how it's managed, how it's been positioned, Rich commented on the duration, ticked out to 2.7 years and continued to maintain that very strong quality at a strong AA-minus.
Rob Berkley: I think one of the important punchlines here is the opportunity or the upside that we see both on the underwriting side and now specifically on the investment side. So we have a book yield on the domestic portfolio approximately 4.7%
Rob Berkley: We got what's rolling off the portfolio is something below that, so we're going to see some lift from that. And in addition to that, we have a new money rate that's probably give her take around 5.2%.
Speaker Change: You got a $30 billion investment portfolio, call it $27 billion or so, interest sensitive flash, fixed income cash, etc. So if you take, call it $50 plus basis points.
Speaker Change: And you apply that to 27 billion dollars, that gives you a sense of where the earnings power is going.
Speaker Change: It's certainly possible that at some point you could see this interest that the shorter end of the curve come down, but from our perspective the intermediate and longer term end, we don't see that backing off as anything it could tick up from here. [inaudible]
Speaker Change: So, long story short, the business had a very good quarter to say the least. Flirting with a 20% return in an environment such as this where we saw exceptional cat activity I think is a very strong outcome.
Speaker Change: What is, in my opinion, even more encouraging is the rate accuracy that we continue to maintain while growing the business and in addition to that, what we've been able to do with the investment portfolio. So, as Rosie, as the picture is here,
And it's not that there aren't headwinds and challenges . . . .
Speaker Change: I think it's pretty evident that not only did we have a good quarter [inaudible]
But the balance of 25 is looking very encouraging. [inaudible]
and the foundation that we're beginning to pour for 26th.
Appears to be quite solid as well. [inaudible]
Speaker Change: So, Wano, did you guys have anything else you want to add? Let's turn.
Speaker Change: Okay, then Christa, why don't we take a pause there and we're very pleased to open it up to any Q and A that folks would like to have.
Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. And if you'd like to withdraw that question, again, press star one.
Your first question comes from the line of Andrew. Andrew.
Kligerman, with PD Securities, please go ahead.
Speaker Change: Both enough. A good evening. I was particularly interested in the short tail lines.
Up 13% Rob Wood.
Speaker Change: You called out rates being up 8.3% X property, meaning like... So, Andrew, I beg your pardon, is 8.3XComp, I'm sorry if I missed that. Oh, okay, so it's 8.3XComp.
Speaker Change: Thank you. Sure, and as far as the growth goes, you know, we're seeing we're continuing to see opportunity on the property lines. And in addition to that, we are seeing opportunity in the A and H space as well. Thank you.
Speaker Change: and those are probably the big drivers as far as the short tail.
What are you seeing in rate and in property?
Speaker Change: So as far as the insurance market space with regards to property and obviously it's a pretty odd space, we continue to see opportunity to push rate of a pretty healthy pace on the risk run.
Speaker Change: On the cap front, certainly there's a bit more competition particularly coming out of the likes of Lloyds both directly as well as through binding authorities that they seem to for some reason be empowering. Brian ,
Speaker Change: In addition to that, Berkley won. Our private client, High Net Worth personal lines business continues to be able to demonstrate their considerable value proposition to the marketplace and grow their footprint while simultaneously taking very healthy rate.
Speaker Change: and then finally our A&H business which has a rich history of performing at a very high level continues to be able to capitalize on market conditions.
Speaker Change: in the reinsurance segment. I mean, again, you put up another fabulous combined ratio. I guess you did it in 85, 4, and that's even with 10.9 points of catch.
Speaker Change: Should we be thinking about that as a stable kind of one-rate for reinsurance? I mean-
Speaker Change: Well, I think that we are very pleased with the performance of the business and how our colleagues...
Speaker Change: very effectively positioned it. I don't think any of us know what tomorrow will will bring with certainty that having been said I think the portfolio and how it has been. [inaudible]
Speaker Change: created and put together and put us on very firm ground, both where we are today and how we're positioned to capitalize tomorrow. So I think that we again remain very encouraged with that business and how it's positioned.
