Rob Berkley:

Krista, thank you very much. We appreciate you getting us through that marathon of a safe harbor statement. And good afternoon to all, and welcome to our Q2 call. Thank you for finding the time, and thank you for the interest in the company. Along with me on the call, you have Bill Berkley, Executive Chair, as well as Rich Baio, Executive Vice President and Chief Financial Officer of the group. We're going to follow our typical agenda where momentarily I'll be handing it over to Rich, he'll run through some highlights for you all, he'll then flip it back to me, I'll offer a few of my own observations on both the industry as well as our quarter, and then we'll be pleased to open it up for Q&A. Before I hand it to Rich, I guess perhaps stating the obvious, clearly an active quarter of frequency of what I would define as severity, but perhaps relatively modest severity on the property front. From our perspective, it was an opportunity for this organization to differentiate itself as it does when there is severity on the property market front. And in spite of all the challenges, we were still able to deliver a 91% combined. I guess for those that subscribe to the [but for] (ph) club, it would be an 88%. But when we look at the goal of the exercise being to generate good risk-adjusted returns to build the book value, we are of the view that cats do count and so does net development. In our opinion, it's not just about the steps forward that you take, it's also about the steps backwards that you will avoid. And that is very much woven into how we approach the business on all fronts. So with that, I will hand it to Rich, and I will follow him in a couple of minutes. Rich, if you would, please.

Rob Berkley:

Okay. Thanks, Rich. That was great. A couple of comments from me, maybe starting on the more macro and the industry and then we can touch on our quarter as promised. So, from my perspective, the industry continues to be one that responds to pain. Pain is the catalyst for discipline and change. We see that from one product to another. I guess perhaps one analogy would be the cast may change, but generally speaking, the script does not change. Unfortunately, it's somewhat predictable. Speaking of change, certainly, we are seeing a bit of a tempering on the financial and economic inflation front. That having been said, social inflation shows no sign of abating. Social inflation is something that we have been very actively and loudly talking about going back to 2018 when we started to wave our arms and share with people what we were seeing in loss trend. One of the challenges, particularly as of late, and it's really in much of the country is there's a bit of resistance to in amongst many insurance departments and allowing carriers to get rate filings that they need to keep up with loss cost trend. That consequently has been creating and continued to create an opportunity in the specialty lines, in particular the E&S lines as the standard market is not able to get their rates to where they need to be, again, given what trend is driven by social inflation. I'm not going to get into every nook and cranny of every major commercial line, but I will flag that auto liability continues to be an area of concern, and obviously, by extension that can feed into the umbrella line. From our perspective, when you talk about social inflation, there is no product line that is more exposed than auto liability these days. Turning to our quarter, as Rich covered earlier, I would just point out the gross was up by 11.4%. As he mentioned, the net was up by 11.2%. The big delta there was a couple of fold. One was, at captive business, which continues to do exceptionally well. A few new operations that we started and when they're in their infancy and don't have much balance to them, we'll maybe be a bit more dependent on the reinsurance buy. And lastly, there was a moment post 1/1, but before everyone started to turn their attention to what could be a very active win season, the ILW market softened a little bit and we took advantage of that. As Rich mentioned, the 11.2% on the top-line was reasonably healthy growth. The rate coming in at 8.3% ex comp from our perspective should give comfort to others as it gives to us that we are keeping up with trend. That having been said, rate's important, but it's not the whole story. One needs to be conscious of what's happening with terms and conditions. And history would remind all of us that oftentimes terms and conditions can have a greater impact than rate on the outcome of underwriting. In addition to that, something that we talk about from time to time, but it's coming into sharper and sharper focus, and that is how there are certain territories or jurisdictions or venues that as far as a legal environment or a legal climate are changing and changing very rapidly. So, there are certain territories that once upon a time politically were red and that would spill over to the legal environment. We are seeing those change. And I wouldn't say that they're bright blue, but they are certainly evolving to something that's more of a shade of purple from our perspective. Rich touched on the expense ratio, again, reasonably stable there. Obviously, as he had mentioned earlier in the year and again touched on in his comments a few moments ago, new businesses that we started that are in their infancy are now incorporated into that until they get their critical mass, they're a bit of a drag on the expense side. And in addition to that, we are making some pretty chunky investments on the tech front as well as the data and analytics front. Loss ratio, the 62.6%, again, not bad given the time of year and what's going on with SCS and related. That having been said, we are always looking to try and improve upon that. There's a lot of chatter in the marketplace at the moment around losses and specifically around reserves. Look, when the day is all done, there's a one of the great challenges of this industry is you sell your product before you know your cost of goods sold. None of us know what tomorrow will bring. None of us know what a jury is going to do. That having been said, as we have commented countless times over the past several years, particularly in light of the commentary, the questioning and occasionally the chastising that we've received for in spite of all the rate we've gotten, how is it that you are not dropping our [losses] (ph). Our response has been consistently that we have a respect for the unknown. We have an appreciation for what's going on with social inflation. And consequently early on we are going to hold our picks at a higher level and they will season out over time as we have more information. A couple of data points that I thought could be possibly helpful is the paid loss ratio continues to run-in the mid-40%. When we look back at how much rate we have gotten since 2019, all lines ex comp on the insurance front are approximately 68% that's cumulative of course. And finally, another data point since some people have suggested that the paid loss ratio only tells part of the story because your business is growing. I'd add to that much of the business, its growth has been due to rate, but nevertheless, I would suggest that people could look at a different data point if it would be helpful to them that being initial IBNR relative to net earned premium. And if you go back in time and you look at that data, which we have, if you look at sort of the '16 to '19 period, that was running at somewhere between 31% and 34% ish. If you look at '20 to '23, that's running between 37.5% and 39%. So, as people think about the strength of our loss reserves, perhaps that would be a helpful data point. Pivoting over to the investment portfolio, Richie touched on this earlier, duration 2.5, strong AA-. The domestic book yield coming in at 4.5% and the new money rate, in spite of all the chatter around interest rates and where they're going so on and so forth, still starts with a 5%. And I would tell you it's probably flirting with 5.25% these days. Cash flow remains strong for the quarter with $880 million, $1.6 billion for the first half of the year. Maybe taking a half a step back and a little more of a macro front, I think some people have taken note that we played it reasonably well in how we positioned things for this rising interest rate environment. And after the quick acknowledgment of that, I think attention quickly turns to, so what are you doing now? What are you doing to make sure you set the table appropriately for tomorrow? And to make a long story short, we have a view that regardless of who ends up in the White House and regardless of who's sitting in what seat in Washington DC, this country has a serious issue with deficit and fundamentally a serious issue with spending. So, there is nothing that leads us to believe that that is going to be curtailed anytime soon. That having been said what compounds the challenge is that some of the largest buyers of US treasuries that being foreign buyers, specifically China and Japan. It's reasonably apparent that they, along with other foreign buyers, the appetite may not be there. So, when you put all of this together, our view is that even if short-term rates come down, you are likely to see the yield curve un-invert, and that will provide an opportunity for us to nudge our duration out. Obviously, around the election, there's a lot of commentary and speculation as to what leaders that will be in the White House will be doing going forward. I would just add the observation from our perspective. If we find ourselves in a situation where an administration takes a different view around immigration and we find ourselves further in a situation where certain parts of the labor market are no longer here to do those jobs. That will likely lead to greater inflation. Additionally, the idea of tariffs does quite frankly, all it does is raise the cost of products that will likely lead to inflation as well. Just pivoting quickly over to capital, Rich touched on the capital we've been returning. When the day is all done, the company at this stage for the foreseeable, we think is going to be growing at 10% to 15%. Could there be a quarter where we do a little more? A quarter we do a little less? Absolutely, but that's sort of the strike zone as we see it. But at the same time, we're generating returns and give or take high teens, low 20%s pretty consistently, and there's a lot of visibility around that from our perspective, so our ability to return capital for the foreseeable -- it's pretty robust. When you layer that on top of, I think, the view, if you take a close look at the analysis any of the rating agencies have done, we are an exceptionally strong place to begin with. So we'll have to see what tomorrow brings. But there is a lot of flexibility that the organization enjoys at this stage. So, I will pause there and, Krista, we would be pleased to open it up for questions. Thank you.

Rob Berkley:

Hi, Elyse. Good afternoon.

Rob Berkley:

Why don't -- Rich has the insurance versus reinsurance. And if you're looking for more detail, I would suggest that if you don't mind, Elyse, just follow up with Rich and Karen and they'll give you as much detail as they're legally allowed to.

Rob Berkley:

I would just add there's a lot of gives and takes on each one of those, depending on the product line. And for our purposes, we're looking at it by operating unit, by product line.

Rich Baio:

So, in the second quarter, we wound up reporting $63 million on inflation linkers. So, it was within the high end of the range. And then, if you were to look at a normalized level with regards to the linkers on a go-forward basis looking out over the next few quarters, we would anticipate, depending on inflation, where it goes, it could be somewhere between $20 million and $30 million.

Rich Baio:

Absolutely. So, in the quarter, one of the things that you'll have noticed is that we had about $58 million of losses on I'll say a realized/unrealized capital gain perspective. There's a number of moving pieces in there. But to Rob's point, there's about $50 million of foreign currency losses that are reflected in that number. So that would offset the $63 million that we reflected in net investment income. So, on a net income basis pre-tax, you have about $13 million of impact, if you will impacting the net income. And if we were to look out into the foreseeable quarters, you'll likely see a similar situation arise where FX will largely offset the impact that's coming through on the net investment income side.

Rob Berkley:

We charged more.

Rob Berkley:

I have the aggregate in front of me. Elyse, if you want to circle back with us, we'd be happy to and share it with you. But what I would tell you is probably auto is the leading candidate. So, when you look at -- maybe, just -- maybe more than you're looking for, but I'll throw it out there anyways. When you look at the growth, for example, where we break it out in the release, the auto line is growing at almost 16%. What's driving that is rate, rate, rate per the comments earlier. So, auto is the leading candidate these days.

Rob Berkley:

Yeah.

Rob Berkley:

Hi, Rob. Good afternoon.

Rob Berkley:

Sorry. I don't recall commenting on reserves by product line. Rich, did you hear something by product line?

Rob Berkley:

Yeah. So, there was no commentary on that, Rob. I'm not quite sure what you're referring to, excuse me.

Rob Berkley:

Yeah. I mean ultimately, the point that I was trying to articulate was that we got 60 different businesses that make up the group, and we're looking at both in the aggregate as well as at a very granular level. So, when you hear about the development that Rich looked at, I think that the reality is that there are a lot of pluses and minuses, and that's just where it came out to, but as far as specifics as it relates to what's happening, that'll probably be more detail in the Q.

Rob Berkley:

Well, honestly, Rob, I don't have a clear recollection of what you're referring to. I think, generally speaking, we feel pretty good about our picks, but as mentioned earlier, alluded to earlier, we're paying close attention to the auto liability line.

Operator:

Your next question comes from the line of Josh Shanker with Bank of America. Please go ahead.

Josh Shanker:

Hi. I'm going to get my chances on reserves.

Josh Shanker:

We'll see what I can find. So, one of your competitors, or maybe one of your peers, I should say, said there's been an elongation in the pace of when claims are being paid. And being paid at a higher level of severity. To the extent that -- that doesn't mean you couldn't have reserved and anticipated for, but is there another pig that the python has swallowed for the industry in '22 and '23 that the claims are coming in differently than they would have looking at the trends from the years prior?

Josh Shanker:

And you cited, of course, the difficulties persistently with a line like commercial auto liability when you talk about how much IBNR you're putting up, are there certain lines that are getting that special IBNR focus that are driving that in particular?

Josh Shanker:

And if I can sneak one more in for Rich. And I guess in past quarters, we're talking about the high interest yield opportunity in fixed income markets. And I think it was said that the appetite for the proportion of income going into alternative strategies will be lower given how much money you can make in bonds, but I notice the proportion of alts has been creeping up over time. Is that just an unusual quirk? Are you seeing different opportunities in the alternative markets that you couldn't see six and twelve months ago.

Rob Berkley:

But I would just add to Rich's comments, Josh, we are -- given where interest rates are, from our perspective, alternatives are really not of great interest to us going forward. Could there be an exception here or there? Absolutely. We are very pleased with the opportunity that the fixed income market offers, and I think you will see us continue to lean into that at this stage.

Operator:

Your next question comes from the line of Michael Zaremski with BMO Capital markets. Please go ahead.

Michael Zaremski:

Hey, Rob. Just curious, most of the attention on reserves has been coming from non-commercial auto actually, more recently. You've been showing and talking about kind of commercial auto continue to get increasing rate. Not that commercial auto has been a good guy for the industry in any way, but is there anything we should be reading through that you think the industry still has plenty of kind of issues to deal with, grapple with on commercial auto more so than the other non-auto...

Michael Zaremski:

Got it. Switching gears a bit to the dynamics within the workers comp market. You all have been kind of clear that the profitability. Your view is that it's likely that the soft market is going to impact for profitability. And most of the commentary historically has been more on the severity side of the equation and negative pricing, but I wanted to your peers recently brought up that frequency was becoming a little less negative. I don't know if you also share that view or data that we should be thinking about the frequency component of workers' comp?

Michael Zaremski:

Got it. And lastly, in your prepared remarks, Rob, you talked about, I might have what you said, I don't have live transcript open, but some resistance allowing carriers to kind of get the rate they need to queue up loss cost trend. I had thought that's more of a personal lines phenomenon, and you're not really much of a personal lines...

Michael Zaremski:

Okay. Interesting. Thank you.

Rob Berkley:

Hi, Mark, good afternoon.

Rich Baio:

Yeah. So, if you look at it on a prior year basis to the 2024 year, we would expect for the foreseeable future an increase in our net investment income.

