W.R. Berkley Corporation

And welcome to WR Berkeley Corporation's first quarter 2023 earnings conference call. Today's conference call is being recorded. The speaker's remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words, including without limitation, believes, expects, or estimates. We caution you that for such forward-looking statements, Such forward-looking statements should not be regarded as a representation by us that the future plans, estimates, or expectations contemplated by us will in fact be achieved. Please refer to our annual report on Form 10-K for the year ended December 31st, 2022, and our other filings made with the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. WR Berkeley Corporation is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise. I would now like to turn the call over to Mr. Rob Berkley. Please go ahead, sir.

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.

Thanks, Rob. Appreciate it. The company is off to a strong start with the first quarter of 2023, despite the significant catastrophe losses facing the industry. Our scale, specialization and disciplined management approach positioned us well to report an annualized return on equity of 17.4%. Contributions to this performance was reflected in both underwriting and investment income. The current exiting year combined ratio excluding catastrophes was a strong 87.7%, and investment income approached the record level achieved in the fourth quarter of 2022, driven by significant growth in our core portfolio investment income of more than 80%. The balance sheet also strengthened with stockholders' equity growing to a record level of more than $6.9 billion and book value per share increasing 3.7% in the quarter. The company returned almost $300 million of capital to shareholders through regular and special dividends, as well as share repurchases, resulting in growth in book value per share before dividends and repurchases of 7.2%. The short duration and the fixed maturity investment portfolio of 2.4 years and high credit quality of AA- benefited unrealized investment losses by approximately $181 million. Continuing on investment performance, net investment income increased almost 29% to $223 million. The income attributable to the core portfolio substantially increased due to a higher new money rate on fixed maturity securities compared to the roll-off of existing investments. In addition, strong operating cash flow of approximately $445 million in the quarter increased our investable assets and will further contribute to growth in net investment income. The book yield has increased from 3.6% in the fourth quarter of 2022 to 3.8% in the current quarter on fixed maturity securities. The investment funds reflected income of $2 million for the quarter, primarily arising from declines in market value in the financial services and consumer goods sectors, partially offset by income from transportation and energy funds. Pre-tax net investment gains reflected an increase of $43 million in unrealized gains on equity securities, bringing our total unrealized gains to approximately $114 million on the balance sheet. Equity investments in the technology sector drove the quarterly improvement. Partially offsetting these unrealized equity gains were losses recognized of approximately $21 million. Turning to underwriting results, Underwriting income was $234 million which included current accident year catastrophe losses of $48 million or 1.9 loss ratio points and prior accident year unfavorable development of $24 million or one loss ratio point principally from property catastrophe losses. Winter storms impacted both the current quarter and carried over from late loss activity in the fourth quarter of last year. This compares with catastrophe losses in the first quarter of 2022 in the amount of $29 million or 1.3 loss ratio points. The calendar year loss ratio for first quarter of 2023 was 61.8% and the current accident year loss ratio excluding catastrophe losses was 58.9%. The growth in net premiums earned of almost 11% continues to benefit the expense ratio. However, a number of factors are causing the expense ratio to increase a half a point to 28.8%. First, the change in our reinsurance over the last year has lowered our seating commissions on certain treaties where we've moved from proportional covers to excess of loss and or reduced our quota share percent ceded to reinsurance partners. In addition, increased compensation costs and new startup operating unit expenses are contributing to the higher expense ratio. we still expect our expense ratio to be comfortably below 30% as communicated on our fourth quarter call. Wrapping up with premium production, net premiums written grew by almost 7% to approximately $2.6 billion. The insurance segment grew 6.6% to $2.2 billion. And as you saw in the supplemental information on page seven of the earnings release, all lines of business improved with the exception of professional liability. the reinsurance and monoline excess segment increased 7.1% to $363 million, a record level for the segment with growth in all lines of business. And with that, I'll turn it back to you, Rob.