Speaker Change: Awesome. Thank you. Thanks for the questions. Have a good afternoon.
Speaker Change: Your next question comes from the line of Elyse Greenspan with Wells Fargo. Please go ahead.
Hi, Elyse, good afternoon. Good afternoon.
Elyse Greenspan: Hi, thanks. My first question, I know I think in the prepared remarks, you guys said, you know pointed out the one million of development in the quarter and I think said
Elyse Greenspan: It seems like nothing to call out in the segments. You know, would you be willing to give us just if it's immaterial numbers just how much reserves in the quarter moved in both insurance and returns? Yeah, Richard, I don't have them. Richard, you have each segment because it was, you know,
Elyse Greenspan: Again, I think people look at the combined and they kind of grasp their head, but we got a lot of moving pieces that come out to this in the wash. So what were the things? So for the insurance segment, it was $11 million unfavorable part of your development. I think it was $11 million.
Elyse Greenspan: and in the re-insurance and monoline access, it was favorable by 12 million.
Elyse Greenspan: Thanks and then my second question was on the underlying loss ratio. I think you guys said mix right in the prior question right in on re-insurance which which had a strong improvement in the quarter. You know, we did see, you know, some, you know, year by year deterioration in insurance. [inaudible]
Go ahead, Richie.
Richie: So as you pointed out, Elyse, yes, it is business mix.
Richie: Obviously, one of the elements that plays into that is also our outward re-insurance purchasing that we do, and you might recall we purchase re-insurance both at the group level, but we also purchase it at the operating unit level, and we've got 58 plus operating units across the group. So, theoretically, if some businesses are growing, others are shrinking, perhaps.
Richie: The level of re-insurance plays into that because of the impact on the seating commissions on the quarter share arrangement, et cetera. So that's really, in large part, what drives that 30 basis point swing from the prior quarter?
Speaker Change: Thanks. And then on my last one, obviously, you guys recently announced that, you know, Ms. Mieson Motomo is going to take right the 15% stake in the company.
Speaker Change: I know in the presentation that you was put out, it pointed to them starting in May. I'm not sure if this is a question for you or them, but is there an update on the regulatory process and is that May timeframe still intact? [inaudible]
So
Speaker Change: They are going through the process that they need to go through and we try to be helpful as we would with any shareholder.
Speaker Change: But I think as you pointed out, Elyse, it's more of a question for them than for us. We are not in all of the details and won't be in the details because we are not going to be precluded from being able to repurchase stock in the ordinary course as we have in the past.
Got it. Thank you. Thank you.
Rob Cox: Your next question comes from the line of Rob Cox with Goldman Sachs. Please go ahead.
Hi Rob, good afternoon.
Rob Cox: Hey, good afternoon. Hey, I want to zoom back in on the tariff's impact. I know you guys are still assessing, but maybe specifically on the property lines of business and the high net worth homeowners.
Rob Cox: How are you thinking about what the impact of tariffs might be? [inaudible]
Rob Berkley: Well, as you'd expect, Rob, we're particularly focused on the shorter tail lines both auto, particularly around the physical damage.
as well as Property.
Rob Berkley: But I think it would be a mistake for one to discount other lines as well. So for example, workers compensation and what the impact could be around pharma. A lot of drugs are manufactured outside of the United States.
Rob Berkley: So it's something that we're very focused on if the whole terror situation again as mentioned earlier and I know you and others appreciate is very fluid.
Rob Berkley: We are doing our best to try and read the tea leaves and we are actively doing a variety of different analyses to try and figure out what this means for lost ticks and how that would instruct rate need.
Rob Berkley: So, yes, does it have an impact on property? Yeah, potentially it would. Would that include personal lines and homeowners without a doubt? And certainly another obvious one is autophysical damage.
Rob Berkley: But while those may be the two more significant spots, I would encourage folks not to underestimate or completely ignore other product lines as well.