Rob Berkley:

Corresponding period. So, Q2 '24 versus Q2 '23, Q3 '24 versus Q3 '23, yes.

Rich Baio:

Yes. But, obviously, a lot of that has to do with scale. So, as we've touched on, I think, in the past, much of the opportunity has been in the short-tail lines. We'll have to see how those opportunities persist. Further, our colleagues, to their credit and their underwriting discipline, have not found as much opportunity on the liability lines. So, is the 29% sustainable? Yeah, but a lot of that will be in part driven by whether the business is able to grow or remain the size it is, or if market conditions were to deteriorate dramatically, then it's possible that could tick up incrementally.

Rob Berkley:

So, the E&S business is probably growing at, give or take, 50% more than the standard market rate. That's a bit of a generalization.

Rob Berkley:

Maybe incrementally better.

Operator:

Your next question comes from Ryan Tunis with Autonomous Research. Please go ahead.

Ryan Tunis:

Good afternoon. How are you? First question, just what are – the cat losses within Insurance, almost $90 million, can you give us a feel of the driver of that? Was it the convective stuff in the US, or [indiscernible] international stuff?

Ryan Tunis:

Got it. And then I guess just on the capital return, I was going to ask how you think between dividends and share buyback, but then I noticed -- I mean, you see you guys doing these specials. But then I noticed that these specials have been almost as predictable from a time of the year standpoint as just the regular divvies. Can you just give us an idea of like why not increase just the common dividend by more and maybe get more credit for that rather than kind of pay these special dividends as though they're regular?

Ryan Tunis:

Thank you.

Operator:

Your next question comes from the line of Andrew Kligerman with TD Cowen. Please go ahead.

Andrew Kligerman:

Hey, good evening -- hey, good afternoon, good evening. Friday was a pretty surreal day with that whole CrowdStrike cyber issue.

Andrew Kligerman:

So, I'm kind of curious, could you frame W. R. Berkley's cyber exposure? And then, with that, what do you make of that for the industry and how it's going to affect the industry, whether it's pricing, loss costs, et cetera?

Andrew Kligerman:

I see. That's helpful, Rob. And just quickly, I mean, as a percent of net written premium, like what proportion of your overall book might that size to?

Andrew Kligerman:

Got it. Okay. And then maybe just shifting back to the commercial auto, 16%, you said maybe all of that growth might have been rate. How comfortable are you with the 2024 book of commercial auto that you're writing? And what does that speak to your reserve adequacy from '21 to '23 on that same line?

Andrew Kligerman:

Awesome. Thanks a lot.

David Motemaden:

Hi, thanks. Good afternoon. Thanks for taking my question. Just had a question on the Insurance segment. So, the accident year loss ratio ex cat was flat year-over-year, increased a little bit versus the first quarter. I was wondering if you could just talk about some of the puts and takes within that? What was driving it to be up versus the first quarter? And just how we should think about that going forward?

David Motemaden:

Got it. That makes sense. And then, I think, the previous question kind of touched on this too, but I noticed in the 10-Q from last quarter, it looks like, you guys had started to make additional reserve increases to just the other liability line for, I think it was accident year 2020 and '21. It sounded like those were primarily auto related. I guess, I was just hoping to get a little bit more color on exactly what was going on? If you're seeing that happen again here in the second quarter? And then maybe just how you're thinking about that and maybe spreading to general liability and umbrella just non-auto related?

David Motemaden:

Got it. Okay. That's helpful. And then maybe just a quick one. You had said earlier you guys have gotten 68% cumulative rate since 2019, excluding workers' comp. I'm just wondering, how does the loss trend look versus 2019 if we were just to compare versus that 68% rate increase?

David Motemaden:

Okay. Thank you.

Rob Berkley:

Hi, Brian. Good afternoon. Good evening.

Rob Berkley:

It tends to be what it is, it's what I would define as professional liability ex D&O is having a reasonably good moment and that's both admitted and non-admitted. The challenge as we've discussed in the past and of course you're acutely aware of, Brian, is on the professional front is D&O. So that continues to be a challenged marketplace. A submarket under D&O that I would flag as very, very concerning is transactional liability. And that is a book of business that we have that is shrinking at a very rapid pace just because we don't like market conditions, but as far as the opportunity, it's much of the professional market ex D&O.

Rob Berkley:

Both admitted and non-admitted.

Rob Berkley:

Yeah. On the GL side, an example would be that you see a contractor move out of the admitted market where they are buying whatever, $1 million limit or [one-to-one] (ph), and they are paying basically, whatever, $50,000 for the $1 million limit. And all of a sudden the standard market because of loss activity or a variety of other reasons, including they can't get the rate that they need, all of a sudden kicks it out. And then as opposed to being $50,000, it's $150,000, but you get $650,000 of cover and maybe you're doing something with defense and you start sub-limiting all kinds of other things and [indiscernible]. So, it really is very much apples and oranges or maybe even apples and bananas because of what you can do with the terms and the conditions. And that's why if you look at our history as an organization, some of our most profitable business has been what we've been able to write on an E&S basis.

Rob Berkley:

I don't have the number in front of me, but as I mentioned to your colleague earlier, pretty consistently our E&S business, even putting aside specialty, but just E&S has been growing at a rate for some number of years, it's 50% more than what our standard market business has been growing at. And just to define standard market, a lot of that is admitted specialty. So, I mean the E&S has really been growing quite quickly and provides good opportunity.

Rob Berkley:

Thank you.

Meyer Shields:

Thanks. So, some of the questions of [Technical Difficulty], it looks like at least compared to the first quarter, the growth in Insurance short-tail line...

Meyer Shields:

I'm sorry, is this any better?

Meyer Shields:

Let me try that. I was hoping you could comment on the apparent slowdown in the growth rate of short-tail lines in Insurance?

Meyer Shields:

Okay. That makes sense. Second question I guess in investment portfolio we saw at least on a percentage basis a decent decline in equities, in common equity. Can you comment on that at all?

Meyer Shields:

Yeah. Just the sequential decline in the carry to value of the common stock equity portfolio compared to March 31?

Bill Berkley:

Well, Meyer, we sold a bunch of common stock.

Bill Berkley:

We just...

Bill Berkley:

We just decided that for the -- other than our specialty positions, the stock market wasn't the place we ought to be at the moment.

Bill Berkley:

No, sir.

Operator:

That concludes our question-and-answer session. I will now turn the conference back over to Mr. Rob Berkley for closing comments.

Operator:

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Rob Berkley:

Audra, thank you very much and let me echo your words earlier with a warm welcome to all that are participating in the call today. We appreciate your time and look forward to discussing with you our Q1 2024 results. In addition to myself, we also have Bill Berkley on the call, Executive Chairman and Rich Baio, Chief Financial Officer and we are going to follow our typical agenda where I am going to be handing it over to Rich shortly. He will be running through some highlights, once he is completed his comments, I'll follow along with a few additional thoughts and then we will be pleased to open it up for questions, comments, discussion. But before I do hand it over to Rich, I think anyone who's had an opportunity to flip through the earnings release would understand already. But I'll say it regardless, that we had a very strong and solid quarter, great way to start the year. And when you really look at the results and unpack it a little bit, as we'll be doing over the next hour or so, it's pretty clear that the business is firing on many cylinders or essentially all cylinders at this stage. Rich again will get into some details and while there are a couple of moving pieces in the investment portfolio that merit some conversation or discussion, I think the overall story is that whether it's on the investment side or on the underwriting side, business continues to benefit from the foundation that was poured yesterday. We continue to pour it today and position the business for continued success. This is really a result of the whole team and in particular, I think it's worth noting that the level of expertise, the focus and as important as anything, the discipline that exists on both the underwriting part of the business, as well as the investment part of the business. So for us, we're pleased with the quarter. Rich is going to give you some more detail on it. In addition to that, we're probably even more enthusiastic because of how we see the business unfolding, not just for the balance of this year, but with every passing day we are laying the groundwork for what 2025 and beyond will look like as well. So with that, let me hand it to Rich and he will share with us some of his thoughts on the quarter. Rich, good morning.

Rob Berkley:

Okay. Rich, thank you. So, let me start with a few sort of comments on the marketplace and then I'll offer a few further observations on our quarter. So perhaps a place to begin would be bifurcating between insurance versus reinsurance, which obviously the markets are related, but they're not one in the same and starting with insurance maybe calling out E&S as a part of the market. I think there's been some commentary around perhaps E&S is losing some momentum and I would suggest that one needs to use, at least through my lens, somewhat of a finer brush. As far as we can see, the momentum for the liability lines is -- continues to be as strong as ever. To the extent you're seeing any slowing in the momentum of E&S, it's likely to be property related. As far as the property market in general, when it comes to insurance, we think that it still does have some momentum, but it probably does not have the level of momentum that it had last year. We're still seeing rates moving up and we expect they will continue to move up for the immediate future. That having been said, I think part of what you're seeing is the insurance marketplace catching up to what the reinsurance marketplace had taken action around and their costs of the capacity the rent has gone up. As far as GL, again, from our perspective, it remains very robust, both admitted and non-admitted and no surprise, it's the social inflation continuing to persist that is driving that. Just on the topic of social inflation auto, which as I think I've commented on in the past, continues to be very much in the crosshairs of social inflation. We think that, that is part of the market that you're going to see considerable additional firming going on, specifically in commercial auto. Excess and umbrella, particularly to the extent that it relates to the commercial auto market, you are going to see additional firming there as well. Workers compensation, we have offered our more defensive view around that. And of course, as far as professional liability goes, we have called out D&O where obviously some number of years it spiked. More recently it has been dropping at somewhat of a precipitous rate. And at this stage, we view that it is not bottomed, but it is closing in on the bottom. Pivoting to reinsurance, barring what Mother Nature may do tomorrow, it would seem as though the property cat cycle has run a bit of its course. From our perspective, rates were off for property cat reinsurance at 1.1, 5% or more risk adjusted. And, you know, we'll have to see how that unfolds. That having been said, we are seeing some potential green shoots of discipline returning to the liability market within under the umbrella of reinsurance. We have been reasonably outspoken about our concerns around discipline over the past couple of years within the liability or the reinsurance liability market and we will see what comes of that. Turning to our quarter top line, just shy of a 11%. As you would have noted in the release, we are pleased with the rate increase that we got at the 7.8%, which in our opinion is comfortably outpacing trend in the aggregate. And the renewal retention ratio continues to be at approximately 80%, which is what we would expect. The strength in the insurance growth, as Rich referenced, just shy of 13% is quite strong. Property in particular was a contributor as we take advantage of that market opportunity. And again, in keeping with my comments about market conditions on the reinsurance front, you would have seen us continuing to exercise discipline when it comes to the casualty or liability lines. As far as our loss ratio goes, clearly a good performance in the quarter and we believe that the stage is set for a good balance of the year, as well as increasingly what we should be expecting for 2025 and beyond. Just as a data point that I share from time-to-time because I think it's a helpful indicator or certainly a truth that we can all hang our hat on. During the quarter, our paid loss ratio was a 45.8, which is the second lowest it's been in the past eight years and the only time it was lower, it was lower by 50 basis points. So we are in a very comfortable place on that front. Just on the topic of losses, maybe spending a few moments on the topic of loss reserves and I think there's a shared appreciation for the challenges that stem from just to put a stake in the ground 19 and prior and what that may mean. From our perspective, I think that we are well on our way, as I suggested to some, to having that behind us. The averaged life of our reserves is just inside of four years, so at this stage that period is getting very much towards the tail end, is there perhaps a little bit out there still? We'll see what time it's possible, but certainly our expectation is that much of it has been processed, if you will. I think a few other data points that are worth noting at least we find them to be helpful as leading indicators when it comes to strength of reserves and putting aside the comment about paid losses, we would encourage people to consider having a look at IBNR as a percent of total reserves, the ratio of IBNR to case reserves and while some people may look at those two data points and say, well, you know, they could be impacted by the growth in the business and certainly there would be that reality to a certain extent, though I would suggest that people should look more carefully at how much of our growth was coming from rate. That all having been said, there is another data point that we look to and we would encourage others to consider as well and that is initial IBNR as a percent of net premium earned. I think all of these data points that I and drawn to your attention to are worth your consideration and I think would suggest the -- this our reserves are in a improving a good place and more likely than not continuing to improve and we will see that mature over time. As far as the expenses go, Rich walk through that. In particular, I would just call out that we had four businesses that had been in their infancy and the first quarter of this year is the first time we pulled them into the expense ratio and we're pleased to see how they are developing and maturing. On the investment portfolio, Rich had walked you through this as well, but a couple of highlights from my perspective, he referenced the AA minus and it happens to be a very strong AA minus, so there could be a lot of credit activity and we would still be in a very comfortable place. As Rich flagged the duration, it nudged out from 2.4 to 2.5. Do we continue to look for opportunities to nudge it out? Yes, absolutely. Do we feel any pressure that we need to do that overnight? Absolutely not. The book yield as Rich referenced or maybe he didn't, I'll be referencing now was 5.9%, but if you back out the Argentine component, the book yield is actually 4.2%. I think that's relevant because when we talk about how we're sort of laying the ground for the future here or what one should expect going forward with our sort of core domestic portfolio, which is the lion's share of what we have at 4.2% and a new money rate that's somewhere between 5.25 and 5.50. I think that combined with the strength of our cash flow should give you a sense as to the earnings power of the business and the contribution that we will be receiving from the investment portfolio, which again, I think there's considerable upside from here, again with the domestic core fixed income portfolio, that's 100 basis points plus upside from here. So when you, you put it all together, I think that we have been thoughtful and prudent on the underwriting side. We responded to the data and pushed rate and adjusted terms, conditions and appetite mix of business and we are seeing the benefits of that, but we don't want to quite frankly as we had shared with you in the past, declare victory prematurely and but more likely, in my opinion than not, but we'll see with time, good news to come on that front. In addition to that, as I just suggested, as it relates to the other part of our economic model, our investment portfolio, very well positioned, benefiting from the focus and the discipline and the opportunity to take advantage of a new money rate that is 100 basis points above where our book yield of our core portfolio will prove to be very advantageous. So with that, I will pause there and Audra, if we could please open it up for questions?

