W.R. Berkley Corporation

Good day and welcome to WR Berkeley Corporation's fourth quarter and full year 2024 earnings conference call. Today's 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, believe, expect, or estimate. 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 ended December 31, 2023, 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.

Lisa, thank you very much, and good afternoon, all. And let me echo Lisa's welcome to our fourth quarter call. So as in the past, we have Bill Berkley, Executive Chairman, joining on this end, along with Rich Baio, Chief Financial Officer. And we're going to follow our typical agenda. where shortly I'm going to hand it over to Rich. He's going to walk us through some highlights. I'm going to then follow up with a few quick comments on my end, and then we'll be very happy to take the conversation in any direction that participants wish to take it. Before I do hand it over to Rich, just a very quick comment, really not just on behalf of myself, on behalf of all of my colleagues, expressing our concern for all who have been impacted not just by the recent events in California and these horrific fires, but also we shouldn't forget about the many people that were terribly impacted during the 2024 year as a result of hurricanes and other events. From our perspective, it is certainly a moment for the industry to demonstrate its value to society. I know that my colleagues and I are very focused on ensuring that we as an organization do what we are supposed to do to live up to our responsibilities and certainly our hope that our peers at other organizations will be doing the same. So with that, I will hand it over to Rich. Rich, if you want to run us through the highlights, and then we'll take it from there.

Great. Thanks, Rob. Appreciate it. Good evening, everyone. The 2024 full year closed out with record top line and bottom line results. yielding return on equity of 23.6% and operating return on equity of 22.4%. The fourth quarter record operating earnings increased 15.5% to $453 million or $1.13 per share with an operating return on equity of 24.3%. Net income represented our second best quarter, increasing 45% to $576 million or $1.44 per share with return on equity of 30.9%. The key drivers behind the quarter were strong underwriting results combined with a continuation of growth in our core investment portfolio. Starting with underwriting performance, our current accident year combined ratio before CAT losses of 2.6 loss ratio points was 87.7%, consistent with the full year 2024. The calendar year combined ratio was 90.2%, resulting in $294 million of underwriting income, bringing the full year 2024 to 90.3%, and a record underwriting income of more than $1.1 billion. The prior year development was favorable by $1.6 million in the quarter. Drilling down further into the component parts, the current accident year loss ratio, x caps, was 59.2%, which ticked up slightly from the prior year due to business mix and remains flat to the full years 2024 and 2023. Cat loss has increased over the prior year, primarily due to Hurricane Milton, driving the increase quarter over quarter of 1.4 loss ratio points. The expense ratio of 28.4% was flat to the prior year quarter, continuing to benefit from record net premiums earned of more than $3 billion and initiatives driving technological and operational efficiencies throughout the business. We believe 2025 will reflect an expense ratio comfortably below 30%. The full year 2024 marked another record year on top line. The growth in net premiums written grew 9.6% and 9.3% respectively. In the fourth quarter, the insurance segment's net premiums written increased 9.9% to more than $2.6 billion with growth in all lines of business. The reinsurance and monoline excess segment grew in property and monoline excess with a decrease in casualty due to the competitive pricing environment. Moving on to investments, the core portfolio increased 9.4% to $313 million. We do expect the core portfolio to continue to grow over the fourth quarter 2024 in the foreseeable future, due to higher new money rates compared with the roll-off book yields and growth in the size of the investment portfolio. Our record operating cash flow from 2024 of almost $3.7 billion followed the year before the operating cash flow of $2.9 billion, which was also a record, and has enabled us to invest more while maintaining the high credit quality of AA-. In addition, We've increased our investment duration from 2.4 years to 2.6 years in the quarter. And at the end of 2024, we had cash and cash equivalents of almost $2 billion. Net investment gains were primarily driven by favorable market value movements in common and preferred equity securities. Investments in the energy and certain financial services sectors led to $163 million unrealized gains. The effective tax rate of 21% in the quarter benefited from the utilization of some foreign valuation allowances established against operating loss carry forwards and true-up adjustments for prior periods. This brings our full-year effective tax rate to 22.5%, and we expect 2025 will be 23% plus or minus. As it relates to capital, the stockholders' equity increased 12.6% to $8.4 billion, primarily due to record net income of $1.8 billion, partially offset by the return of capital to shareholders of $836 million through dividends and share repurchases. In the fourth quarter, we paid regular and special dividends of $220 million and repurchased $67 million in shares. Our after-tax unrealized investment loss is $517 million as of year-end 2024 an improvement of $69 million from the prior year. And finally, book value per share before repurchases and dividends grew 23.5% for the full year. Rob, I'll turn it back to you.