Speaker Change: Um, you know, what are you seeing in terms of outliers by line of business? Is that any different from recent quarters and what kind of the acceleration? [inaudible]
Speaker Change: Yeah, I think it's pretty consistent with what we've seen in the past and there are some product lines that we've talked about in the past like auto liability as an example where we are very focused on
Speaker Change: Laws cost trends, social inflation and doing what we need to do to keep up with that and other liability lines as well. But as we called out in the past auto liability and particularly umbrella and how the auto liability feeds the umbrella exposure. [inaudible]
are areas that we continue to push pretty hard on. [inaudible]
Speaker Change: One way or the other, I would suggest in my mind the takeaway is that the company remains very focused on rate adequacy and keeping up with trend.
Speaker Change: And I think that is evidence both in what we've delivered this quarter, as well as what we've delivered for the past many quarters.
Thanks a lot. Thank you.
Speaker Change: Your next question comes from the line of Mike Zaremski with BML. Please go ahead.
Good afternoon.
Speaker Change: I guess going back to the macro and I appreciate that with the tariffs there's lots of
Speaker Change: Uncircuity, but maybe curious if you can kind of talk high level about
Speaker Change: your view on work comp, profitability, under a recession scenario. I know you just kind of simply said, you know, keeping an eye on care of impact on farmer cost, but I'm
Elyse Greenspan: I guess curious, more specifically, is higher than historical weight inflation level, does that
Elyse Greenspan: I'm a material tailwind in recent years that we should be thinking about to under a recession scenario or just any kind of high level shots given that this find the business continues to be just highly profitable and we're getting a lot of recession questions. Thanks.
So I think the answer is yes.
I think...
Elyse Greenspan: Coming out of COVID when we saw significant wage inflation that comfortably outplayed, outpaced much of the medical inflation equation that created a bit more tailwind or wiggle room for the industry. Obviously that can cut both ways. [inaudible]
Elyse Greenspan: and you know medical costs are a little bit of more than 50% of every claims dollar so one should not in our opinion underestimate the significance around that.
Elyse Greenspan: So long story short, to your point, Mike, I think it does cut both ways and one will need to see how it unfolds.
Elyse Greenspan: But, you know, again, as far as the growth that we're seeing in comp, it partly has been to do the wage inflation, but even more so as we flag earlier today as well as I think in the prior call, we see opportunity in. [inaudible]
Elyse Greenspan: Some of the comp market that is less commoditized and is more specialty in nature. So yeah I think to get to your specific question. I think wage inflation was a plus but that can cut both ways. I think it is a thing.
Elyse Greenspan: The point, I think, people need to be very conscious of that. [inaudible]
Okay, that's very helpful. Well, I'm...
Rob Berkley: You know, thinking kind of looking at, you know, Berkley's path disclosure and just the industry as well, and other liability occurrence continues to be I know you said no analogies, but right kind of takes through the Python. You know, do you feel. Well, I'm.
Rob Berkley: Pricing levels for, although I believe currents, I know that it works its way through different lines, but do you feel that pricing is at kind of a level where? Yes, I do.
Rob Berkley: to actually roughly can start playing offense or do we really need to see a continue to see a material increase in pricing there to really feel like the coast is clear. .
Rob Berkley: I think that we've done a pretty good job keeping up with it, and the question really is how the balance of the market will behave.
Rob Berkley: and we are encouraged by what we saw quite frankly more recently with additional discipline coming into the market in certain product lines.
Rob Berkley: That having been said, we don't know necessarily what tomorrow will bring. So will there be an opportunity for us to accelerate the growth? We'll have to see with with time right but again.
Speaker Change: One of the things, and I think you're in some ways flagging it right now, is how different the market is and our product lines have decoupled.
Speaker Change: and one of the benefits that we as an organization are enjoying is the breadth of our offering. So there are parts of the marketplace that we participate in where we are maintaining very much of a defensive posture and there are other parts of the marketplace where we're finding opportunity to lean in. [inaudible]
Other liability occurrence, we'll have to see how it unfolds.
Speaker Change: Clearly there are many folks that have taken some bumps and bruises particularly on the excess in umbrella and historically that would suggest that will lead to opportunity and if that is the case we look forward to participating.
