The operator welcomes listeners to W. R. Berkley Corporation's Third Quarter 2023 Earnings Conference Call and reminds them that the call is being recorded. The speakers may make forward-looking statements, but caution listeners not to rely on them as a guarantee of future plans or expectations. The company is not obligated to update these statements. Rob Berkley, Executive Chair, and Rich Baio, EVP and CFO, will discuss highlights of the quarter before opening the call for questions. Berkley notes that the 20% return for the quarter is an outstanding result.

The company had a successful quarter due to the hard work and collaboration of the entire team. The company's focus on risk-adjusted return was evident in both underwriting and investing activities. The underwriting results were exceptional despite significant cat activity, and the investing activities yielded a book yield of 4.5% and a new money rate of approximately 6%. These achievements are a result of the team's discipline and expertise. The company is well positioned for the future and has good visibility for the coming quarters and years. Rich will now provide more details on the numbers.

In the third quarter, net income for the company increased by 45.7%, with a return on equity of 19.8%. Operating income also saw a significant increase of 30.1%, with a return on equity of 21.7%. The company's strong performance was driven by underwriting profits, despite high industry-wide catastrophe losses. Net premiums written grew by 10.5%, with growth in insurance business and Monoline access. Pre-tax underwriting income was $259 million, with a combined ratio of 90.2%. Current accident year combined ratio, excluding catastrophe losses, was 87.9%. The expense ratio remained in line with the company's nine months year-to-date.

In the fourth paragraph, the company explains that the small increase in net investment income is due to the same factors as previous quarters, including changes in reinsurance structures and increased expenses. The company also attributes the significant increase in the core investment portfolio to rising interest rates and record levels of operating cash flow. The book yield has also grown significantly compared to the previous year. However, this increase is partially offset by net investment income from investment funds, which is closely correlated with the equity markets and has only shown a marginal improvement.

The company has been actively managing its capital position and announced a special dividend per share in addition to its regular dividend. This brings the total capital return to investors to approximately $775 million and stockholders' equity has increased to over $6.9 billion. Book value per share has also increased by 13.7% on a year-to-date basis. The company's top line is building momentum again after parting ways with partners who did not agree on adequate rates. The marketplace has been focused on property, but the company warns that auto liability is also a product line that needs attention due to social inflation. Workers comp has also been a concern, and social inflation is expected to continue.

The company is concerned about rising medical costs and the end of benefits from COVID and a tight labor market. They are focused on social inflation and have been successful in raising rates. The paid loss ratio is healthy and their investment portfolio is performing well with a book yield of 4.5% and a new money rate of 6%. The duration has been pushed out, indicating a positive future for the company.

The company has kept its operations short to take advantage of higher rates in the short term. They are uncertain about the future but are confident in their ability to weather potential volatility and see an increase in earnings. The speaker then opens the floor for questions and the first question is about the company's views on loss cost trends, specifically social inflation. The speaker acknowledges that social inflation continues to be a challenge, but the company is in a good position to absorb it due to their rate increases.

The speaker believes that there is potential for improvement in the underwriting result over time. They mention that they are generating a 20% return and do not feel the need to push the envelope. They believe there is upside in the investment portfolio and encourage people not to discount the opportunity on the underwriting side. The speaker also mentions that the top line growth is returning due to the end of relationships that are being parted ways with and the diminishing impact on the top line. They also mention that they will not follow the competitive professional liability market down the drain.

The company is experiencing growth in other areas of the marketplace, not just in workers comp. The rate increase is a factor, but not the only reason for the growth. The CEO expects this momentum to continue in the future. There was $1 million in favorable prior year development, but nothing noteworthy to report.

During a conference call, Rob Berkley, the operator, and Mark Hughes from Truist discuss the company's general liability and property reinsurance markets. Berkley mentions a combination of factors, including rate and discipline, that are leading to an acceleration in general liability. He also notes that there is a growing focus on partnering with reliable carriers. Hughes asks about the slower growth in property reinsurance, but Berkley assures him that it is due to seasonality and there is still a good opportunity in that market. Alex Scott from Goldman Sachs asks about the paid loss ratios, which remain around 48%.