Rob Berkley:

Good morning, Mike.

Rob Berkley:

When you say top off, what is your...

Rob Berkley:

Nothing particularly material at this stage. Again, we think that the -- look, we were constantly looking at our loss picks in trying to tweak and refine. So it's not like we come up with these picks and then they're frozen indefinitely. That having been said, there was nothing material or consequential to the portfolio overall as far as changes during 2023.

Rob Berkley:

My best guesstimate at this stage and that's with a capital G is that we should be able to grow the business all, given what I see between 10% and 15%. As Mike, I know you're aware of and we all presumably have a shared appreciation. We have 60 different businesses, all focused on different niches within the marketplace. And at any moment in time, there are parts of the market that we participate in that are improving and there are parts of the market that are facing more of a headwind. One of the things, again, as I think we've discussed in the past is that once upon a time, these product lines marched in lockstep, at this stage, they have seemed to be decoupling more and more every day. So there'll be some puts and there'll be some takes, but overall, I think that there's a better than average chance that we can grow between 10% and 15% for the foreseeable future. Could there be a quarter that we come in shy of that? Yes. Could there be a quarter that we exceed that? Yes, but that's sort of the channel markers I would offer you.

Rob Berkley:

Look, so let maybe just to bifurcate it a little bit between insurance and reinsurance. So, first off, I think that one needs to understand just because pricing is peaked, that doesn't mean there's not still good margin to have. So if you look at our reinsurance business and the opportunity that we still see in property, we view it as still a healthy line. That having been said, barring the unforeseen event, we think that property cat specifically has perhaps seen the peak we'll see with time. Obviously, the reinsurance marketplace has an impact on the insurance market, when reinsurance costs are up, then obviously that there is a trickle through or a waterfall effect for the insurance market and there is a little bit of a delay in that. So, the reinsurance market, which force the firming, I think, is out ahead. I think there's still margin to be had there, I think the impact that it's had on the insurance market is still very real, as the insurance market is still coming to grips with that higher cost of capacity that they rent from the reinsurance marketplace. But I don't think that there is the same level of pressure in or urgency in the insurance marketplace in particular E&S that we saw or felt a year ago. That doesn't mean there's not still opportunity. That doesn't mean we don't still like the margin and don't still want to have a second helping of whatever the market can offer. We have a view as to what adequate rate is in order to achieve the risk adjusted return that we think is appropriate. Right now, we think that opportunity, generally speaking, still exists in property. How quickly that will dissipate? I don't know, but we play close attention to it and we will not have an issue shutting off the spigot if we don't think it is a good use of capital going forward.

Rob Berkley:

Thank you.

Josh Shanker:

Yes. Good morning, everybody.

Josh Shanker:

Thank you. I was interested in just getting a little bit of past perspective and maybe future perspective on the impact of the Argentine component of the investment portfolio in the traditional NII. How has it impacted the past, this quarter and how should we think about it in the future as a one-off line item?

Rich Baio:

Sure. Happy to do that, Rob.

Rich Baio:

So Rob had alluded to earlier, the impact, excluding Latin America, in terms of our book yield being 4.2%. If we were to look to the prior period, a year earlier, if you will, just to show an appreciation for the increase in the domestic portfolio, that would have been around 3.6%. So certainly saw some pick-up there in regards to our overall yield. We did have a majority of our Argentine positions mature in the first quarter. And so for that reason, that's why we're saying that we would not anticipate the same level of investment income that we saw in the first quarter of this year, but would anticipate that we would get back down to a more leveled basis, as it relates to the Latin American portfolio in the second quarter and it will continue to decrease as the remainder of those inflation linkers mature throughout the remainder of this year.

Rich Baio:

I think that's a fairly reasonable approach, Josh, yes.

Rob Berkley:

Josh, we -- as I think we've discussed in the past, we look at our reserves a variety of different ways by each one of the operations that makes up the group by product line at a very granular level. We also look at it at the aggregate as well, the group level and we assess where we are and what we need and what tweaking needs to happen. I think there tend to be some folks that tend to maybe not try and tweak as regularly as we do, but we are constantly looking at it and trying to make sure that we're not getting the porridge too hot or too cold. So at any moment in time, there's 60 different moving pieces, but we feel as though that things are in a good place.

Rob Berkley:

Okay. Thanks for the question, Josh.

David Motemaden:

Hi. Thanks. Good morning.

David Motemaden:

Good morning. Just had a question, if you could just let us know, understand it's about $1 million of favorable PYD. How much of that was coming from the insurance segment versus the reinsurance segment? And maybe just a little color in terms of the movement between lines and accident years?

David Motemaden:

Understood, that...

David Motemaden:

Got it. That's helpful. And then just following-up on that, just looking at the accident year loss ratio ex cat in the insurance business, assuming negligible PYD to sort of back into that, it looks like it deteriorated around 100 basis points year-on-year. I'm wondering, was there any change that you guys made to loss trend or anything on the mix side that you would just call out as sort of pushing that up?

Rich Baio:

I think certainly with social inflation, some of our loss picks maybe are slightly higher than where they had been the year earlier, but it really is just a mix of the business that's just rising that.

David Motemaden:

Understood. Thank you.

David Motemaden:

Yes, that makes sense. Understood. Appreciate it.

Operator:

We'll move next to Elyse Greenspan at Wells Fargo.

Rob Berkley:

So I'm not familiar with the data, Elyse, that perhaps you have in front of you. But speaking to our experience, we continue to see during the first quarter very robust activity on the E&S front, particularly on the casualty or liability. In general property, there continues to be an opportunity. But again, I think it's probably not what it was a year ago. And I think that that's just the reality of things and the cycle. So we are more of a liability shop than a property shop though we do participate in property. I expect that we'll try and make some more hay and property before we call it a day, but it is possible that, that may have not peaked, but property is peaking. On the liability front, there is nothing that leads me to believe that the momentum is going to be subsiding anytime soon. I think the reality is that social inflation, the legal environment, the social environment persists and that continues to drive lost costs. And I think that there's some reasonable chance that the reinsurance marketplace is becoming more acutely aware of this social inflation issue and you're going to see them look for opportunity to try and put pressure on the insurance marketplace when it comes to like casualty and liability lines like they did on the property front. As it relates to us, we are less exposed or susceptible to that because we are a small limits player, approximately 90% of our policies that are legally allowed to have a limit have a limit of $2 million or less. So we are not as exposed to the whims of the reinsurance market, but we look forward to the reinsurance market embracing greater discipline on the casualty lines.

Rob Berkley:

I think that we will continue to look at the business and the data and how we think things are performing. And, Elyse, hopefully you would expect we will respond accordingly. So that's the best I can do, sorry, if it's not good enough.

Rob Berkley:

My colleagues and I -- we continue to have a view that frequency remains the industry's friend and we along with others have benefited from that, but are sensitive to or maybe I would take a step further and suggest concerned about medical costs and where they are likely going and there's a delay there. So are we at the bottom? It would seem as though my calling the bottom, I was just, some might say early, others might just say wrong. That having been said, I think we are seeing more signs of California bottoming out and the rest of the country or much of the rest of the country is probably a pace or two behind.

Rob Berkley:

Thanks for the questions. Have a good day.

Rob Berkley:

Good morning, Ryan.

Rob Berkley:

Ryan, thanks for the question and long story short, obviously we have both the tools and the expertise to write both non-admitted and admitted. I mean, ultimately what it really boils down to is when some of those exposures make their way back into the standard market is that something that we think is a sensible use of our capital, when the standard market, if it were to become more competitive at that time, do we still think that it's a good use of capital? So do we have the ability to do it? Yes, but we'll need to look at the pricing, the terms and conditions and my colleagues will have to reach a conclusion as to whether they think it's sensible or not. So the tools and the capabilities, yes and colleagues will have to decide whether it makes sense or not.

Rob Berkley:

Our expectation is that it's going to start with a two indefinitely. Is it possible there could be some extraordinary something or other that could change that? Yes, of course. But at this stage, you know, we feel that we are in a good place and that this is very sustainable.

Rob Berkley:

Thank you.

Mark Hughes:

Yes. Thank you. Good morning.

Mark Hughes:

I think you've expressed more enthusiasm about the other liability than commercial auto, but commercial auto accelerated a bit and outgrew other liability, which decelerated a little bit in terms of net premiums written. Anything to read into that?

Mark Hughes:

What do you see in terms of pricing in the liability line? You obviously given us the kind of your consolidated non-workers comp number, but anything specifically about the other liability?

Rich Baio:

That's correct, Rob.

Rich Baio:

Very good. And then final question, the cash from operations is quite strong. If you touched on that earlier, I apologize, but what was the big driver of the year-over-year increase?

Rich Baio:

It's really driven by the underwriting performance. So we had very strong cash collections on a net premiums basis. And then our paid losses, as Rob alluded to earlier from the paid loss ratio perspective was very low as well. And so the combination of those two items was really the biggest driver.

Operator:

We'll go next to Brian Meredith at UBS.

Brian Meredith:

Yes, thanks. Hi, good morning. Two questions. Rich, I'm just curious, could you just give us the actual income that you generated from the Argentina inflation bonds in the quarter? Just so I don't have to do the math.

Brian Meredith:

I can back into it with what you said in the yield, but I just wanted to know what the actual number was.

Rob Berkley:

Yes, Brian, he's just going to check with an attorney and call you back. How about that?

Rob Berkley:

The world we live in.

Rob Berkley:

I'm just trying to -- make sure I understand, Brian, you want to know how much of our business is cat exposed?

Rob Berkley:

The answer is the 2% to 3% is probably in the right zip code, it may be up a little bit from there. As far as how much of our portfolio is cat exposed? You know, that's become perhaps a more complicated question than it once was because of what we've seen happen with wildfire and SCS over the past several years. So I don't have a percentage for you as to what's exposed to quake or particularly as we get earth quake apparently now in the northeast or exactly what is exposed to wind. We're happy to pick up the conversation offline, but we have a view that cat load has had to evolve from how people thought about it just a few years ago. So the short answer is, I don't have a percentage for you, but we're happy to further the conversation if you like.

Rob Berkley:

Thank you.

Unidentified Analyst:

Hi, I just had one. Hi, this is Dean on for Meyer. I just had one question. I was sort of surprised to see. I was sort of surprised to see that there were no share repurchases in the quarter. Is there anything anymore color you could provide on that? Or how should we think about repurchases for the remainder of the year?

Operator:

And that concludes our Q&A session. I will now turn the conference back over to Rob Berkley for closing remarks.

Operator:

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Rob Berkley:

Sarah, thank you very much, and good afternoon all and welcome to our fourth quarter call, and for that matter full year '23 call. In addition to me, you also have Bill Berkley, Executive Chairman, on the call as well as Rich Baio, Chief Financial Officer of the Company. We're going to follow our usual agenda where very shortly I'm going to hand it over to Rich. He's going to walk us through some highlights from the quarter. Once he's completed his comments, I'll offer a couple of thoughts at my own and then we'll be pleased to open it up for Q&A. Before I hand it over to Rich, I did just want to offer a thought or two and for some participants who is probably won't be new to, I guess, a discussion that we've had in the past. For our organization, there is without a doubt amongst all of our colleagues, a shared recognition that the goal of the exercise is value-creation. We approach this through a lens that we've again touched on in the past, but I'll flag it again. A lens that we referred to is risk-adjusted return. All returns are not created equal. One needs to consider the type of risk that you're taking on in order to achieve that return. And in contemplating that risk, one needs to consider volatility as a component of that. One is to ask themselves the question? Am I getting paid enough for that risk? And of course in considering that, what role volatility plays. In the fourth quarter of '23, there should be many market participants that report good numbers. But I think that one needs to look beyond just a quarter. One needs to look at the year. One needs to look at the past several years. When it comes to value creation, it's not just about a step forward. It's about consistently taking steps forward, and it's about avoiding taking steps backwards. When you look at the results of our quarter, without a doubt, they are very strong, very robust by any measure. But I would encourage people to look at the full year and look at the past many years and our ability to create value, taking into account the risk that we are accepting in order to achieve those returns, is really the cornerstone why we've been able to build value for shareholders so successfully over many years. This quarter and this year, no exception. So to that end, before I hand it over to Rich, I would like to thank and congratulate my colleagues throughout the organization on a really outstanding quarter, outstanding year, and yet another year of a job very well done. Also, on behalf of my colleagues. I would like to thank our shareholders for allowing us the opportunity and the privilege for managing capital on their behalf. I will pause there and Rich, over to you. What do you have for us?