Speaker Change: Okay, got it. They'll sneak in just a follow-up question to Rob Cox's question and your answer about
Um, more than just the, um, the auto line.
Speaker Change: I probably just need to do more homework myself, but have you been willing to quantify just directionally, commercial property would tear us under their current form, potentially impact.
Speaker Change: Laws ratio by like just I don't know if you have a corridor or like very low single digit [inaudible]
Speaker Change: So my answer is that the terror discussion coming out of Washington particularly led by the administration, I think is still a bit of a moving target.
Speaker Change: So for us to put a number down right now that I'm hoping that that's something we can do give it take 90 days from now for you and others.
Speaker Change: But right now, I think it would be premature. My message to you is that we are very focused on it.
Speaker Change: and making sure that we will take the appropriate action from a loss ratio as well as what those implications are from a pricing perspective as well. The short answer is if it comes to be as it's been advertised.
Speaker Change: Yeah, it's going to drive up loss costs. Do I have a number for you? No, not that would be particularly valuable to you or valuable to us shared with anyone at this moment.
Understood. Thank you.
Thank you.
Speaker Change: Your next question comes from the line of Josh Shanker with Bank of America. Please go ahead.
Good evening everyone. How are y'all doing? [inaudible]
We're doing great. How are you? [inaudible]
Rob Berkley: that you have to concentrate on specialty workers' comp to understand why Berkley grew in the quarter and otherwise Tepid comp environment.
Speaker Change: But you always have a specialty as what you're writing. Is there a few unique opportunities that you saw in 1Q25 and should we expect that workers comp is going to be a unique area that Berkley's able to grow for the next few quarters while the industry struggles?
Speaker Change: So, I think that maybe thanks for flagging that Josh and let me try and do a...
Speaker Change: A better job articulating the thought than I did. You're absolutely right that by and large all we do is specialty in nature. But some of what we do that is specialty in nature.
Speaker Change: Often times by the standard market is mistakenly not recognized as specialty and that tends to be smaller and mid size accounts.
Speaker Change: So, as they are mistakenly coming into that marketplace, you know, that creates more competition and we have no qualms letting that part of the portfolio shrink.
Speaker Change: That having been said what I was attempting to flag was there is a part of the comp market which is perhaps even more specialized. And what I mean by that it's even higher hazard in nature where the standard market. Yeah.
Speaker Change: has a greater recognition for the complexity and is less inclined to try and come into that marketplace and cut rates and try and leverage their multi-line offering.
Speaker Change: So apologies if I muddied the waters, but hopefully that adds a bit of clarity [inaudible]
Speaker Change: And is there anything we can use by looking at this number to think about the remainder of the year?
Well, you don't judge
Speaker Change: Both you and I, along with others, though, that nobody knows exactly what tomorrow will bring. If market conditions in that part of the comp market.
Speaker Change: Continue as they have been more recently than we will look forward to continuing to lean into that opportunity.
Speaker Change: If that opportunity or window of opportunity were to close, then you will see us do what you would expect us to do. And we will have no qualms letting the business move in a different direction or away from us.
Elyse Greenspan: So, if I could ask the same question, but about a different market, about commercial auto liability, it's been a tough market for a while, but this is the first time that I've really seen Berkley's premium volume really fade compared to the prior quarters. It's something changed in the last three months.
Rob Berkley: I think what it is is to start commitment to rate accuracy and the rest of the marketplace has been a bit sluggish, particularly earlier in. [inaudible]
Q1, I would tell you more recently, perhaps there's-
Rob Berkley: Early signs of a green shoot coming through, hard to know whether that is green grass or a weed, but we remain hopeful.
Andrew: Okay, and if I can sneak one other in, you know, Andrew mentioned about the cat.
Speaker Change: Uh, notably Berkley has no exposure to California homeowners, uh, which the avoided the the didn't avoid completely obviously be avoided the line of business that was most exposed to the biggest cat in the quarter, yet this was quite a big quarter for.
