W. R. Berkley Corporation Q3 FY2025 earnings call

• Rich Baio highlighted third quarter results with a return on beginning of year equity of 24.3%, net income of $511 million or $1.28 per share, operating income increased 12% to $440 million or $1.10 per share. Pretax quarterly underwriting income increased 8.2% to $287 million. Calendar year combined ratio was 90.9%, current accident year combined ratio ex cat was 88.4%. • Quarterly net premiums earned reached a record of over $3.2 billion. Expense ratios were 28.5%, with recent start-up operating units gaining scale and contributing to the expense ratio. Technology enhancements contributed to operational efficiencies. • Pretax quarterly net investment income grew to $351 million, driven by a 9.4% increase in the core portfolio. Fixed maturity portfolio had a book yield of 4.8%. Stockholders' equity reached a record of $9.8 billion. • Rob Berkley discussed market cyclicality, reinsurance marketplace trends, different lines of business (property, liability, workers' comp, etc.), and portfolio adjustments, emphasizing focus on rate adequacy and risk-adjusted returns.

The Insurance segment's quarterly accident year loss ratio ex cat was 60.9%, bringing the accident year combined ratio before cat to 89.3%. The Reinsurance and monoline access segments had an accident year loss ratio ex cat of 52.6% with an accident year combined ratio before cats of 82.4%. Quarterly net premiums earned reached over $3.2 billion, with gross and net premiums written at $3.8 billion and $3.2 billion respectively. Net premiums written grew in all lines of business in both segments.

• The underwriting opportunity continues to unfold with discipline to ensure margin. The investment portfolio has much opportunity ahead. • Anticipated softening in property cat reinsurance at 1/1, but focus remains on making good risk-adjusted returns.

• Cyclical nature of the insurance industry. • Industry self-sabotage potential. • Exposure to market fluctuations in certain lines like auto and property cat. • Challenges in lines such as commercial auto and parts of the liability market.

Q: Alex Scott asked about the company's capital position and plans for additional capital flexibility.

A: W. Berkley and William Berkley responded that the company has significant excess capital, with plans to return excess to shareholders through dividends and share repurchases when opportune.

Q: Tracy Benguigui inquired about excess capital in the industry and catalysts for pricing turnaround.

A: W. Berkley stated the company is focused on its value proposition, and if competitors drive parts of the market to unattractive places, the business may shrink.

Q: Elyse Greenspan asked about Mitsui Sumitomo and auto growth/slowdown.

A: W. Berkley discussed Mitsui Sumitomo's regulatory filing requirements and auto growth being flattish due to market transition and loss cost considerations.

Q: Robert Cox asked about catastrophe losses and homeowners.

A: W. Berkley said catastrophe losses were due to frequency with modest severity and growth in short tail lines, and Berkley One is a successful $0.5 billion business growing in certain states.

Q: Brian Meredith asked about past regrets and tariffs.

A: William Berkley discussed past margin miscalculations and preparing for tariffs in exposed product lines.

Q: Michael Zaremski asked about E&S market and capital models.

A: W. Berkley discussed E&S market trends, liability focus, and being conscious of capital model data points.

Q: Andrew Andersen asked about investment portfolio and expenses.

A: W. Berkley and Richard Baio commented on investment portfolio yields and expense management related to start-up units and holding company expenses.

Q: Joshua Shanker asked about competition and commissions.

A: W. Berkley noted focus on rate adequacy and not yet seeing significant commission-driven competition.

Q: Jian Huang asked about growth mechanics and macroeconomic concerns.

A: W. Berkley explained growth can adjust quickly based on market conditions and appetite adjustments, and the company navigated macroeconomic challenges like COVID.

Q: Wesley Carmichael asked about property cat reinsurance.

A: W. Berkley said property cat reinsurance may soften at 1/1 depending on market activity, and the company has a view on margin and market posture.