Rob Berkley:

Rich, thank you very much. Pretty attractive picture and even a conservative CPA couldn't make it sound anything other than encouraging. So a couple of observations on my end. Obviously, the top-line growth, we're pleased with the progress that we're making relative to the past few quarters. I think this is unfolding exactly as we suggested. Just calling out a few pieces of that puzzle, clearly some of the things that we had talked about as far as portfolios that we were separating from, much of that pig is through the Python. The specialty market in general continues to be particularly attractive. I would highlight E&S especially, furthermore, I don't think that party is over. When we're looking at the submission flow, we continue to be quite encouraged. On the other hand, certainly, within the professional liability space and I'll call out public D&O as perhaps one of this extreme examples, I think it is delicate and treacherous and as you can see in the numbers in our release, we are treading thoughtfully as you'd expect. Rich touched on the rate coming in at 8%, which based on our assessment is pretty clear that we are comfortably exceeding any reasonable assumption around loss cost trend. And we are encouraged by that. I know that there are couple of chicken littles out there that are sort of hanging on the rate number that we share on a quarterly basis and some might say, well, geez, this is down below where it was in the third quarter and that is a factually correct statement. That having been said, I would caution people to please understand that is really driven by mix of business and not just product line, but we have more than 60 different businesses under the Group umbrella and at any moment in time, some are growing more than others and rate opportunity is not equal amongst all the businesses in the Group, and obviously our product lines as well. And just as a point of reference, you'll recall this time or fourth quarter '22, we got 6.9 points of rate ex-comp. So again, we are comfortably above where we were a year ago and we are confident again that we are exceeding trend by a meaningful margin. Again, Richie talked about the losses. I'm not going to get into that. The only thing that I will flag is that the paid loss ratio for the quarter came in at 48 and change, and for - I don't know how many quarters it is at this at this stage, it's just sort of floating between 46 and 49, which I think is really just a reflection of the rate action along with the underwriting discipline and focus of our colleagues that are allowing us to be arguably writing business at a pretty healthy margin, to say the least. Again, Rich touched on the expense piece. So I'm not going to rehash that other than I will make the one comment that for purposes of '24, we have some businesses that we started prior. And those are going to be impacting our expense ratio, though, even with those coming into the expense ratio, as they are in business for a full year, the fact of the matter is, that's going to be a relatively modest drag. Going the other way as far as benefit goes, you'll see what happen with our written premium in Q3 and certainly in Q4 and we all know how that's going to travel through and impact the earned in '24, which will clearly be a positive. Last comment on the investment portfolio. Rich touched on that. As far as the book yield, as far as we're concerned, the new money rate for us still today, even with all the humming and honking about where interest rates are going, we still can put money to work at 5%-plus. So we think there's opportunity there. As Rich mentioned, the duration, 2.4 years. We are looking for the window of opportunity to nudge that out. We are not in a rush. We have a slightly different view than much of the world as to where interest rates are going. And when the window of opportunity presents itself, you will likely see that 2.4 moving out from here. So again, I think it's exciting that we had a good quarter. It's rewarding and encouraging that we had a good year and top of - a good year in '22 and so on, but I think the most encouraging thing is when you look at where, I should say, how the table is set for '24 and beyond, we are in a very good place and not only on the underwriting side but on the investment side. So I believe in '24 and likely beyond, you are going to continue to see this economic model firing on all cylinders. So that probably wasn't as brief as I promised, but it was relatively brief for me, and I'm going to pause there and Sarah, we would be very pleased to open it up for questions. Thank you.

Rob Berkley:

Hi, Elyse.

Rob Berkley:

Good afternoon.

Rob Berkley:

Yes, no, Elyse, I appreciate that you and other colleagues are trying to build models and making certain assumptions. But the truth of the matter is that, tell me what market conditions are going to be. And I can give you a thoughtful answer to your question. There is nothing that I see today that leads me to believe that there isn't meaningful opportunity before us. And again, do I think the 12% number is a reasonable number to use? Yes. Do I think it's possible to be better than that? It certainly is possible. But again tell me what the market conditions will be and then I can give you a more thoughtful answer as opposed to fumbling around on this end.

Rob Berkley:

I think you should. From our perspective, obviously, one of the big drivers there is social inflation and as far as we're concerned, it's alive and well. In addition to that, as far as another pressure point, I think you're starting to see the reinsurance marketplace, particularly on the treaty side, but across-the-board starting to wake up and really recognize some of the challenges that the liability market faces. And the kind of pressure that you saw, the reinsurance marketplace, but on the property line, I think, while it may not be to the same extent, I think you're going to see them start to really focus on the - some of the liability lines and I think that will perhaps introduce further discipline into the casualty market. Quite frankly, if you go back in time, we've sort of been standing on our head and jumping up and down, talking about social inflation for many years. And we started pushing on rate pretty early and it's been good to see more recently people showing up to the party and recognizing what that loss trend is, recognizing what that means for this loss cost and taking action. So long story short, I think that there is some more legs to the liability market, particularly umbrella, auto liability, GL, and there's a lot of the excess market overall.

Rob Berkley:

Nothing that's particularly earth-shattering. I would say it's kind of more of the same. But if you're looking for more detail, I'd encourage you just give Karen or Rich a call and if you can't get one of them, just give me a buzz.

Rob Berkley:

Thanks.

Rob Berkley:

Hi, Mark, good afternoon.

Rob Berkley:

I would suggest that some of the older years are beginning to show signs of petering out and I think some of the more recent years that look particularly encouraging. As they season out more, we will be more inclined to recognize the good news. But I think at this stage, if you look at the average duration of our loss reserves or an average life of our loss reserve, which is 3.5 plus years, just shy of four years at this stage, we have our arms around, I think a lot of the years that we're particularly frustrating where I think the industry may have gotten caught a little flat-footed, and ourselves are not completely insulated from that with social inflation. I think we may have gotten on top of it a little quicker than some. But nevertheless, '16 through '19 is not without its challenges. That having been said, I think some of the more recent years are encouraging, but I think '16 through '19 are slowing considerably and certainly the earlier of that Group, I think have - maybe not fully played out but are pretty darn close.

Rob Berkley:

Yes, that was primarily due to payroll, if you will. Just wage or - wage inflation, if you like.

Rob Berkley:

We still have reservations about the product line. We're pleased that we participate in the market. We think our colleagues that are in this space have exceptional expertise and are managing the capital well. But by and large if there is a little bit more of a certainly neutral to defensive posture at this stage, I think as we've talked about in the past, we think that the medical trend is going to prove to be challenging. As far as obviously the U.S. comp market is both broad and deep. And from what I hear from my colleagues that are far more knowledgeable than I, I would keep an eye on California for leading the charge as far as market bottoming out.

Rob Berkley:

Thanks for the question. Good evening.

Rob Berkley:

Hi, Mike. Good evening.

Rob Berkley:

So the way I characterize it, Mike, is I think that the market is changing every day. And if you go back, call it two years ago, professional liability, D&O, as an example, was in a different place than it is today. So you have that force. On the other hand, clearly, two years ago property was in a different place than it is today. So you have all these pieces that at any moment in time some things are firming, some things are softening, and obviously, that instructs how we feel and how strong or not our appetite is. In addition to that, I think, as we may have flagged in some earlier calls, there were a couple of what I would describe as meaty relationships scale-wise, that we came to a shared understanding that we agreed to disagree as to what an appropriate rate need is and what action was required. And as a result of that, we wished each other well, or at least we wished them well, and that played a role in it as - in addition to the earlier comments. So do I think that the 12% is this like phenomenal number? That's one-off. The answer is no. I think that there were some things in the first half of the year that served as somewhat of an extreme drag, and what you're seeing now is a lot of that shift away has been processed.

Rob Berkley:

Yes, obviously, we take it from one pocket and hopefully, we're getting it back and then some in the other pocket. I think one of the things that - so do I think it's possible that you're going to see some of the reinsurance marketplace trying to take action, for example, with seeding commissions? Yes, I do. The good news for our organization, as we've discussed, because of our limits profile and how the business is operated with approximately 90% of our policies that are legally allowed to have limits, having a limit of $2 million or less, that makes us less reinsurance dependent. So consequently, we have the ability to pivot and think about what we buy, perhaps differently than some of our peers, and we also can shift structurally. So as Rich mentioned earlier, around the seed, part of the reason why the - excuse me, around the expense ratio partly has to do with seed, where people wanted to cut seeding commissions. So maybe we switched to an XoL structure that made sense to us, given the rate environment, and that worked out. So the punchline is this, Mike, a hardening reinsurance market when it comes to the casualty lines, net net will be very good for us as an organization because it will force further discipline and consequently pricing power for the primary market. And in addition to that, my colleagues on the reinsurance side, I'm sure will be right in there seizing the opportunity.

Rob Berkley:

Before he answers that, I think we may need to read the Safe Harbor again.

Mike Zaremski:

Appreciate it.

Operator:

Your next question comes from the line of David Motemaden of Evercore ISI. Your line is open.

David Motemaden:

Hi, Rob. Good evening. So I just had a question on the rates that you guys are seeing now in liability lines. If we exclude comp and exclude financial lines, I'm wondering if you started to see evidence of those rates accelerate in the quarter - in the fourth quarter. I'm just trying to get a sense for if we were to adjust for the mixed dynamics that you had just mentioned in your opening remarks if we are actually starting to see those rates move higher in response to the environment.

David Motemaden:

Okay, great. Thanks. That's encouraging. And then maybe if I could just move to the accident year loss ratio ex-cat. So if I look at the improvement year-over-year, I was wondering, and I know this is getting a little bit granular, but I think the prior period had some fire losses in there. Was the improvement really just the absence of those fire losses? And are we sort of at a clean baseline here going forward?

RichBaio:

Sure, Rob. I would say yes. It is certainly part of the reason for the change. Quarter-over-quarters, we certainly, over the last few quarters, as Rob has alluded to, I think on some of the earlier calls, been making some changes with regards to re-underwriting some of the property risk side of things. And so, yes, there has been an improvement. Certainly, much progress has been made. Can't say that it's completely completed, but certainly do I anticipate a better position going forward.

Rob Berkley:

Thank you, David.

Rob Berkley:

Hi, Ryan, good evening.

Rob Berkley:

Are you speaking specifically about professional? Sorry, Ryan. Trying to make sure....

Rob Berkley:

Yes. The skinny on that, at least through, in my opinion, is the D&O market, particularly public D&O market has been, from a pricing perspective, in somewhat of free fall, and rates went up considerably, and now they're coming back down. And then we have a view as to what rate adequacy is. And ultimately, while we're sorry to see it go, if it goes, it goes. We're not going to chase it down the drain. In addition to D&O, a couple of other product lines that I would call out would be medical professional, specifically hospital professional liability, where the lack of discipline in that product line over the past, quite frankly, a couple of years, I think, has given reason to pause. To our colleagues credit, they also - they have been operating with the discipline. So that's quite frankly having an impact on the top line as well. Other areas that I would flag, maybe one other would be architects and engineers with some of the larger accounts where again, we have found that the market is willing to do things we don't think make sense, and the pricing has come off. So professional liability, extraordinarily broad category, just trying to give you a little bit of a flavor with some of the bigger pieces of that puzzle. But yes, there are some areas within the professional space that we still find notably attractive, particularly nonstandard. And then there are some big chunks of the professional line, some of which I just referenced, that I think should be giving anyone who's responsible and disciplined real reason to pause.

Rob Berkley:

Please.

Rob Berkley:

So it's a combination of both. As you'd expect, we're pushing pretty hard on the rate front and it's sticking. In addition to that, as we see rate adequacy more and more attractive, then we're going to lean into that. And you would take note the growth, for example, in short tail lines or specifically property in the reinsurance business during the '23 year. And of course, we had meaningful growth on the property front and the E&S space as well, both through our domestic businesses as well as through our London operation.

Rob Berkley:

Not meaningfully, when the day is all done. I mean, as I said a few moments ago, the majority of our growth is driven by rate. So there's a lot of things where our exposure hasn't changed, but we're charging considerably more. But also, that has led to opportunity to write some additional business as well. But I don't have a specific breakout on the 20% what's rate versus exposure. But if you'd like, you're welcome to follow up with us tomorrow and we can give you some more context.

Rob Berkley:

Thanks for the question.

Rob Berkley:

Hi, Meyer. Good afternoon. Good evening, rather.

Rob Berkley:

Good, how are you?

Rob Berkley:

I think primarily what's driving it is we're just charging a lot more. We're insisting on a lot more rates. That's the big driver, no pun intended.

Rob Berkley:

Well, I would suggest you look at the paid loss ratios. I'd also sit because that's a reality. In addition to that, I would encourage you to have a look at how much IBNR we are carrying relative to case for some of those years. And further, I would encourage you to look at how much IBNR we're carrying relative to our total reserves.

Rob Berkley:

For those years.

Rob Berkley:

And I think that directionally should give you something to hang your hat on.

Rob Berkley:

Sure.

Rob Berkley:

The answer is that I think that 2024, at least so far, based on what we saw at 1/1, is likely to continue to provide a very good opportunity. Is it going to be quite as attractive as 23? Perhaps not, but I think that even if it isn't, that doesn't mean it's no longer an attractive opportunity. So we, as far as property cat goes in a very measured way, continue to be bullish on the opportunity. But as I said earlier, we are doing a bit more, but if the growth is really driven by the rate, I don't think you are going - you would not see a dramatic shift in our risk profile.

Operator:

Your next question comes from the line of Brian Meredith with UBS. Your line is open.

Rob Berkley:

Good evening.

Rob Berkley:

I'm sorry. As far as our property writings?

Rob Berkley:

Reinsurance starting. Brian, I think that - I think, I'm happy to share that with you, but I want to check with our General Counsel to make sure that I'm allowed to share that with you. But what I know I can share with you is that our general view on the property cat market at 1/1 was that it was still very attractive, maybe not quite as attractive as it was at 1/1/23, or said differently, I think the market is still very attractive, but I also believe it has peaked, at least for the moment.

Rob Berkley:

And - there are parts of the business that we are grappling with exactly those questions. Ultimately, the reinsurance marketplace, from our perspective, is that there are some people that are our partners through thick and thin, and there are some people where it's much more of a transactional relationship. Those that are our partners through thick and thin, we are not likely going to cut them off, if you will. Those that are more transactional in nature, we come to the table recognizing we are renting their capital, and we have a choice whether we're going to use our own or whether we're going to rent theirs. And my colleagues are pretty good at doing the math and we try and figure out what makes sense. So are there parts of the business where if the reinsurance marketplace were to push us, we might exercise that option of keeping more for exactly the reasons that you're flagging?

