BERKLEY W R CORP Q3 FY2024 earnings call

• Acknowledged the impact of significant nat-CAT activity, expressing concern for those affected and gratitude to claims colleagues. - Highlighted the growth in the specialty and E&S market driven by factors like climate change, social inflation, and regulatory challenges. - Emphasized strong financial performance with robust net income, operating earnings, and returns on equity. - Discussed underwriting discipline, loss ratios, expense ratio, and investment income. - Stressed the focus on rate adequacy, book value growth, and risk-adjusted return. - Mentioned progress in businesses not yet at scale, expecting them to positively impact the expense ratio over time.

The third quarter saw net income increase almost 10% year-over-year to $366 million, with a nine-month net income of approximately $1.2 billion. Operating earnings were $374 million or $0.93 per share. Net premiums written exceeded $3 billion for the second consecutive quarter. Current accident year underwriting income excluding CATs rose 13.4% to $362 million pre-tax. The calendar year combined ratio was 90.9% including 3.3 loss ratio points from CAT events, and 87.6% on an accident year ex-CAT basis. Pre-tax net investment income grew 20% to $324 million. Stockholders' equity climbed above $8 billion to over $8.4 billion, and book value per share before repurchases and dividends grew 10% in the quarter and 20.1% year-to-date. The financial leverage ratio stood at 25.2%, the lowest in nearly two decades.

• Anticipates annual top-line growth between 10% and 15%. - Expects investment income to continue increasing due to strong cash flow and portfolio growth. - Foresees the effective tax rate for the fourth quarter to likely revert to the high 23% to 24% range. - Plans to continue returning capital to shareholders through share buybacks, dividends, etc., given excess capital.

• Nat-CAT activity posing challenges to people's lives and insurance economics. - Regulatory hurdles with insurance departments facing staffing issues and political influences. - Uncertainties in loss trend, particularly with social inflation affecting liability lines. - Potential volatility in underwriting and investment due to various market conditions.

Q: Any movement within insurance versus reinsurance in terms of prior year reserve development?

A: It was reasonably uneventful between segments, with $3 million favorable on insurance and $2 million adverse on reinsurance and monoline.

Q: Thoughts on loss trend in insurance today?

A: Rate adequacy is a priority; financial inflation has subsided for short tail lines, but social inflation remains challenging for liability lines.

Q: How might the market react pricing-wise from hurricanes?

A: Too early to conclude, reinsurance marketplace is challenging, insurance marketplace will depend on loss settlement.

Q: Outlook on short tail lines and other liability?

A: Short tail lines are PIF growers, other liability and professional lines are more challenging with discipline shown.

Q: New money yield on purchases?

A: More than 5%, less than 5.25% on domestic.

Q: Concern about credit?

A: Always concerned, maintaining strong AA- credit quality and not compromising on quality for yield.

Q: Reserves nuances and confidence?

A: Focus on paid loss ratio, IBNR strength, and granular mix of business; respect different opinions but confident in efforts.

Q: Capital and approach to returns?

A: Comfortable surplus of capital, will return to shareholders opportunistically.

Q: Incubating businesses and premium benefit?

A: Four operating units contributed $25-plus million in net written premium in the quarter, expected to become less dilutive over time.

Q: Investment funds returns?

A: Likely $10 million a quarter in the short run, expecting to increase to $20 million over time.

Q: Duration and yield curve?

A: Incrementally lengthening duration, watching market developments closely.