W.R. Berkley Corporation

Good day and welcome to WR Berkeley Corporation's first quarter 2025 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 such forward-looking statements statements should not be regarded as a representation by us that the future plans, estimates, or expectations contemplated by us will be in fact be achieved. Please refer to our annual report on Form 10-K for the year ended December 31st, 2024 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. W.R. 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 Berkeley. Please go ahead.

Krista, thank you very much and good afternoon, good evening all. Thanks for dialing in and let me echo Krista's warm welcome to our Q1 call. So in addition to me on this end of the phone, you also have Executive Chairman Bill Berkley as well as Principal Financial Officer Rich Baio. We're going to follow our typical agenda where momentarily I'll be handing it over to Rich. He's going to run you all through some of the highlights from the quarter. I will follow behind him with a couple of additional observations, and then we'll be very pleased to open it up for Q&A. Before I hand it over to Rich, maybe just a sound bite or two from me, perhaps stating the obvious or not perhaps actually stating the obvious. I think the world is chock-a-block full of volatility these days, these weeks, these months, and perhaps this year and maybe beyond. seems to be presenting itself in a variety of different ways, political, social, economic, and certainly natural catastrophes as well. But it is without a doubt a moment where the realities of risk adjusted return come into very sharp focus. And from our perspective, it applies to both of the business activities that we participate in, that being underwriting and investing. The resilience of our business model was once again demonstrated over the first quarter, and we feel as though it is another example of how this organization is not just built to perform well during moments where there is a tailwind or smooth seas, but in fact it is built to continue to excel or succeed during more challenging environment circumstances. From our perspective, it's very important to not lose sight of the goal of the exercise. The goal is to create value. And in our opinion, it's not just about the steps forward you take, it's also about the steps backwards that you avoid. So as we talk about the quarter, There is going to be no but fours. There is going to be no lipstick on the pig or any other analogy. We're going to talk about what the results were with TAD activity and with a variety of other events and how we managed to navigate through it. It is the reality, again, that when it comes to value creation and the power of compounding and what that means for value creation, avoiding steps backwards is very consequential. So with that, I will hand it over to Rich. Rich, if you want to run us through the highlights, please. And I apologize every now and then if you hear a cough or a sneeze here in the Northeast, it is very much peak allergy season.

Richie, over to you. Great. Thanks, Rob. Appreciate it. Good evening, everyone. As you saw, the company started 2025 with a strong first quarter, reporting net income of $418 million, or $1.04 per share, and an annualized return on beginning of year equity of 19.9%. Despite significant industry-wide catastrophic activity led by the California wildfires, we continue to demonstrate stability in underwriting earnings and continued growth in net investment income. Operating earnings were $405 million or $1.01 per share, yielding an annualized return on beginning of year equity of 19.3%. The calendar year combined ratio was 90.9% and the current accident year combined ratio excluding CAT losses was 87.2%. The driver for this difference was CAT losses of 3.7 loss ratio points or $111 million representing an above average cat quarter primarily attributable to the California wildfires. Carrier development was favorable in the current quarter by approximately $1 million with small offsets between segments. Accordingly, the current accident year loss ratio excluding cats was 59.4%, representing a 30 basis point increase over the prior year, largely due to business mix. The expense ratio of 27.8% continues to benefit from the growth in net premiums earned, which grew to a record $3 billion. In addition, the 80 basis point improvement over the prior year quarter includes a non-recurring compensation-related benefit of approximately half of this amount. We believe the expense ratio should be comfortably below 30% for the full year as we continue to invest. in our newer operating units and make investments in our infrastructure. As it relates to premium production, the company grew net premiums written to a record of more than $3.1 billion. The insurance segment grew 10.2% to our second best quarter of $2.7 billion with growth in all lines of business. The reinsurance and monoline excess segment grew 8.2% to a record quarter of $439 million with growth in property and excess workers' compensation partially offset by a small decrease in casualty. Turning to investments, net investment income increased 12.6% to $360 million. The improvement is primarily attributable to two items. First, our record net invested assets of $30.7 billion and higher new money rates on our growing fixed maturity portfolio. along with strong operating cash flows in the quarter of $744 million. And second, higher investment fund income arising from transportation and financial services related sectors. As a reminder, we report investment funds on a one-quarter lag, and with the recent volatility seen in the equity markets, you may expect some correlation between public and private equity markets. Accordingly, we anticipate investment fund income may be at the lower end of our quarterly range of $10 to $20 million in the next quarter. The credit quality of our portfolio remains very strong at a AA-, with a duration on our fixed maturity portfolio, including cash and cash equivalents, increasing from the fourth quarter of 2.6 years to the current quarter of 2.7 years. Foreign currency losses in the quarter of $19 million related to the weakening U.S. dollar relative to most other currencies. Offsetting this income statement loss is an improvement in the currency translation loss in stockholders' equity of $24 million. The effective tax rate was 22.5% in the quarter, and we continue to expect 2025 will be 23% plus or minus. Stockholders' equity increased by more than $500 million or 6.2% over the beginning of year to a record $8.9 billion. Book value per share before dividends and share repurchases grew 7.1% in the quarter. And our balance sheet remains strong with cash and cash equivalents of more than $1.9 billion and financial leverage of 24.2%, the lowest level in decades with no debt maturities until 2037. Rob, with that, I'll turn it back to you.