The speaker welcomes participants to the W. R. Berkley Corporation First Quarter 2024 Earnings Conference Call and reminds them that the call is being recorded. They caution against relying too heavily on forward-looking statements and encourage listeners to refer to their annual report and SEC filings for a better understanding of the company's operations. The speaker then introduces the other participants and outlines the agenda for the call.

The company had a strong first quarter, with record net investment income and the best first quarter underwriting income. Operating income increased by 53.4% and net income increased by 50.4%. The company is pleased with the results and sees continued success in the future.

In the first quarter of 2024, the company experienced a 10.7% increase in net premiums written, reaching a record high of almost $2.9 billion. This growth was driven by rate improvement and exposure growth. The insurance segment saw a 11.9% increase in net premiums written, while the Reinsurance & Monoline Excess segment increased by 4.2%. Pretax underwriting income increased by 31.8% and the calendar year combined ratio improved by 1.8 points. The current accident year combined ratio remained flat and there was a reduction in catastrophe losses, resulting in a benefit to the calendar year loss ratio. The expense ratio improved by 20 basis points and the company is confident that it will remain below 30% for the full year. Pretax net investment income also reached a record high of $320 million, a 43.2% increase from the previous year.

In the first quarter of 2024, the company's core portfolio increased significantly due to Argentine inflation linked securities, but this is not expected to continue in the rest of the year. There was a loss of $29 million from investment funds, which is expected to be less impactful in the second quarter. The company had strong operating cash flow and is well positioned for future investment income growth. The credit quality of the portfolio remains high and the effective tax rate is expected to remain elevated. Despite an increase in unrealized losses and currency translation losses, the company's stockholders equity remains strong at $7.8 billion.

The book value per share increased by 4.4% from the previous year and 14.7% from the prior quarter. The speaker, Rob Berkley, then discusses the insurance and reinsurance markets, noting that the momentum for liability lines in the E&S market remains strong, while the property market may not have the same level of momentum as last year. The GL market for both admitted and non-admitted remains robust due to social inflation, particularly in the commercial auto sector. Berkley predicts that there will be further firming in the commercial auto market due to social inflation.

The paragraph discusses the current state of the insurance market, noting that there is firming in the excess and umbrella sectors and a more defensive view in workers compensation. The professional liability market is also mentioned, with D&O rates expected to bottom out soon. In the reinsurance market, property cat rates have run their course, but there are signs of discipline returning in the liability sector. The company's top line has seen an 11% increase, with a strong growth in property insurance. The company is also exercising discipline in casualty and liability lines.

The company's loss ratio has been performing well in the quarter and is expected to continue for the rest of the year and beyond. The paid loss ratio was the second lowest in the past eight years, indicating a comfortable position. The company is also making progress in resolving loss reserves from previous years. The average life of reserves is just under four years and the company expects most of it to be resolved soon. Other helpful indicators for strength of reserves include IBNR as a percent of total reserves and the ratio of IBNR to case reserves, which may be impacted by business growth but should also be considered in relation to rate increases.

The speaker encourages others to consider initial IBNR as a percent of net premium earned as a data point to show that their reserves are in a good place and likely to improve. They are also pleased with the development of their four new businesses and the strength of their investment portfolio, with a book yield of 5.9% but 4.2% when the Argentine component is excluded. They will continue to look for opportunities to increase duration but do not feel pressure to do so immediately. The core domestic portfolio has a book yield of 4.2% and a new money rate of 5.25-5.50%.

The speaker believes that the company's strong cash flow and investment portfolio will contribute to its earnings power. They have been careful in their underwriting and have responded to data by adjusting rates and terms. They are seeing positive results, but do not want to declare victory too soon. The investment portfolio is well positioned and will benefit from a higher new money rate. The speaker then opens the floor for questions from analysts. The first question is about whether the company made any changes or additions to their reserves for the 2023 vintage.

