The W. R. Berkley Corporation's Fourth Quarter and Full Year 2023 Earnings Call began with an operator introducing the speakers and cautioning listeners about forward-looking statements. The call included remarks from Rob Berkley, Bill Berkley, and Rich Baio, who highlighted the company's performance in the quarter. Rob Berkley then shared his thoughts before opening up the call for questions.

The second paragraph discusses the shared goal of value-creation within the organization and the importance of considering risk-adjusted return in achieving this goal. The speaker emphasizes the need to look beyond just one quarter and consider the full year and past years in evaluating the organization's success in creating value. They express gratitude to their colleagues and shareholders for their contributions to the organization's success. The speaker then hands over to Rich, who will provide further updates.

The Company had a successful quarter and an outstanding full year, reporting record-setting financial results. Net income and operating income both increased, with a high annualized return on equity. Top-line growth was strong, with a 12% increase in net premiums written. Underwriting performance was also strong, with a record pre-tax underwriting income and a low combined ratio. Current accident year catastrophe losses remained flat, and prior year development was favorable. The improvement in the loss ratio was due to business mix and lower attritional property losses.

The expense ratio increased in the current quarter due to lower ceding commissions, increased compensation costs, and startup operating unit expenses. The company expects the expense ratio to be below 30% in the next year. The combined ratio, excluding catastrophes, was 87.2%. Net investment income increased by 35% and operating cash flow was over $2.9 billion in the full year. The book yield on the fixed maturity portfolio increased to 4.4% and the credit quality remains strong. The investment funds improved from the previous quarter but decreased from the prior year due to market value adjustments. Foreign currency losses were also reported in the quarter.

The company's stockholders' equity increased to a record high of $7.5 billion, largely due to careful capital management and special dividends and share repurchases. The company's top-line growth has been strong, especially in the specialty market, and the CEO is optimistic about future growth based on submission flow.

The speaker discusses the delicate nature of professional liability insurance, specifically public D&O. They mention that they are treading thoughtfully and are encouraged by the 8% rate increase, which exceeds loss cost trend. They caution against focusing solely on the rate number, as it is influenced by a mix of businesses and product lines. The paid loss ratio has been consistent for several quarters, reflecting the success of their underwriting discipline and focus. The speaker also mentions the expense piece, which was discussed by Rich.

The speaker briefly discusses the impact of previous businesses on the expense ratio and the positive effect of written premiums on the earned in '24. They also mention the investment portfolio and their ability to put money to work at a high rate. The duration is expected to increase in the future. The speaker believes that their company is in a good position for '24 and beyond, both in terms of underwriting and investments. They then invite questions from the audience.

During a conference call, an operator introduces Elyse Greenspan from Wells Fargo as the first questioner. She asks about the company's premium growth and whether it will continue to increase in the future. The CEO, Rob Berkley, responds by saying that it is difficult to predict future market conditions, but he believes there is potential for continued growth. He also mentions the possibility of a strengthening casualty market, driven by social inflation.

The reinsurance marketplace is starting to recognize the challenges faced by the liability market, which could lead to more discipline in the casualty market. The company has been pushing for rate increases due to social inflation for years, and it is good to see others taking action. There was $1 million in favorable development in the quarter, but there were no significant movements in lines or accident years. If more detail is needed, the listener can contact Karen, Rich, or Rob.

Rob Berkley, the speaker, suggests that some of the older years in the casualty lines are showing signs of improvement, but the years from 2016 to 2019 still pose challenges due to social inflation. However, the more recent years are looking more positive. The company has seen growth in premiums written for workers comp due to wage inflation, but they still have reservations about the product line and are taking a defensive approach. They believe that medical trend will continue to be challenging.

The speaker discusses the changing market conditions over the past 12-18 months, with different lines of insurance fluctuating in terms of firming or softening. They also mention disagreements with certain clients over appropriate rates and actions.

The speaker explains that the company has had a successful year, with a high return on equity. They also discuss the potential impact of reinsurers on the company's expenses, as they may try to increase pricing and seeding commissions. However, the company is less dependent on reinsurance due to their limits profile and can pivot and shift their expenses accordingly.

The speaker discusses the switch to an XoL structure and how it has worked out in the current rate environment. They also mention the potential benefits of a hardening reinsurance market for their organization. The question is raised about the potential impact of a change in presidential administration on the market and investment strategies, and the speaker responds by discussing the country's deficit and the need for increased taxes to pay for current spending. The speaker believes this issue will need to be addressed regardless of who is elected.