The speaker is asking for clarification on how much the company is benefiting from the growth in their business, as well as the impact of insured values increasing. They also mention criticism of older accident years and ask for insight on how the company's reserves are developing. The speaker also asks about the company's preference between primary and reinsurance exposure for general liability and other liability.

Rob Berkley discusses the current state of the insurance market and explains that the business itself is not less attractive, but rather the ceding commissions that competitors are willing to pay on the reinsurance side. He mentions that there are opportunities in the Specialty and E&S markets, where they are one of the largest players in the liability lines. He also mentions that some reinsurers are now focusing on social inflation and litigation funding, which have been ongoing issues in the industry. There is hope that this will bring more discipline to the market.

The speaker asks about the short-tailed lines and the growth in that area, suggesting that there is property involved. The speaker confirms that the majority of the growth is due to property, with some auto physical damage as well. They mention the need for rate and the opportunity for it, and state that they are trying to pass on the increased reinsurance costs to clients. The speaker also addresses the high cat loss in the reinsurance segment, mentioning modest exposure to areas like Hawaii and the Florida Panhandle. They end by discussing commercial loss trends.

In response to a question about the loss trend in commercial auto and concerns about social inflation, Rob Berkley of WR Berkley Corporation explains that they are aiming to build in a risk margin beyond the actuarial answer in their reserving. He also notes that their commercial auto premium growth has accelerated due to achieving desired rates and their focus on rate and targeted returns. Additionally, Berkley mentions their efforts to stay on top of medical cost inflation in workers' compensation.

The company is starting to see early signs of medical cost inflation impacting their claims data. They have been cautious about this for a while, as the economic model of many large health systems is not sustainable. This trend is not just about pharma, but also other components of medical costs. The company does not have the same negotiating leverage as larger payers, which could impact workers' compensation. The company did not mention fire losses in the quarter, but they are making progress on that front and are being cautious in their approach.

The speaker discusses the profitability of their business and states that there is no need to push for more growth. They also mention that short tail lines may have a lower loss ratio, but the cat load may affect this. The speaker then addresses the challenges of underwriting commercial auto and explains that it is a significant part of their business due to it being written both stand-alone and as part of a package.

The speaker, Rob Berkley, discusses the relevance of the article to writing a package and the challenges they face in the Monoline market. He mentions that they have had success in the past but have also faced difficulties and are working to improve their focus and expertise. The next question asks about any positive developments in the professional liability line, specifically in the areas of cyber and D&O, to which Rob responds that there are currently no significant changes and that the market remains competitive.

In this paragraph, Brian Meredith asks Rob Berkley about the impact of the business going through the python on their underlying or loss picks. Rob Berkley responds that they pushed the picks up and believe what they are carrying makes sense and won't be an issue. He also mentions that they wish the business well, but they won't miss it. Later, Meyer Shields asks about feeding commissions on casualty reinsurance and if there are any indications of improvement. Rob Berkley responds that he is not involved in their pricing meetings, but there is chatter about it. Finally, Meyer Shields asks about Berkley's willingness to write more property and how it compares to their expectations from December of last year.

Rob Berkley, CEO of the company, is pleased with the progress made by his colleagues and wants to emphasize that the success of the company should not be solely measured by the amount of premium written. He explains that while the company may have collected the same amount of premium, they have reduced their exposure or increased their premium while reducing exposure. This shows their ability to navigate the market effectively. When asked about the expense ratio, Berkley states that they aim to keep it below $30, but it can be impacted by the growth strategy of starting new businesses. However, they remain confident in their ability to maintain a low expense ratio.

During a conference call, Mark Hughes, Rob Berkley, and Rich Baio discussed the Reinsurance & Monoline excess for the quarter. They noted that there was nothing unusual and attributed this to the same reasons they had been discussing, such as loss cost trend and social inflation. Rob Berkley mentioned that they would continue to push for rate increases, as there was no evidence of social inflation abating. They also mentioned that the international book was accretive and had strong leadership and shared values.

The speaker, Rob Berkley, is responding to a question about the property book in the loss picks. He explains that they review it every 90 days and don't want to get ahead of themselves. He also mentions that the cat exposure will not be released prematurely. He concludes by saying that the table is set for the company's earnings power to grow and they look forward to speaking with everyone again next year.

The writer is thanking the reader for their participation and instructing them to disconnect.

This summary was generated with AI and may contain some inaccuracies.