Catastrophe losses for Berkley. Has thee?
Speaker Change: Premium footprint change as you've moved into short tail line and expose yourself more.
Speaker Change: to property such that we should revise our priors and how we think.
Berkley's Uh, uh,
Catwalk exposure evolves relative to the market more broadly. [inaudible]
Just so the way I would answer that is. [inaudible]
Speaker Change: No, not really. First off, as far as the homeowner's piece.
Speaker Change: I want to make sure there's no misunderstanding. It wasn't that Berkley won, didn't get too expanding to California. A conscious and deliberate decision was made not to enter California.
as far as the balance of the loss.
Speaker Change: As it relates to that, it has to do with our commercial lines book, and we have felt as though the property market, as we've talked about in the past, is reasonably well-priced, and that's why we were prepared to take on a bit more exposure.
Speaker Change: I think that view was validated because if you look at the result we delivered, even with having opportunistically, modestly expanded our footprint or participation in the property space, we still delivered a 19 plus percent return.
Speaker Change: So long story short, do I think you should come away from this?
Speaker Change: Feeling like there's been a sea change in our approach to property and cat exposed property? No, I think that would be a mistake. Do I hope that you'll continue to recognize that we are an organization that is opportunistic and when we see things that are well priced, we're willing to take on a bit more exposure? Yes, I would hope that that would be the takeaway. But no, there is not a sea change in our appetite for cat if you will. No, no, no, no, no, no, no.
Speaker Change: and that's why arguably a $40 to $50 billion event relative to our size. I think by any measure we are underweighted as far as our cat loss.
Well, thank you for all the answers appreciated.
Thanks for coming in.
Speaker Change: Your next question comes from the line of David Motemaden with Evercore ISI. Please go ahead.
Hi David, good afternoon. Good afternoon.
David Motumadam: Good afternoon, Rob. I had just a follow-up question on the reserve development within the insurance segment, the 11 million. I was hoping to get a little bit more detail in terms of some of the moving pieces there.
Speaker Change: I don't have that in front of me. If you'd like, maybe you could give Karen a richer call tomorrow and we can unpack it. I think we have about $17 billion of reserves, so I didn't view $11 million dollars as to be on end all, but we're happy to do our best to unpack that for you.
Speaker Change: Great. Thanks. And then, you know, I was, I know not a big line for you guys either, but the property reinsurance growth was a pretty nice tail in this quarter. I'm, um,
Speaker Change: You know, ticked up quite a bit, I guess. How should we think about how sustainable growth is in that market within the property cat market? [inaudible]
Speaker Change: I think it depends on what tomorrow holds. When the day is all done, the property market, particularly as it relates to re-insurance, was not as rosy as this one won as it was a year earlier, but we don't think that it's well priced.
Speaker Change: But as we've demonstrated in the past, whether it's property or any product line, if that opportunity shifts and is less attractive, we're very happy to let it go.
Speaker Change: So, what will tomorrow bring? I don't know, but right now we think that there's still a reasonable risk of just a return to be had.
Speaker Change: That having been said, we all saw a fair amount of erosion at 1-1, so I don't know if there's another year or not in the tank.
Speaker Change: Got it, thanks. And then maybe just lastly, so there's been...
Speaker Change: Some efforts at tort reform in Georgia. I know you guys are a decent-sized player in Georgia within GL and commercial auto. I guess
Speaker Change: Just various on your thoughts in terms of what that does to address some of the social inflation issues that have been problematic there. Thank you for your time.
Um...
Speaker Change: I guess the short answer is we're pleased that it's getting the attention, not sure if it's enough, but it's a step in the right direction.
Great. Thank you. Thank you.
Speaker Change: Your next question comes from the line of Mark Hughes with Tour with Securities, please go ahead.
Hello, Mark. Good afternoon. Yeah, thank you.
Hey Rob, how are you?
Speaker Change: Anything to say on admitted versus E&F and the mixed shift that seems like it's continued in E&F? How did you see that play out this quarter and any commentary on submission growth would be great?