Rob Berkley:

I'm not close enough to it, but I think we're using a pretty broad brush. I think that if you look back at some of the personal lines players or even some of the commercial line folks that write property books, it hasn't been necessarily a wonderful five years for them. Maybe it's better today. But when the day is all done, I think one needs to use a bit of a finer brush and really look at it at product line by product line. I think, as I suggested earlier, I think Q4 is going to be a really attractive quarter for many market participants. But I don't think 2023 proved to be this remarkable experience for all carriers. So again, do I think that the industry is in a better place today, certainly for many product lines, than it's been at other moments in time? Yes, I agree with that comment. But I think if you look at the total results for a lot of insurance companies for the '23 year, not everyone is hanging their hat on a return that starts with a two.

Rob Berkley:

Thanks for the question, Brian. Have a good night.

Rob Berkley:

Hi, Josh. Good evening.

RichBaio:

So we have seen a - an increase, Josh, in the overall book yield, I'd say from a fixed maturity perspective, we certainly have been able to deploy capital and reinvest at higher rates, as Rob was alluding to earlier in some of his remarks in terms of the - where the new money rate is and where the roll-off is. So certainly that's been a big contributor to it. We did have a little bit of an uptick, if you will, with regards to some securities that we own in Argentina that are inflation-adjusted as well. So that did create a little bit of an uptick. But I would tell you that the book yield in the quarter, I would say, core would be around 4.7%, which is certainly up from where we were at the end of the third quarter.

Rob Berkley:

Yes.

Rob Berkley:

So, Josh, our goal is, if the opportunity presents itself, to move that duration out a bit from here, if that is your question, I want to make sure I'm understanding it.

Rob Berkley:

We're going to move it out -

Rob Berkley:

Yes. So our desire is to move it out, but we're going to move it out when we see the window of opportunity. So would we like to see that move out to '25, '26, '27 over time? Yes, we would. But we're going to do that in a way that makes sense. So I would encourage you to stay tuned. And we're - there's a lot of volatility in the world, and when we see the things working with us, we're going to try and lean into that window, but we're just trying to roll with the punches. And again, it's remarkable volatility.

Rob Berkley:

Actually, I think at this stage, quite to the contrary, we're very pleased with what this traditional fixed income portfolio is offering us. And I think, just as a general mix, while we - I don't see us exiting alternatives, I don't think that there's the same level of encouragement or it's not as compelling to look in the alternative directions as it once was given where fixed income rates still are.

Rob Berkley:

Thank you, sir. You too.

Rob Berkley:

Good evening.

Rob Berkley:

I want to draw a distinction. First off, as far as things peaking, that comment was suggested that they may be peaking in the property cat market. And I'd like to draw a distinction between the primary or insurance market versus the reinsurance market. And in addition to that, I would suggest that it's important to draw a distinction between the property cat market versus the property risk reinsurance market because they are clearly not one in the same in our opinion. As far as our desire to grow the business, look, if we like the margin, we are going to lean into it. And I think that at the moment, generally speaking, we like the opportunity that continues to exist in the reinsurance marketplace when it comes to property. And we are certainly paying attention to a lot of the opportunity that exists in the primary property insurance space, particularly as it relates to E&S in the commercial lines. And of course, not to be forgotten, our colleagues at Berkeley, one on the high net worth front, the opportunity for rate, both on the admitted basis as well as, just as a reminder, they are using non-admitted paper as well, is creating meaningful opportunity also.

Rob Berkley:

When in doubt, ask.

Rob Berkley:

I think directionally, yes, you will see that. Do I think that we are very far or well on our way to having '15 through '19 behind us? Yes, I do. Do I think that it's done? Probably not. Look, we take a different approach than some other organizations when it comes to monitoring our reserves and trying to make sure that we're getting it right. There are some folks that just ignore it for quarter-after-quarter, year-after-year, and then all of a sudden they have this giant problem that they need to deal with and they take this massive charge. We take a different approach. Our view is we're looking at it every 90 days or more frequently and we're tweaking it to where we think it needs to be, and we think that that's the more sensible approach. So again, you'll see the information, but I think that we continue to be very optimistic about the more recent years and how that's going to play out. Do I - clearly, some of that good news has been used along the way as we've had some challenges coming out of the older years. I think, again, those challenges are in the rear view mirror and shrinking by the minute. And I think there continues to be a lot of encouraging signs, as I referenced earlier, around the amount of IBNR we continue to carry in some of the more recent years.

Rob Berkley:

Thanks for the questions. Have a good evening.

Operator:

We do have two more questions.

Operator:

Would you like to continue?

Operator:

Perfect. Thank you. So your next question comes from the line of Alex Scott with Goldman Sachs. Your line is open.

Alex Scott:

Hi. Thanks for taking - hi, thanks, and good evening to you. I just have one quick one for you.

Alex Scott:

You guys have been very good real estate investors over time. So I thought I'd sort of ask a similar question to what Mike asked you before. So just - what kind of opportunities are in real estate? Obviously, fixed income is a lot more attractive right now at higher yields. But are you seeing any stabilizing trends in the real estate market?

Alex Scott:

Understood. Thank you.

Operator:

And your final question comes from the line of Scott Heleniak with RBC Capital Markets. Your line is open.

Scott Heleniak:

Hi, thanks. Yes. Just had two quick questions here. Just E&S, you talked about to be an attractive market here. The submission count sounds like it's pretty encouraging still. Can you just - can you comment more on the submission count for the - for Q4 versus the past few quarter, how that's trended and where you're kind of seeing the most opportunity there, if there's any particular lines or areas where it's changed much?

Scott Heleniak:

Okay, I appreciate that. And then just the last one is, you mentioned some startups that you had during the year. How many of those did you have in particular, and are you able to talk about what the premium is on those? Just - if you don't have it now, I can get it later. I don't know if you give that out, but is there anything more you can comment on that?

Scott Heleniak:

Sure.

Scott Heleniak:

All right, fair enough. Thanks.

Scott Heleniak:

Thank you.

Rob Berkley:

Okay, Sarah, thank you very much. And thank you to all of the participants. We appreciate your time. I think the quarter speaks for itself. The year speaks for itself. The organization continues to perform at a high level, and as suggested earlier, perhaps the most exciting news is how well-positioned we are for not just '24, but likely '25 and beyond. We thank you again for your time, and we look forward to speaking with you in April. Have a good evening.

Rob Berkley:

Lisa, thank you very much, and good afternoon all, and I guess a second welcome to our Q3 call. We appreciate you dialing-in and your time and your interest today. Joining me on the call, at least on this end, is Bill Berkeley, Executive Chair, as well as Rich Baio, EVP and Chief Financial Officer. We're going to follow on our typical agenda where momentarily I'll be handing it over to Rich. He’s going to give us a bit of an overview and flag some highlights from the quarter. I will follow with a few comments of my own and then we'll be pleased to open it up for Q&A. Before I do hand it to Rich, I just wanted to make a couple of quick observations and really one macro one in particular and that is on the results of the quarter. I think by any measure, I call it a 20% return is really an outstanding result. The fact is there were no one-time this or one-time that in there, that is truly when you strip it down to its fundamentals, that is how the business is performing. And these great results are really a reflection of a team. This is a team sport, not an individual sport. So my congratulations to all of our colleagues throughout the organization on a job very well done. I have the good fortune of being their mouthpiece in these types of settings. But again, this achievement was a team achievement. To that end, obviously it was a quarter where the organization was able to demonstrate our value proposition to capital. The idea of less risk for more return. We've talked to you all in the past about our, we are preoccupied with a concept that we refer to as risk-adjusted return. You can see it in moments like these that we just saw in Q3 very clearly. When as our Chairman says, the tide goes out, you get to see who's where and what. You could see it in both aspects of our business activities, one being underwriting, the other one being investing. Our underwriting results of a combined of a 90 during a period that had meaningful cat activity is really exceptional. Additionally, on the investing activity, clearly a book yield of 4.5%, while maintaining a quality of AA minus, and additionally, a new money rate of approximately 6%, that is no accident either. These results, these achievements are a result of our colleagues, their focus, their discipline, and their expertise. This call certainly is about reviewing what happened in the third quarter, but I would suggest even more than that, it is about how the table is set, not just for the coming quarters, but the next several years. So I think we are very well positioned. I think there is a fair amount of visibility. We will be getting into that in a bit more detail later in the call. But at this moment, let me hand it over to Rich and he's going to walk us through some numbers. Rich, if you would please?

Rob Berkley:

Rich, thanks very much. That was great. So, I'm just going to offer a couple of other quick observations on the quarter and how we see things unfolding from here, and then again, we'll move on to the Q&A. Rich touched on the top line, obviously, building momentum again, as promised. This is a reminder to some number of quarters ago, we agreed to disagree with a couple of partners as to what we thought was an adequate rate. They did not think that we needed that much rate and again we decided to part ways that had a meaningful impact to the negative on our top line. That pig is making its way through the python to the extent that it's of interest, that was in the auto line. So we wish them well and we'll see how that unfolds. Speaking of different products, obviously the marketplace for the past 12, 18, 24 months or so has been very focused on property and with good reason. I would suggest to you, as we've commented in past quarters, auto liability is one that people need to continue to pay close attention to. I think as far as product lines, when it comes to social inflation, auto liability has the biggest bullseye on its chest. And by extension, that clearly spills over to excess and as well as umbrella. That having been said, just in general, social inflation continues to burn and we do not see that abating anytime soon. Quick comment on workers comp, I know we've touched on this in the past. We continue to be of the view that one needs to be very mindful of medical cost trend. We went through a period of time where it was pretty benign. We think that is shifting very quickly. We've touched on it in the past. We think it's going to become more and more into focus for a broader audience over the coming quarters. In addition to that, the benefit that comp was getting both as it relates to COVID and frequency and then on the heels of COVID a tight labor market and wage inflation, I think those benefits have run their course and clearly wage inflation is slowing. I mentioned a moment ago the topic of social inflation. We are very focused on it. You can see it in our rate increases. Ex-comp coming in at 8.5%. We have every intention of continuing to stay on top of it. We think the market is accepting our rate increases, and you can see that in part demonstrated by our renewal retention ratio continues to be at approximately a steady 80%. Another number that I find useful, perhaps others do as well, is the paid loss ratio. This is a number that we flagged for you all in the past, again coming in at a very healthy 47.9% for the quarter, which obviously, given where we are booking the business, would leave one to believe that the strength of our IBNR speaks for itself and would encourage people to look at our IBNR relative to case and IBNR relative to total reserves to the extent you're interested in the topic. As far as the investment portfolio goes, again, Rich went into some detail on this. I touched on it earlier. But without a doubt, it's not just about the 4.5% that we're getting on the book yield. I think the bigger story is the new money rate today of give or take 6%. You compound that with the strength of the cash flow that the business is experiencing. I think it's again setting a table for a very encouraging future. The duration we did bump out from Q3 to Q4, I think it's more likely than not over time you're going to continue to see that push out. But the fact is, having kept it short the way we have has given us greater flexibility to take advantage of the higher rates in a more immediate or over a shorter period of time. Finally, and perhaps a little bit on the forward-looking and picking up on the comments about the investment portfolio, nobody knows with certainty what tomorrow will bring, and there certainly is the potential for volatility to be around the corner. That having been said, you can see the business's ability to weather a choppy time as far as CAT activity. You can see the rate increases that we are getting, and you can see how, quite frankly, I should say, we can see where the book yield is going. So that all having been said, I think it's very clear where the -- how the business is positioned for the coming quarters and the coming years, and the earnings power of the business is likely to be accelerating from here. Lisa, I'm going pause there, and why don't we go ahead and open it up for Q&A.

Rob Berkley:

Hi, Mike. Good afternoon.

Rob Berkley:

I think social inflation continues to be a challenge. But if you look at the rate increases that we're achieving ex-comp of 8.5%, I think that we're in a comfortable position to be able to more likely than not absorb whatever that inflation trend is sending our way. So do I think there's opportunity for the underwriting result to show improvement over time? Yes, I do. That having been said, when we're generating a 20% return, there is no need to push the envelope. I think if you look at the paid loss ratio and how it's been running for some number of quarters, that should be a pretty good leading indicator. As far as the investment portfolio goes to the point that you raised, Mike, I think it's pretty straightforward. You know, you can see what the new money rate is, you know what the duration is, and you can just -- it's not that hard to calculate the upside from here. And as, you know, time goes by, we're just locking in every day, higher and higher rates and pushing that to reach out. So, from my perspective, certainly there's a lot of upside on the investment portfolio, but I would encourage people not to discount the opportunity on the underwriting side either.

Rob Berkley:

I think it's just at least what I was trying to articulate to make a long story short. The momentum is returning on the top line, because those relationships that we're in the process of parting ways with are getting towards the tail end. And the impact on the top line is diminishing with every passing quarter. As a result of that, it's impacting the overall less and less. In addition to that, the other piece that I should mention is there are parts of the professional liability market that are really, really competitive and we're just not going to follow things down the drain. If it doesn't make sense, we're not going to do it. And it's a similar story with workers comp. Fortunately, there's lots of opportunities in other parts of the marketplace and you know we are going after those and that's what's driving the growth that you see and I think you're like -- more likely than not to see more of that. Sure is the rate increase a component of it? Yes, but it's certainly not the whole story.

Rob Berkley:

Yes.

Elyse Greenspan:

Hi, thanks, good evening. My first question is I guess, you know, building upon the growth conversation, you know, as you guys had alluded to rate growth within the insurance book did pick up in the quarter, obviously, pushes and pulls across the different business lines. Rob, just based off of your overall outlook, you know, how would you expect, I guess, premium growth within that book to trend not only in the fourth quarter but also in 2024 as well?

