Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- WR Berkley Corp (WRB, Financial) reported a record third-quarter net income of $366 million, marking a nearly 10% increase over the prior year.
- The company achieved a strong return on equity of 20% for the quarter and over 21% year-to-date.
- Net premiums written exceeded $3 billion for the second consecutive quarter, with a 10.8% increase in net premiums earned over the prior year.
- Pretax net investment income rose by 20% to $324 million, driven by growth in fixed maturity securities.
- The company's financial leverage ratio is at its lowest level in almost two decades, indicating strong capitalization and financial health.
Negative Points
- The company faced above-average catastrophic activity, impacting the loss ratio with 3.3 points attributed to cat events.
- Foreign currency losses amounted to $25 million due to the weakening of the US dollar against other currencies.
- The effective tax rate increased to 23% due to higher foreign earnings taxed at rates above the US statutory rate.
- The expense ratio increased by 20 basis points to 28.5%, influenced by investments in technology and new startup operating units.
- Premium growth within the insurance segment slowed, with a notable decrease in growth rates for certain lines such as auto liability.
Q & A Highlights
Q: Was there any movement within insurance versus reinsurance in terms of prior-year reserve development?
A: W. Robert Berkley, President and CEO, stated that the movement was reasonably uneventful between the segments, with $3 million favorable on the insurance side and $2 million adverse on the reinsurance and monoline side.
Q: Can you provide some color on the exposure piece or what went on within the premiums within insurance ex comp in the quarter?
A: W. Robert Berkley explained that the slowdown was primarily due to their stance on auto liability, where they have been waiting for the market to catch up to their view on rate adequacy. He noted that October showed signs of the market aligning with their perspective.
Q: Any thoughts or color on the loss trend in insurance today, and is financial inflation coming down a reason to maybe loosen the loss trend assumptions?
A: W. Robert Berkley mentioned that they are comfortably in excess of trend with an 8.4% rate increase ex comp. He emphasized the importance of maintaining rate adequacy and acknowledged the challenges posed by social inflation, particularly in liability lines.
Q: How might the market react from a pricing perspective across admitted E&S and reinsurance following recent hurricanes?
A: W. Robert Berkley noted that it's early to determine the market's reaction, but he expects challenges in achieving flat reinsurance pricing unless the storms prove more severe. He highlighted the unexpected nature of losses in certain ZIP codes, prompting reassessment of exposure and pricing.
Q: What is the outlook for net written premium growth, and how does it relate to short tail lines and other liability lines?
A: W. Robert Berkley confirmed that short tail lines are seeing growth, while exposure in auto and workers' comp is shrinking due to their disciplined approach. He expects the market to catch up to their view on auto, potentially improving growth rates.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