Speaker Change: So, using a pretty broad brush, we are pretty pleased with the continued flow in the E&S market ever increasing particularly around some of the liability lines, casualty in particular.
And for that matter, excess and umbrella.
Speaker Change: As far as the property piece goes, there's still opportunity there but probably a bit less than there was yesterday.
Speaker Change: January was a little bit more challenging, but we were very pleased to see how the balance of a quarter unfolded and tried it to be quite encouraging.
Speaker Change: Thank you for that. And then Rich on the re-insurance purchasing that you talked about influencing on seeing the next switch influence the current accident year.
Elyse Greenspan: Is that an ongoing phenomenon, do you think, or is that there's some timing about the purchasing of the reinsurance that might have influenced Q1 more than others?
Elyse Greenspan: I don't think it has to do with the timing of the purchasing. It really is just driven by each of those operations whether they're growing or shrinking or moving in or out of particular businesses and what the contribution is to the overall. I don't think it has to do with that.
Elyse Greenspan: So, if you have a business as an example that week...
Elyse Greenspan: Quote to share some of that out to third party re-insurers and you don't have as much net premiums written. [inaudible]
Elyse Greenspan: Contributing to the overall total net premiums written, it will obviously have an impact.
Elyse Greenspan: One way or the other. So no, I think if you look at our session rate, we kind of hover in that high 14 to low 15% rate.
Elyse Greenspan: So I think that our session rate is pretty consistent from period to period. It's really just the composition across the 58 plus operating units.
Very good. Thank you
Speaker Change: Your next question comes from the line of Andrew Anderson with Jeffries, please go ahead.
Speaker Change: Hey, good afternoon. Just on casually reinsurance, you had mentioned the professional liability component. I was just hoping you could touch on kind of the rate and discipline that you're seeing in the market and expectations are thought to that maybe improving as we go through the year.
Speaker Change: So the punchline is a lot of it has to do with...
Speaker Change: Fair amount of it has to do with DNL, fair amount of it has to do with fiber and transactional as well.
Speaker Change: and make a long story short. It's not that we're running the same number of treaties and the rates just getting cut or the underlying is collecting less premium.
Speaker Change: Got it. So maybe still some some novel news as we go throughout the year on that line perhaps. Obviously one one is is a big date, but we'll have to see how it unfolds but again of course the stuff. So far.
It comes throughout the year.
Speaker Change: Okay, and then just on specialty workers comp, it is the right there kind of similar to traditional workers comp or what are you seeing in that market?
Speaker Change: A healthier market where we find the rates are higher and we think the rate accuracy is more appropriate.
Thank you. Thank you.
Speaker Change: Your next question comes from the line of Brian Meredith with UBS. Please go ahead.
Brian Meredith: Yeah, thanks. Hey, how are you? Too quick one to hear for you. First one, just on the property reinsurance again. We're any color reinstatement premiums or anything in there that may have kind of elevated the growth on a year of your basis. Just give me that losses. Nothing. Okay, not material. Okay, thank you.
Speaker Change: Okay, excellent. And actually, the next one is for Bill. Just curious, Bill, during the 1970s, we had stagflation. Maybe you give us, tell us what that kind of means for the commercial insurance industry and kind of what it was like back then was stagflationary environment.
Speaker Change: Well, a first of all, that's age discrimination. I think that that's, that's the
But the inflation was somewhat different, it was much more. [inaudible]
Speaker Change: Focus, and you saw it. It wasn't quite across the board in the stagnant economy. There were a lot of different moving parts.
Speaker Change: But I think that the industry, when that happened, went through a tough period of pricing pressures.
But it wasn't a disaster by any means.
I think the industry was able to move along raising prices. [inaudible]
Speaker Change: and keep up with that. But there was less growth because the economy really wasn't growing.
So, last growth, Facing was okay, and the industry...
Speaker Change: Lightblood of new companies and change was diminished. So flexible, modest size and larger size companies did well.
Speaker Change: Not a lot of new companies getting started was really when we were just getting into the business and you have lots of issues including things we faced when we were just getting into the business.