Elyse Greenspan:

Okay. And then in terms of the prior year development, so $1 million overall favorable, was there any noise in either insurance or reinsurance within that $1 million or any noise within different accident years that you want to call out? I know you typically wait for the 10-Q, but anything worth flagging tonight?

Rich Baio:

I would agree with your comment, Rob, I don't think there's much, you know, in terms of from a segment perspective, pretty benign, you know, in each of the segments, so I think that's all I would comment before the queue.

Rob Berkley:

Thanks, Elyse.

Rob Berkley:

Hi, Mark, good afternoon.

Rob Berkley:

I think that it's a combination of things, one is rate, and two, certainly our E&S businesses in particular are benefiting from that as well, and our Specialty businesses overall. I think there's a recognition, two things; one, there's discipline, people are taking the rate, and two, I think that there is a growing percentage of the audience that is looking to do business with carriers that they can have confidence in and that's not just about ratings and in the eyes of the insured, I think it's also distribution partners, where they are trying to narrow the number of relationships they have and have those relationships the more important and really focusing on partners that they know will be there tomorrow in a predictable and consistent manner.

Rob Berkley:

Yes, I wouldn't read too much into that. There's just a fair amount of seasonality, if you will, to how that business is written. There is still a good opportunity there and our colleagues I think are very focused on it.

Operator:

We'll take our next question from Alex Scott with Goldman Sachs.

Alex Scott:

Hi, Good afternoon. So I wanted to ask you about the paid loss ratios. I mean, you know, I think in 1Q is 48%, it sounds like it's around that level now still. Can you help us think through like how much is that benefiting from the growth in the business, just with insured values and so forth going up, you know, how does that compare over like a longer period of time ex, you know, sort of those items? I'm just trying to think through, I mean it seems like that's an important part of why you're so optimistic on the future. And as you all know, there is a fair amount of criticism of some of the older accident years. I'm just trying to think through order of magnitude, that dynamic, and sort of how seasoned the older stuff is. I mean, anyway you can help me think through all that.

Alex Scott:

Got it. That's helpful. Second question I had for you is, I guess on general liability, other liability, and maybe the preference between primary versus reinsurance, you know, I'm just noticing the casualty reinsurance has been declining a bit and we've heard some more cautious commentary from some of the global reinsurers. I just want to understand what you're seeing there that's causing you to favor the primary versus reinsurance exposure?

Alex Scott:

Got it. Thank you.

Operator:

Our next question comes from Josh Shanker with Bank of America.

Josh Shanker:

Good afternoon, thank you for taking my call. Hope everyone's well. Can we talk a little bit short-tailed lines, lot of growth there, you know, I mean, that, you know, that says to me there's property in there, but short-tail is a pretty big catch up for a lot of things, a lot of growth instead what you're finding there and what the opportunities are?

Josh Shanker:

And do you have -- obviously, your reinsurance costs are up a little bit, you're not a huge buyer of reinsurance, are you able to take on some of that increased price to the benefit of the shareholders or some of that getting passed off the reinsurance market.

Josh Shanker:

And then, look, it's down a lot from where it was in 3Q '22 but the cat loss in the reinsurance segment was somewhat high. I don't think your big Hawaiian right, but maybe there's some homes in Hawaii you write the Albo in the Panhandle in Florida, just doesn't seem like that would have been a big area for you. Can you talk about the cat loss a little bit in the reinsurance segment?

Josh Shanker:

Okay. And if I can get one more in. In terms of -- I know you guys gave the rate -- not really loss trend. You talked a lot about commercial and where it can be. What is the loss trend in commercial auto? And what are you reserving to given your concerns about social inflation? Is there a variance between where you think the loss trends currently and where you're booking it? I know you're trying to be conservative but is this something that's been prepared for in how you're pricing and whatnot?

Josh Shanker:

Okay, well, thank you, and have a good evening.

Operator:

Our next question comes from David Motemaden with Evercore ISI.

David Motemaden:

Hey, Rob. Good afternoon. Just had a question on the commercial auto premium growth and I guess I hear your commentary loud and clear on social inflation impacting that line, so I was a little surprised that the growth accelerated there, was that more a function of this partner that you parted ways with, resulting in I guess an easier comp or have you seen something change there on the pricing side this quarter that makes you want to lean into the commercial auto market a little bit more?

David Motemaden:

Got it, thanks. That's encouraging. And then maybe, you know, I know you guys have been vocal on just workers' comp, medical cost inflation, and staying on top of those trends. I'm wondering if you're actually starting to see that come through, then manifest in your claims data, just in terms of the medical cost inflation starting to impact your payments.

David Motemaden:

Got it. Understood. And then maybe if I can sneak one more in, just a quick one. I didn't hear you talk at all about the fire losses. And I think is that fair to assume that that's pretty much one you guys have re-underwritten that book, and that's no longer impacting results? Or did that have some smallish impact this quarter as well?

David Motemaden:

Got it. Understood. Thank you.

Operator:

We'll take our next question from Ryan Tunis with Autonomous Research.

Rob Berkley:

Es. I’m doing well.

Rob Berkley:

I think it potentially does. But with a lot of those lines, you got to remember, we carry a cat load. So we are not going to release the cat load prematurely. So that could spill over that benefit may not be realized, if you will, we may carry that through into a future period. But yes, to your point, would it have a lower loss ratio oftentimes, yes.

Rob Berkley:

Yes. So I think we need to dissect that a little bit. And apologies in advance if this proves to be more of an answer than you're looking for. But as far as commercial auto goes, I would draw the analogy perhaps to your point that it's sort of the industry's version of whack-a-mole. As far as our book goes, we write it both stand-alone and we also write it as part of a package. Is it relevant to how you write a package? Yes, it is. But that doesn't mean you should write it in an undisciplined manner. I think as far as the Monoline goes, we play when we think we're making a buck and quite frankly, a lot of our Monoline guys, we think, over the past few years have done very well. So we'll see over time, but I think we just have some reservation and concerns about where the marketplace is going. That having been said, it has caused us indigestion from time-to-time. I think we've as of late, have more consistently done better where we're running at Monoline because we are very focused on it. I think there are some examples where we've written as part of a package where we probably haven't been as focused and didn't have is strong and expertise being brought to bear, and that is something that we are working at changing. But yes, are there moments in time where I look at it and I say, how does this make sense? That having been said, there are many parts of this organization where they are doing it consistently well.

Rob Berkley:

Thanks for the question.

Rob Berkley:

Hey, Brian. Good afternoon.

Rob Berkley:

I guess my answer would be not yet. We'll have to see what comes about. Particularly as far as cyber goes, it's going to be interesting to see what type of pressure the reinsurance marketplace brings to bear on the underlying or the insurance marketplace. As far as D&O goes, it continues to be very, very competitive. Other parts of professional liability, I would tell you that to a varying degree, it's pretty challenging out here. So again, I think that you can still make a buck in a bunch of pockets, but you need to be careful.

Rob Berkley:

The answer is as we saw what was going on with it. We pushed the picks up. We think what we're carrying makes sense and it won't be an issue but quite honestly, we wish them well, but we're not going to miss them.

Operator:

We'll take our next question from Meyer Shields with KBW.

Meyer Shields:

Hi, good afternoon. How are you?

Meyer Shields:

Good, thank you. I wanted to drill down a little bit more maybe into feeding commissions on casualty reinsurance, because we're reading a lot if you said, maybe European reinsurers getting nervous about social inflation. I'm wondering, is it too early or are in your current discussion, so let's say, one-one casualty reinsurance renewals. Is there -- are there any indications of seeding commissions improve it?

Meyer Shields:

Fair enough I wanted to step back a you talked about Berkley's willingness to write more property in the current environment. And I'm wondering about now that we're nine months through the year, how the growth that you've seen compares with the expectations you had and the opportunity you saw as you go back to December of last year?

Meyer Shields:

Okay, fantastic. Thank you very much.

Operator:

Our next question comes from Mark Hughes with Truist.

Rob Berkley:

Look, I think the -- as we've suggested to people in the past, our view is that we're going to be able to keep the expense ratio more likely than not comfortably below $30. That can obviously be impacted as you're familiar, Mark and others are as well. Our oftentimes prefer an approach for growth is through de novo or starting new businesses. When you start a new business and it's in its infancy and doesn't have scale, not a lot of earned premium that has a negative impact on your expense ratio. That having been said, we think it's a much more controlled model to growing the business. So again, does it pick up a little bit, it can go up, it can go down. But probably the biggest driver around that is businesses that we start and the timing for them to get to scale. But I think we remain convinced that we should be able to keep it starting with a two.

Rob Berkley:

Rich, is there anything that you can think of?

Rob Berkley:

Excellent. Thank you.

Yaron Kinar:

Thank you. Good afternoon. My first question, and I may be paraphrasing what I think I heard from you, but I think you're not taking the foot off the pedal in terms of rate. At the same time, you are achieving a ROE of about 20% new money rates would suggest upside there. So why is there a need to continue to aggressively push rate here? Is it that you worry about medical inflation, social inflation and once they rear there had they quickly impact margins?

Yaron Kinar:

Got it. And then we haven't heard in a while about the international book. Can you maybe give us a quick update there. Is it margin accretive, dilutive for the quarter for year-to-date? How growth patterns developing there?

Yaron Kinar:

Got it. If I could sneak one last one, if I may. On the property book in the loss picks there. assume those develop a bit faster than you see in the casualty line. So how long before you start updating those? Is it mostly frequency driven and we could see those start to move according to the actual frequency within a couple of quarters? Or does it take longer?

Yaron Kinar:

Okay. Thank you very much.

Operator:

And that concludes the question-and-answer session. I'd like to turn the call back over to Rob Berkley for any additional or closing remarks.

Operator:

This concludes today's presentation. Thank you for your participation, and you may now disconnect.

Robert Berkley:

Breanna, thank you very much and good afternoon, all. And again, welcome to our second quarter call. Along with me on this end of the phone, we also have our Executive Chairman, Bill Berkley, as well as Chief Financial Officer, Rich Baio. And we're going to follow our typical agenda where momentarily, I'm going to hand it over to Rich, who will walk us through some highlights from the quarter. I will follow up with a few observations after Rich makes his comments and then we will be opening it up for Q&A. Before I hand it over to Rich, a few comments from me. Based on everything, I can see -- it would look as though the stage is being set for what one might call yet another but-for quarter for the industry. It would seem as though cat losses don't make a difference. And bizarrely, from our perspective, people seem very quick to back out cat losses as though it's not real money. But ironically, they don't seem to back out the premium associated with the exposure that just had the losses. So again, from our perspective, it's no wonder why the industry struggles oftentimes to make good risk-adjusted returns. In order to do that, one needs to recognize the exposure taking on and not pretend that it doesn't exist, particularly when it occurs. Through our lens, we are in the capital management business. We are focused on risk-adjusted returns and around here, cat losses count. In our opinion, it is not Monopoly money. It is real money. And when we measure how we are doing, we do not back out cat losses. Perhaps we are a bit of an exception to the industry but ultimately, we think it is an economic reality and that's not something we shy away from. So with that, Rich, if you would, please.

Robert Berkley:

Rich, thank you very much. Very helpful. So look, I think the market continues to not operate in any type of lockstep where major lines, as we've discussed in the past, continue to somewhat march to the beat of their own drum. In addition to that, we continue to see the marketplace struggling with trying to strike the balance between rate need and keeping up with loss cost trend, on the other hand, a desire to grow. This is an industry where you can, practically speaking, grow as quickly as you want to. It really becomes a much more challenging exercise, though, when you were looking to achieve a certain loss ratio which will deliver a return that is acceptable in the end. For us, rate adequacy to support a reasonable loss ratio and deliver an acceptable return has, is and will remain a priority for us. I believe that this has been demonstrated over time through our results and, obviously, our continued focus on making sure that we are keeping up with trend comfortably. A couple of soundbites on the marketplace and major product lines. And I would hope it will dovetail in with some of Rich's comments and where we have been growing and parts of the marketplace that we find less attractive and we're playing a bit more defense. For starters, speaking of defense, I think public D&O within the professional line space is clearly a place that one needs to pause and tread carefully. We are seeing the pricing erode at a very rapid pace. Clearly, there has been good margin in the business but that seems to be whittling away quite quickly. As far as liability lines and maybe under the umbrella of social inflation, we continue, particularly in the auto space or especially commercial auto, to see great challenge. That's also spilling over into GL and, ultimately, umbrella. And what I mean by that is the plaintiffs' bar is very aggressive and they are taking a variety of new tactics. We think that we are able to keep up with it appropriately through terms, conditions, attachment points and, of course, pricing. But it is not lost on us that it is a challenging moment and requires one pay close attention. In addition to that, there is growing evidence that the tail associated with some of these product lines maybe extending a little bit, particularly on the claims -- excuse me, on the occurrence front and to a certain extent, on certain aspects of the claims made upfront. Property, I think it has finally come into focus what needed to happen as it relates to cat-exposed properties and that seems to be spilling over into the non-cat or risk property account where additional rate is required. The other piece that's worth mentioning, at least through, in my opinion, is Tier 2 cat which I would define as severe convective storm, wildfire, winter storm, etcetera. These are things that were a bit of an afterthought. And I think after the past several years, they are becoming much more front of mind. Last comment as it relates to market conditions would be workers' compensation, certainly a topic we have discussed on these calls in the past. There was a period of time during COVID, where clearly, there was a break that was caught on the frequency front for the industry. Frequency has returned to a more traditional norm but one of the things that we've been waiting for and we're starting to finally see rear its head is medical inflation. It is our expectation that you are going to see more medical inflation coming through to all payers, including the workers' comp space. And as a reminder, slightly over 50% of every claims dollar associated with workers' compensation stems from medical. So again, we can get into more details on that to the extent people are interested later on. Last comment on the marketplace. There continues to be this bifurcation between where the standard market, particularly national carriers, have an appetite. They seem to be very aggressive. But where they don't have an appetite, that is creating great opportunity for the specialty, in particular, the E&S space. The submission flow that we continue to see remains robust and we are very encouraged with what the balance of the year likely holds and beyond. And certainly, the early returns on July are positive. Rich talked about the top line. Obviously, we benefited from the rate increases that we continue to get, the ex comp rate increase during the quarter was 8.2% which was reasonably consistent with what we saw earlier this year. I think the loss ratio demonstrates, yet again, our strategy around how we manage exposure, how we have balance in the portfolio and how we think about risk and return. And certainly volatility is folded into that and, in our opinion, is a key component in building book value. As far as the expenses go, Rich touched on that as well. We remain very focused on making sure we're thoughtful about the dollars that we spend and there's nothing that leads us to believe that, that number won't remain comfortably below 30. And pivoting over to the investment portfolio, we remain -- we continue, I should say, excuse me, to be rewarded for the position that we took as it relates to duration. Obviously, as we've discussed in the past, we benefited in having less of an adverse impact on our book value as rates moved up. And in addition to that, we were able to put money to work at higher rates more quickly than many of our peers. The new money rate in the quarter was probably around 5.25%-plus and as you would gather, relative to the book yield at 4.2%, that would suggest we still have significant upside and that will come into focus over some period of time. Rich mentioned the duration at 2.3, I think it was at 2.4 last quarter. Just to clarify that, that was really as much as anything, just rounding. That having been said, we are paying close attention, as you would expect, for the window of opportunity; and when it presents itself, likely you'll see that duration start to push out again. So all things being equal, I think a very solid quarter for us on virtually every front. I think when you take into account the cat activity that the industry faced, we fared particularly well. And in spite of that, our ability to generate a 21% return, I think, is really a great positive and a tribute to our colleagues and to our strategy and how effectively they are executing. When the day is all done, the goal of the exercise is to build book value. There is no question that is the goal. Ultimately, it's when building book value, it is not just about the steps you take forward. It is also about the steps you take -- that you avoid taking backwards. So with that, Breanna, we'd be very pleased to open it up for questions. Thank you.

