W.R. Berkley Corporation

Good day and welcome to WR Berkeley Corporation's second quarter 2024 earnings conference call. Today's conference call is being recorded. The speaker's remarks may contain forward-looking statements, some of which forward-looking statements can be identified by the use of forward-looking words, including without limitation, believes, expects, or estimates. We caution you that 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 ending December 31, 2023, and our other filings made within the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. W.R. Berkeley's 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.

Christa, 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 a 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 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 a 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. Of course. Thanks, Rob. Good evening, everyone. The company continues to perform well with the second quarter annualized return on beginning of year equity of 20% on a net income basis and 22.4% on an operating earnings basis. References to per share information in my comments and the earnings release have been adjusted for the three-for-two common stock split affected on July 10th. Operating income increased approximately 35% to $418 million, or $1.04 per share, driven by strong underwriting and investment income. Growth of 11.2% in net premiums written to a record $3.1 billion represents the first time above $3 billion for a quarter, and provides the opportunity for continued record-setting net premiums earned beyond this quarter. The U.S. dollar strengthens to many foreign currencies in the quarter, adversely impacting the growth rate by approximately 90 basis points, and accordingly would have been 12.1% excluding the foreign currency impact. We grew in both segments of our business, led by the insurance segment with 12.2% growth, unadjusted for foreign currency. and the reinsurance and monoline excess segment increased 3.5% led by property. Pre-tax underwriting income was $254 million, which included $90 million of catastrophe losses or 3.2 loss ratio points. Heightened catastrophe events during the quarter led to the increase in CAT losses of 1.1 loss ratio points over the prior year quarter, well below what we would expect will impact the industry. Our careful and prudent management of CAT risks has continued to result in stability in earnings. Our accident year loss ratio excluding CATs is a 59.4%, slightly below the prior year's 59.5%. The prior year accident development was favorable by $1 million, combined with the previously mentioned CAT losses brings our calendar year loss ratio to 62.6%. The expense ratio increased 40 basis points to 28.5%, primarily due to higher commissions from business mix and is relatively flat to the sequential quarter. We remain confident with our guidance that the expense ratio should be comfortably below 30%. Record pre-tax net investment income increased almost 52% to $372 million. The fixed maturity securities continue to drive results quarter over quarter, with an increase of more than $100 million. In addition, net investment income from investment funds improved to $25 million in the quarter. The record operating cash flow through the first six months of $1.6 billion combined with the ability to reinvest the roll off of existing securities at higher yields should continue to drive growth in net investment income quarter over quarter for the foreseeable future. The credit quality of the investment portfolio and duration remains at a double A minus and two and a half years for the quarter. The effective tax rate was 23.7% and will likely remain at this level throughout the remainder of the year due to the contribution of foreign earnings taxed at rates greater than the U.S. statutory rate of 21%. Turning to capital management, the company returned total capital of $381 million consisting of $224 million of share repurchases, $127 million of special dividends, and $30 million of regular dividends. Stockholders' equity increased 4.2% from the beginning of the year to $7.8 billion, while book value per share of $20.42 grew 5.4% over the same period. Book value per share before share repurchases and dividends grew 4.7% in the quarter and 9.7% on a year-to-date basis. With that, Rob, I'll turn it back to you.