So is that just looking back at what that was? [inaudible]
Speaker Change: It opened the doors to really a much improving period of time.
Speaker Change: But margins were not what they were, although interest rates moved up. So we had improving interest rates. That was when. [inaudible]
Speaker Change: You know, interest rates started to move up, where they had been settled and 3% to where they became settled and 6% so it was an okay time for the industry if you paid attention to risk but overall. Well.
Speaker Change: Bigger companies did better than smaller companies and opportunities because of themselves so...
Speaker Change: Like everything, there's no broad brush that gives you an answer. Very, very differentiated.
Thank you.
Speaker Change: Your next question comes from the line of West Carmichael with Autonomous Research. Please go ahead.
Speaker Change: Hey, good evening. I wanted to come back quickly to the increasing underlying loss ratio that was driven by mix. And Rich, I heard your commentary on re insurance and I don't think it sounds like it, but I just want to confirm is there any mix standpoint on the expense ratio that you're saying? [inaudible]
Speaker Change: There could be as well, because as I was alluding to earlier, depending on the contributions from quota shares with seating commissions, that could also have an impact on the expense ratio. So, yes. In this case, that was less the correction from the quarter. That's right.
Speaker Change: Okay, understood. Thank you. And then just in the insurance segment, I wondered if you could just unpack growth a bit more and Robbie talked about about workers comp for a while. So any more color on the other lines, including other liability that you might call out in the quarter going forward. [inaudible]
Speaker Change: I think it's a combination of making sure we're staying on top of it with the rate and market conditions where we are seeing opportunity to grow and we are making the most of that where the opportunities are.
Speaker Change: So, you know, long story short, some of the product lines, it's...
Rate, rate, rate all day like auto as an example.
Speaker Change: There are other product lines where rate adequacy remains very important and market conditions are such that it's allowing us not just to grow through rate but to grow through exposure.
Great. Thanks so much.
It's you.
Speaker Change: Your next question comes from a line of mayor shields with KBW. Please go ahead.
Mayor Shields: Thanks. If I go back to the specialty workers' competition, driving the growth.
Speaker Change: Are the underwriting and claim handling tools different from the prior book of Work with Cometation of Berkley? Sorry, what was the last piece? Mary, thank you for, are they different from what?
Speaker Change: So the legacy, in other words, the work of competition business that you've written over the last few years [inaudible]
Speaker Change: Well, I think the answer is that each one of the businesses are specialized in nature and some of the opportunity as we alluded to earlier.
Speaker Change: with some of the higher hazard is creating a meaningful opportunity for us.
Speaker Change: and we are leaning into that. And is it, yes, it has...
Speaker Change: Teams of people, as you know, were set up the decentralized structure with different businesses, with their own focus and expertise to support that area of focus or to go hand in hand with that area of focus. So the answer is yes.
Thank you.
Speaker Change: and then completely changing topics. So, in the press release, confirming Ms. Wissubitomo, their President and CEO talked about deploying their network to grow the value of their investment, which I think means Berkley, and hoping you could flush out what that means in terms of growth potential for Berkley.
Speaker Change: We'll have to see you over time. Obviously, they are a large organization with a meaningful footprint in different parts of the world. And if there's opportunity for us to partner with them and bring some of our expertise and skills, then if that's something that makes sense for the business, that's something that we're very open to.
OK, but that's not having nothing 2025. Bye.
We'll have to see.
Okay. Fair enough. Thank you very much. Thank you.
Speaker Change: And that concludes our question and answer session and I will now turn the call over to Mr. Rob Berkley for closing comments.
Speaker Change: Krista, thank you very much and thank you all for dialing in. I suggested earlier I think by any measure a very solid quarter. Let alone when we add a cat of this size. [inaudible]
Speaker Change: Additionally, I think he was very encouraging the top line that we were able to enjoy, and of course that was nicely complemented by the continued benefits on the investment portfolio as well.
Speaker Change: Thank you all, and we look forward to connecting with you in 90 days or so. Have a good night.
Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.