Elyse Greenspan:

My first question, Rob, is on the underlying combined ratio, the 87.6% in the quarter. I was just curious if there was anything one-off in that number. I know the last couple of quarters, we've seen some elevated non-cat fire losses that you guys have called out. Was there -- were there any similar losses in the quarter or anything within that 87.6% we think about the level of margin we could see in the balance of the year?

Elyse Greenspan:

And then in terms of the mix, right? So your rate ex comp in the quarter was 8.2, right? We can call that stable with the 8.3 last quarter. And I would have thought, like given we've heard of a lot of strength within property in the quarter that you might have seen the rates move up a little bit. Is that just a function of mix?

Elyse Greenspan:

And then one last one. The PYD, you guys said was favorable $3 million. I know you guys typically wait for the Q to give insurance versus reinsurance. But could you give us a sense of the magnitude in one segment versus the other?

Operator:

Your next question comes from Alex Scott with Goldman Sachs.

Robert Berkley:

The answer is because a lot of what you -- I was referencing and you just referenced are things that we have been anticipating. And when people have been asking us, why aren't you dropping your current accident year? Why aren't you dropping your loss ratios? Because there's a lot of uncertainty out there. So we feel very comfortable about where we sit at this stage. We revisit and look at our loss ratios by product line at a very granular level with some regularity, that being every 90 days. And we think we are in a good place to be able to absorb what we are seeing.

Robert Berkley:

Our E&S businesses, their submission flow is very robust. And again, we are -- there's nothing that leads us to believe that the market, by and large and the lines that I talked about is softening in any capacity. There's a lot of momentum out there not just in the property but in the liability, including pockets of professional. That's why I called out D&O, in particular, because that is a particularly challenged line. That's why I called out workers' comp. It has been very competitive for an extended period of time. But much of the rest of what we do, we are seeing very strong submission flow.

Mike Zaremski:

A follow-up on the question from Elyse in your comments about maybe about some non-cat property losses and you, Rob, used that comment, the metaphor about the pig through the python. So are you saying that some current year property losses led into the underlying -- this -- from last quarter to this quarter? Because I thought you used that term when we're talking about kind of a reserve tail.

Mike Zaremski:

Okay. Good. And so that makes sense. And just curious, lots of your competitors call out and helps us -- tell us non-cat property was 2 points higher or 2 points less than expected. But Berkley has a smaller property book than some of those competitors. So just curious, are non-cat property losses, is that many -- is that 10 points of your loss ratio? Or are we talking kind of normal, it would be a low active number of points from the loss ratio?

Mike Zaremski:

Okay. And a follow-up on -- you made some interesting comments on some growing evidence that the tail is elongating on occurrence but maybe also at claims made. Just curious if you can elaborate because when we look at -- I thought last time we looked at your -- the statutory pay to incurred loss ratios, we couldn't see that. And I also noticed you didn't give us an update, I don't know if you want to, on just how paid-to-incurred loss ratios are trending for you all.

Mike Zaremski:

Okay. And I guess lastly, we've obviously -- we and others value your insights. So when you're -- you've been talking a lot about medical inflation is brewing. In the CPI data, at least, it looks like it's inching higher but still looks a bit tame versus historic levels. Is this thesis kind of based on -- similar to what you just said about just talking with your folks on the front lines and understanding the macro and kind of you feel that there's going to be more inflation coming? Or are you actually seeing it? For example and I'll be quiet, Travelers commented today that the workers' comp inflation is still negative overall for them.

Operator:

Your next question comes from Josh Shanker with Bank of America.

Robert Berkley:

I think more people are starting to realize that they need to do something about rate. So I'm not going to comment specifically on other market participants. But whoever it is that you may be referring to, maybe they just recognize that they need more. And that's why they decided to put their foot harder down on the pedal. We had a view as to what we need and what rate adequacy is for some period of time and we feel comfortable where we were. It's consistent with where we -- what we believe we need today. So again, I think that we feel as though that we're in a pretty good place.

Robert Berkley:

Did you say poor results in the investment portfolio?

Robert Berkley:

Okay, yes. Okay, yes. Understood.

Robert Berkley:

Yes.

Robert Berkley:

Yes. Sure, Josh and thanks for the question. And if I keep it too high level, we're very happy to catch up offline. But ultimately, we look at the business today, we look at where things are going tomorrow. We want to make sure that we are well positioned from a capital perspective to have not just what we envision our need are but plus a cushion. And when the day is all done, to the extent that we have a surplus of capital beyond what we have today, plus -- beyond what we need today plus and see we need tomorrow plus a cushion, then we're going to think about what's the most efficient way and effective way and thoughtful way to return that to the people that it belongs to, that being the shareholders. Obviously, there are different tools that we can use to return that capital. Part of the analysis when we think about the returning of the capital is not just what do we think the value of the business is today and what is our view on what real book value is, we also think about what the earnings power of the business is for the foreseeable future. And then we make what I believe is a thoughtful decision, with all of that and a few other things taking into account the best way to return the value to the shareholders. So that's sort of a long story short. Do I believe that we are able to continue to grow the business at a pretty healthy pace? Yes, I do. Do I believe that we're going to be able to continue to generate very healthy returns? Yes, I do. Do I think we'll be able to do that with an eye towards risk-adjusted return and do it in a consistent way? That is certainly the expectation. So, if you want to get a bit more into the details, we can try and do that offline. But we are not going to just try and hold on to capital that we don't need. In addition to that, we're conscious of what the capital needs will be in the future and we're aware of the fact that certain rating agencies are reexamining potentially what their view is going to be and we have a view as to what that may mean for us.

Mark Hughes:

I appreciate the call. On the Reinsurance segment, your loss ratio was pretty low, hasn't been that low in a while. Is that just good experience in the quarter? Or is this maybe the impact of cumulative rate increases over the last few years?

Mark Hughes:

And then in the GL line, you had a nice acceleration sequentially back up into double-digit growth. You'd mentioned the challenges around the plaintiffs' bar and the inflation but you seem to be enthusiastic. Any additional commentary about what you're seeing in GL?

Mark Hughes:

And then finally, the casualty re was down, presumably a judgment on your view on -- again, on the plaintiffs' bar. But is that something you'd probably likely to shy away from here in the foreseeable future?

Operator:

Your next question comes from Ryan Tunis with Autonomous Research.

Robert Berkley:

Yes. Look, we're pleased with how the business is performing, Ryan. We're not going to get into a whole lot of minutia around that. But we think that the various businesses that make up that segment have positioned themselves well and they're reaping the benefits from it. And we think that it's likely that for the foreseeable future, that we'll continue to see good performance. That having been said, as I mentioned a few moments ago, there was some positive development; and that came out of one of the operations in that segment which was helpful.

Robert Berkley:

When you look at the group, we're a bit of a bouquet. And there are certain parts of this group that are growing very rapidly. So for example, many of our E&S businesses are growing at a very healthy pace, to say the least. And there are other parts of the organization that are growing as well. But we're believers in underwriting discipline. And as you can see in the release, there are parts of the business that are growing quite quickly, perhaps in keeping with your comment relative to some others. And there are parts where we're just going to be more disciplined. So you would have taken note that workers' compensation, we are concerned about how competitive that marketplace is. And even with the growth in payrolls that we've seen, we are -- I would suggest in somewhat of a defensive mode. A similar story when it comes to professional liability and we're kind of scratching our head around public D&O. If you want to talk about the reinsurance, obviously, the casualty reinsurance is down a little bit and the monoline excess is up incrementally. So I think that -- and I can appreciate why people might look for a broader brush but we're looking at our business and we're looking at each part of the market that we participate in with a very fine brush. And we are trying to make sure we make good decisions in every pocket. And when you add up all the pieces, this is where it came out. Do I think that there is opportunity for there to be pockets of further momentum? Yes, absolutely. But I think that when push comes to shove, that's just the reality of when you put all the pieces together, this is where it came out.

Robert Berkley:

It's not a big growth area for us these days. There were moments in time where we found it to be very attractive. And then to your point, we saw a lot of people coming into the space. And again, we have the underwriting discipline that we're not going to do foolish things. So have we ever been a giant player in the space? No, we're careful and selective and we're conscious of how to manage the systemic exposure that comes along with that product line. But clearly, cyber has become a more competitive market and we have a view as to what an accurate rate is and appropriate terms and conditions. And we will draw the line in the sand and stay on the right side of it.

David Motemaden:

So I had just a question on these fire losses. Just had a question just in terms of how far along we are in fixing that and specifically how many more quarters would you expect this to really have an impact on results?

David Motemaden:

Got it. And then I guess, I'm assuming that the shift in mix, just sort of excluding the fire losses, the shift in mix would mean that something in the neighborhood of the loss ratio ex cat, ex reserve development is somewhat of a sustainable level just given the mix shift is obviously enduring. Is that the right way to think about it?

David Motemaden:

Yes. So looking at the 59.5% accident year loss ratio ex cat, you cited mix as a sign as to why one of the reasons why that was at that level and it deteriorated a bit year-over-year. Obviously, in addition to the fire losses. Is that something -- just given the mix is obviously a more sustainable change, is that something we should expect around that level for the remainder of the year?

David Motemaden:

Got it. And then maybe just a follow-up. Obviously, not a big impact on the entire book with the $3 million of favorable reserve development. But you guys have been on top of the 2019 and prior casualty lines. Can you just talk about any changes you may have made to those lines for those years in the second quarter and how you feel about your reserving position there going forward?

David Motemaden:

Got it. And then maybe if I could just sneak one more in, just on that last point, the more recent years. I know you had mentioned on the last call that you guys have been measured in terms of how quickly you recognize the progress from 2020 onwards and that could have implications for how you think about loss picks as you make your way through 2023 and into next year. Have you updated this view at all? This most recent quarter, just thinking about some of the comments you made about lengthening tails on occurrence and claims-made form [ph].

Operator:

Your next question comes from Yaron Kinar with Jefferies.

Robert Berkley:

Putting aside the property piece, to your point, I would say the leading contributor to the question you're raising is mix of business

Robert Berkley:

Some of them do and some of them are -- hold on, I'm just pulling out a couple of papers. Why don't we, as opposed to me fumbling through our papers, why don't we catch up offline?

Robert Berkley:

If we backed out? I'm not sure I understand the question, sorry. What would the 87 be without what?

Robert Berkley:

Right.

Robert Berkley:

Well, we don't really spend a lot of time doing that because we don't fool ourselves that cat losses don't count.

Brian Meredith:

So Rob, just curious, property reinsurance, huge growth in the quarter. Is that you all leaning into the cat reinsurance market? Or is there something else going on there?

Brian Meredith:

Good. That's helpful. Second question, I'm just curious, Rob, you talked a little bit about pricing. You talked about D&O being challenging and some pressures you're seeing in commercial auto. I wonder if you can kind of bifurcate a little bit in what you're seeing kind of large commercial and then as you work your way down middle and small. Is it more competitive kind of in the excess liability for larger companies? And as you get down less, any differentiation?

Brian Meredith:

Got you. And I'll just throw one more in here. I'm wondering if maybe you can characterize your primary commercial property book. When you write commercial properties, is that cat-exposed stuff? Is that regular homeowners? What exactly are we looking at when you're seeing that growth in your commercial property book?

Operator:

Your next question comes from Meyer Shields with KBW.