Mike Zaremski asks Rob Berkley if there were any changes made to their view on the 2023 vintage and Berkley responds that there were no major changes, but they constantly refine their loss picks. Zaremski then asks about pricing power and top line growth for the year, and Berkley estimates that they should be able to grow the business between 10% and 15% due to the decoupling of product lines in the market.

The speaker believes that their company has a good chance of growing between 10% and 15% in the future, but there may be quarters where they fall short or exceed that range. They also mention that the property market may lose some pricing momentum in the excess and surplus marketplace, but their company is still growing in that area. They clarify that this applies to both insurance and reinsurance, and while property cat pricing may have peaked, there is still good margin to be had. The reinsurance market has a bigger impact on the insurance market, and the firming in the reinsurance market is ahead of the insurance market.

The speaker believes that while there is still room for profit in the insurance market, the pressure and urgency seen a year ago has dissipated. They will continue to pay attention to opportunities and will not hesitate to stop investing if it is not a good use of capital. They also mention the impact of the Argentine component of the investment portfolio, which has been affected by the political environment.

The speaker discusses the impact of linked securities in Argentina on the company's data points and overall yield. They mention a significant increase in yield in the fourth quarter of last year and anticipate a decrease in the second quarter due to the maturity of Argentine positions. They also mention that the trajectory of investment income may continue towards a 5.5% yield on the overall portfolio.

The speaker discusses the reserve releases in the current quarter and explains that they constantly monitor and tweak their reserves. They mention that there was about $1 million of favorable prior year development, but it was immaterial in terms of the overall reserve position. They suggest that the listener follow up with Karen for more details on the development.

The speaker discusses a sheet in front of them and suggests speaking with Karen for more details. They confirm that they are not taking many reserves out of the current year. When asked about a deterioration in the accident year loss ratio, they mention social inflation and concerns about commercial auto and excess/umbrella. Another speaker chimes in about the need to keep up with the changing environment. The call is then passed to Elyse Greenspan from Wells Fargo.

The speaker is discussing the current state of the E&S market, specifically in regards to liability and property lines. They have seen robust activity in the first quarter for liability, but property may have peaked. They believe this is due to social inflation and the legal environment. They also mention that their company is less exposed to this due to their focus on small limits.

The speaker discusses the impact of the reinsurance market on their business and expresses hope for more discipline in the casualty lines. They also mention a mix driving up the loss ratio in the first quarter and the possibility of responding accordingly. They then touch on the workers comp market and express concern about rising medical costs, but note signs of it bottoming out in California.

In response to a question about the company's ability to write both non-admitted and admitted business, Rob Berkley, the speaker, states that the company has the tools and expertise to do so but will need to consider the pricing and market conditions to determine if it is a sensible use of capital. He also mentions that the company has seen more improvement in the expense ratio than the loss ratio this cycle, leading to a sub-30 combined ratio.

During a conference call, a representative from an insurance company clarifies their short-term guidance for expense ratios and states that they expect it to remain at the current level indefinitely. They also mention that they are pushing for higher rates in the commercial auto market and that they are outpacing trend in other liability lines. The company's strong cash from operations is attributed to their strong underwriting performance.

The speaker responds to a question about the income generated from Argentina inflation bonds and mentions that they will follow up with more details. They also answer a question about the amount of their short tail business that is cat exposed and the expected cat load going forward, stating that the 2% to 3% range is likely accurate.

During the Q&A session of the company's earnings call, an analyst asked about the percentage of the company's portfolio that is exposed to catastrophic events. The speaker, Rob Berkley, stated that this question has become more complicated due to recent events such as wildfires and severe storms. He did not have a specific percentage to provide, but was willing to discuss further offline. Another analyst asked about the lack of share repurchases in the quarter, and Berkley explained that the company only makes repurchases when they feel it is the best use of capital for shareholders. He concluded by stating that the company had a strong quarter.

The speaker finds the current situation to be intriguing and believes it will have a significant impact on the rest of the year and even 2025. The conference call has come to an end and the operator thanks everyone for participating.

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