The speaker believes that there will be pressure on inflation and government spending after the election, which will lead to interest rates remaining flat or possibly increasing. They also mention that they are achieving good rate increases in the liability market, except for challenges in the professional liability space. They are confident that they are keeping up with or surpassing trend in terms of rate increases.

The speaker does not have specific numbers on hand, but believes that the underwriting environment for the lines in question is healthy and possibly improving. This is due to loss costs and increased focus on the environment. The accident year loss ratio has improved due to changes in re-underwriting property risks. The speaker anticipates continued improvement in this area. The questioner asks about insurance growth in professional lines.

The speaker, Rob Berkley, is discussing the decline in growth in professional lines, specifically in the D&O and medical professional liability markets. He mentions that rates have been in a free fall and that they are not willing to chase them down. He also mentions the impact on the top line in areas such as architects and engineers. However, he notes that there are still some areas within the professional space that they find attractive, particularly nonstandard.

The speaker discusses the growth and composition of the professional line in the insurance industry, noting that there are some concerning factors that should give pause to those responsible and disciplined. They mention that the growth in short tail lines was around 20% and was a combination of pushing rate increases and taking advantage of rate adequacy. They also mention growth in property and E&S space, but note that their exposure to cat risks has not changed significantly. They offer to provide more details on the breakdown of rate versus exposure upon request. The next speaker asks a question about the outlook for cat exposure, to which the speaker responds that it has not changed significantly.

Meyer Shields and Rob Berkley are discussing the recent growth in commercial auto rates and the impact on the company's reserves. They also discuss the potential for expanding into property cat in 2024. Berkley believes that 2024 will still provide a good opportunity, but it may not be as attractive as 2023.

The speaker is bullish on the property cat market and expects growth, but not a dramatic shift in their risk profile. They cannot disclose their actions at 1/1 but believe the market is still attractive. They are considering retaining more of their ceded reinsurance business due to adequate rates and low operating leverage.

The speaker discusses the reinsurance marketplace and how they approach relationships with different partners. They also mention potential reasons for keeping more of their own capital and the industry's overall profitability. They caution against using a broad brush to analyze the industry and suggest looking at specific product lines.

The speaker discusses the potential for the fourth quarter to be attractive for market participants, but notes that not all carriers have had a remarkable experience in 2023. They agree that the industry is in a better place for certain product lines, but not all insurance companies will have a return starting with a two. The next question asks about the increase in traditional investment income, which the speaker attributes to higher reinvestment rates and some securities in Argentina.

The speaker, Rob Berkley, discusses the book yield for the quarter, stating it is around 4.7% and higher than the previous quarter. He also mentions the new money yield being over 5% and the company's goal to increase duration. However, they will only do so when the opportunity presents itself and when it makes sense. He also mentions the volatility in the market and the company's satisfaction with their traditional fixed income portfolio.

The speaker discusses the current state of the property market and clarifies that they believe it is peaking in the primary insurance market but not in the reinsurance market. They also mention their desire to continue growing the business, particularly in the reinsurance marketplace, as long as the margins are favorable. They are paying attention to opportunities in the primary property insurance space, specifically in E&S commercial lines.

The speaker acknowledges the contribution of their colleagues at Berkeley in creating opportunities for rate increases and mentions their use of non-admitted paper. They are asked about the trend in liability reserves and releases in upcoming financial reports, and the speaker expects to see similar trends as seen year to date, with the possibility of some adjustments still to be made. They also mention their different approach to monitoring reserves and express optimism about recent years while acknowledging challenges in older years are diminishing.

The speaker responds to a question about the real estate market, stating that there have been opportunities in residential real estate but commercial real estate has been more challenging. They mention owning high quality assets and paying attention to potential opportunities, but note that the current fixed income market makes it difficult to justify investing in real estate.

The speaker, Rob Berkley, responds to a question about the challenges faced when using new money on the fixed income portfolio. He mentions that the hurdle is higher but the yield and liquidity are good, making it a favorable option. He thanks the questioner and ends the call. The next question is from Scott Heleniak of RBC Capital Markets, who asks about the submission count and areas of opportunity in the E&S market. Berkley declines to comment on specific opportunities but mentions that products liability is in high demand. Heleniak then asks about startups and their premium, but Berkley suggests following up with Karen and Rich for more information.

Rob Berkley thanks the participants for joining the call and Scott Heleniak for his contribution. The operator turns the call over to Rob Berkley for closing remarks. He thanks everyone for their time and highlights the organization's strong performance in the quarter and the year. He also mentions their promising position for the future. The call ends and participants can disconnect.

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