Robert Berkley:

So it is -- as far as medical malpractice, I would separate that as to -- that's a different issue. But as far as the medical costs go, as far as what is the Band-Aid cost today versus what does it cost yesterday for an injured worker, our expectation is that, that is clearly on the rise. Are you going to see it in other product lines? Yes but to a much lesser extent because when you think about a claims dollar, medical plays a far more significant role with workers' comp than any other product line that we're in.

Robert Berkley:

I think we're just trying to give people guidance for the long run. And ultimately, our expense ratio can, at any moment in time, be adversely impacted by investments that we are making, whether that be in technology or whether that be in a new business that we are starting that's early on or in its infancy. So I think we're just trying to give people guidance as to what they should be expecting going forward longer term.

Robert Berkley:

Are we talking specifically about -- are you referring to the public D&O?

Robert Berkley:

Yes. There's nothing that we're seeing as of now that would suggest that it's bottoming out, or let alone, pivoting.

Scott Heleniak:

The first question I had was just on the investment funds. You had a loss there in the quarter. And I'm just curious if you have changed any allocations there? Or just any kind of update on what's going on there in the strategy for that -- for the second half of the year and into 2024, if there's any change in that thinking.

Scott Heleniak:

Okay. Were those marks significant then for the quarter for the alts? Is there a number that you had on there?

Scott Heleniak:

Yes. Okay, got you. And then, just one more question. You mentioned there'll be a window of opportunity to deploy capital into higher-yielding securities in your durations at 2.3 years now and I'm just wondering if we might be getting close to that window of opportunity and how you see that playing out as well.

Operator:

Your next question comes from Josh Shanker with Bank of America.

Robert Berkley:

Josh, I think that was a pretty good prediction on your part as to the quality of the answer, at least that you'd get from me. But why don't I hand it over to our Chairman, who also moonlight as our Head of repurchase.

Operator:

There are no further questions at this time. Rob, I will turn the call back over to you.

Operator:

This concludes today's conference call. You may now disconnect.

Robert Berkley:

Emma, thank you very much, and good afternoon to all participants. Thank you for finding time to join us this afternoon. Co-hosting with me today is Bill Berkley, Executive Chairman, as well as Rich Baio, Executive Vice President and Chief Financial Officer. We are going to follow our typical agenda, where momentarily I'll be handing it over to Rich. He's going to run through some of the financial highlights from the quarter. Once he gets through his comments, he'll be handling it back to me. I will follow-up with a few of my own observations, and then the three of us will be available for Q&A to answer any questions people may have. So with that, Rich, if you would, please.

Robert Berkley:

Rich, thanks very much. That was great. So let me provide a couple of observations through my lens. And then, again, as promised, we'll open it up for Q&A. So, upon reflection, certainly one of the things that we chat quite a bit about on our end of the phone is this, taking note of how clearly the cycle remains alive and well and the emotions and that drive the behaviors remain very much intact. But we continue to take note of a fact how major product lines, while they are still subject to the cyclical behavior, the fact of the matter is, they are clearly not in lockstep at all. And we've talked about this in the past, but it seems to be becoming more and more pronounced. So to that end, just a snapshot on how we're thinking about property. Clearly in, what I would suggest is, early stages of meaningful firming. From our perspective, it is a little bit disappointing as to the momentum that we saw on the insurance side when it comes to property in January. We saw a little bit more momentum in February. And quite frankly, March, we started to see real progress in April. I think there was meaningful traction as far as rate goes. While it perhaps is a little bit more pronounced or extreme on the CAT side, I would tell you these comments apply to non-CAT or risk exposure as well. Professional liability on the other hand, clearly, it's a very broad category and it is a mixed bag. I think on the miscellaneous D&O front, particularly written on an E&S basis, there is still great opportunity and we are making meaningful hay there. On the other hand, the D&O marketplace, particularly large account D&O, I would tell you for some number of quarters and it continues to be in the state of free fall as far as rate adequacy or pricing, if you will, and it is concerning to us. In addition to that, though a smaller line than D&O, I would tell you hospital professional liability is another product line where it's in desperate need of some discipline returning to the marketplace. Moving away from professional on to the topic of casualty. I would tell you that it seems from our perspective, there is also meaningful opportunity there, particularly in the E&S lines on the primary front and the excess front, particularly large accounts becoming more challenging. Clearly, a similar situation on the auto classes as well. Where Excess is becoming a bit more competitive and the primary there is competition but not as bad. I think the industry needs to be very careful with the professional casualty and auto, in particular, because they are notably susceptible to social inflation. And from our perspective, while there are signs that economic inflation is cooling a little bit from the heights that it reached, social inflation. There's really no sign or indication that we see that coming at all. Moving on to comp. Clearly continues to bounce along the bottom. One observation there historically or at least oftentimes California has lagged the rest of the market as far as where it stood in the cycle. There is some evidence that California is actually ahead of the rest of the market and showing potential signs of firming. Finally, reinsurance, I think there was a lot of excitement and discussion around affirming reinsurance market. Certainly from our perspective, the reinsurance market, particularly around property and property CAT has gained a meaningful level of additional discipline relative to where it's been in past years. That having been said, the casualty, somewhat disciplined and there are certain parts of the professional marketplace that had given us reason to pause. As we are just not seeing the ceding commissions coming down, even though we are seeing the pricing of the underlying erode. Pivoting over to us, a couple of sound bites, I think as Rich suggested, 17.4% return, great way to start the year in our opinion. The top line was impacted by what I would refer to as strong or excellent cycle management by our colleagues as we are deemphasizing certain product lines and leaning into other product lines. Just as a reminder, our priority is the bottom line. We are focused on building book value through a lens that we refer to as risk adjusted return. And we applaud the discipline and opportunistic approach that our colleagues operate with. On the topic of rate as we were touching earlier, clearly the rate was quite strong in the quarter, which we were pleased to see. The 8.3% ex-comp is the strongest that we've seen on the rate front since this time last year or same time last year. Additionally, I would mention that the renewal retention ratio still is hanging in there around 80%, which as we've mentioned in the past, we think it's an important data point, because it reminds us that we are not churning the book, but it actually the rate we are getting is sticking, we are not changing the quality or integrity of the book, important thing again. I guess finally just on the 8.3%, I think by any measure, we are comfortably outpacing trend. And I think it is likely that you will see that coming through in our loss ratios over time. Even with the CAT activity, the 90.6% combined, I think is quite attractive. If you're [about] (ph) four person, which I am not, it would have been an 87.7%. Obviously, the difference, as Rich alluded to and you would have picked up in the release was two things. One, obviously, the CATs that we had during the period, which equated to approximately 1.9 points and then we had a point of negative development. Now before anyone gets too carried away with the negative development, it was essentially driven by property and property CAT losses that happened during the fourth quarter. And as people will recall, some of that CAT activity happened late in the fourth quarter, and we just didn't have our arms fully around it. So please don't misconstrue the development for being something different than it really is. Paid loss ratio, 48 and changed. I think people will presumably continue to take note of the delta between the paid versus what we are booking the loss ratio to. We get questions from time to time, given how well the paid loss ratio has been running relative what we -- the loss ratio picks that we are carrying, when are those going to converge? And I would tell you that, it's coming. In my opinion, I think there's a reality for the industry and we are not completely insulated from it. 2016 through 2019 was a challenging period of time. I think that we have been cautious and measured as to how quickly we want to recognize the progress that was made 2020 and more recent than that. But I think that's coming. I think it's going to come more into focus as we make our way through this year into next year and likely we'll have implications for the lost picks that we are carrying in the more recent years and also how we think about current year lost picks. Rich touched on the expense ratio, the 28.8%. As he suggested, partly driven by new business initiatives, partly driven by some investments that we are making, particularly on the technology front. And finally some shifts that we are making on the reinsurance as he alluded to. The [seed] (ph) on something proportional or quota share, obviously, is very different than an [XOL] (ph). And while we are very keen for our reinsurance partners to make a reasonable return, we are unaccepting of being inappropriately gouged and we will use our flexibility as appropriate. Pivoting over -- excuse me, to the investment portfolio. Without a doubt, a lot of momentum there. I think we've discussed it in some detail in the past. You can kind of see it coming our way. I think there is more opportunity from here. The duration of 2.4 years, I think we are looking opportunistically to nudge that out. I don't think we're going to move the needle dramatically overnight, but certainly our hope is that there will be windows of opportunity to nudge that out a little bit. The book yield at 3.8% is notably below where the new money rate is. So our best guesstimate that a new money rate today is sort of between 4.25%, 4.5%. So you can do the math as to the upside there. Rich touched on the funds. We had a little bit of noise in the quarter, not a complete surprise. By and large, it was stemming from some private equity funds that we participate in. We feel like we have clarity around it and it is our expectation that going forward funds performance more likely than not will turn to sort of that range of between $20 million and $50 million a quarter. So long story short, 17.4% return, combined ratio of a 90.6% with some CAT activity, both in the quarter and a bit spilling over from Q4 2022. Rate increases, robust as effort. And of course, the new money rate, 50 basis points plus upside relative to the book yield, I think all those things put together are very encouraging. To the extent you're [indiscernible] person, which I am not again 87.7% would deliver you a 20% plus return. So I think that was more than enough from me. Why don't we, Emma, go ahead and open it up for Q&A, please.

Robert Berkley :

Hi, Mike. Good afternoon.

Robert Berkley:

Well, as far as comp goes, Rich, correct me if I'm wrong. I think we were kind of flattish. I think we went from $303 million in the quarter to $310 million, which isn't a large uptick. That having been said, I would tell you it's mainly payrolls. Certainly, we're getting a little bit of traction from our new initiative in California. But what would be driving it more than anything else would be. I think we all have an appreciation for where a wage inflation has been going as of late. And we're picking that up, whether it be in initially or coming through in the audits afterwards. Rich. Am I correct on that?

Mike Zaremski:

Okay. My bad. I think I looked at [still] (ph) number. So I'll do my best to ask a better follow-up question. So, on the investment portfolio, we've gotten a lot of questions about commercial real estate. Clearly, W. R. Berkley has an excellent track record, but any stats you want to offer additional color on Berkley’s commercial real estate portfolio, such as maybe LTVs or anything you think we be thinking about that could be helpful?

Mike Zaremski:

Okay. And lastly, I guess, looking at you're -- thinking about your prepared remarks, it -- when looking at the growth rate trend, it feels like there's a number of puts and takes. I mean, it sounds like guarded optimism. Any help in kind of think of the top line.

Mike Zaremski:

Thank you.

Elyse Greenspan:

Hi. Thanks. Good evening. My first question, can you just provide a little bit more color on what drove the accident year ex-CAT loss ratio, deterioration, and insurance? And how should we think about the balance of the year, given your design ratio concept?

Elyse Greenspan:

And how large were the non-CAT property losses? Or is that the sole driver of the year over year deterioration in the underlying loss ratio and insurance?

Elyse Greenspan:

Okay. And then, following up, I guess, on the growth question. It sounds like you expect growth to pick up in the second half of the year. You guys used to talk about double digit growth, and I recognize there's a lot of moving pieces. If everything plays out the way that you expect, Rob, I mean, do you think you'd be back to seeing double digit growth in the back half of the year?

Elyse Greenspan:

Thanks. And one last quick one. Am I right in assuming that the adverse development, the property CAT that, that all was in your insurance segment in the quarter?

Richard Baio :

Yes. For the most part.

Richard Baio :

Right.

Operator:

Your next question comes from the line of Josh Shanker with Bank of America. Your line is now open.

Josh Shanker :

Good evening and good afternoon. At the risk of speaking on behalf of the [indiscernible] people, I was wondering -- look, if we go to the last cycle, obviously, things are never the same. But at the end of 2004, 2005, 2006, I don't know when you want to put the end of the last cycle, it turned out that pricing was so adequate that although some people pulled back, you really had another healthy five, maybe longer, years to write stuff that was very attractive. And maybe the less learned was that we should have been more aggressive. I don't know, maybe that wasn't the lesson learned, and there was a lot of opportunity even as pricing cooled off. We have from, I guess, the 2019 through 2021, 2022 cycle, pricing has cooled off. And it looks like maybe there will be some property [indiscernible] but things have changed really, really quickly. Where I'm going with this is, has the industry changed that you're always going to be following the loss costs that everything has gotten more technical and more advanced in a way that there's not a extended period of excess pricing where the insurance companies are allowed to flex their muscles a little bit and gain mixes earnings? Or are you as a company and the industry is always going to be tied to the pricing and the loss trend, such that it's going to be tight going into the years to come, if that makes any sense?

Josh Shanker :

And so -- yes, I mean -- here's where I'm going. The growth wasn't -- with obviously single digits, you're only get back to double digits. You have the best pricing ex workers' comp that you've had in a number of cores at 8.3%. It doesn't feel like with 8.3% that you're so excited to lean into it just yet. Even though you're saying, look, you're going to see that margin come through in the next few quarters, if it were at 8.3%, I would think that you feel pretty good about things, and we'd already be at the double digit. I'm not telling you how to run your business, but it just seems like that you're already cautious about that.

Josh Shanker:

All right. I appreciate the fulsome answers. If there is time I may more akin questions, but I’ll let somebody have a chance. Thank you.

Operator:

Your next question comes from the line of Ryan Tunis with Autonomous Research. Your line is now open.

Ryan Tunis:

Hey, good evening, Rob. So yes the first question, I guess, you mentioned that the property losses again hit you quarter and you seem to have your hands around that issue. But are you expecting potentially losses to stay elevated there for the time being, like as you're fixing that book or...

Ryan Tunis:

Got it. And then on the expense ratio, it was [sub-29] (ph). I heard Rich say you expect it to be sub-30 for the rest of the year. Is that just sort of a generic comment or can you try to say the expense ratio tick up from here?