W.R. Berkley Corporation

Ladies and gentlemen, good day and welcome to WR Berkeley Corporation's second quarter 2025 earnings conference call. Today's conference 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, beliefs, 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 ended December 31 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, sir.

Abby, thank you very much, and thank you to all participants for your time today and your interest in the company. In addition to myself, you also have our Executive Chairman, Bill Berkley, on the call, as well as Rich Baio, our Chief Financial Officer. We're going to follow our typical agenda where momentarily I'll be handing it over to Rich. He'll run us through some highlights from the quarter. He'll then pass it back to me. I'll offer a few more sound bites, and then we look forward to taking people's questions and, for that matter, taking the conversation in any direction participants wish to take it. Before I do hand it over to Rich, perhaps just stating the obvious, it is very much an interesting moment in the property and casualty space. We are reminded of the complications of this industry, an industry where you make a sale before you ultimately truly know your costs of goods sold. We have been grappling with this reality as an industry forever. But there are moments in time when it comes into sharper focus than others. We certainly over the past several years have had to grapple with financial or economic inflation, and that was combined with social inflation, which we have talked about and I suspect we'll continue to talk about. But while on the heels of COVID, financial or economic inflation seems to be brought far more under control, There are some real threats to that. Certainly, tariffs are top of mind for all of us. In addition to that, one should not lose sight of what's going on in the labor market and what that may mean for wage inflation over time, particularly around some of the administration policies that they are in the process of putting into place. And finally, there's the big question around deficits. and what that will ultimately mean for the economy. And lastly, to what extent can we expect the U.S. consumer to continue to be the driver and allow the economy to remain as resilient as it's been? These are amongst some of the macro questions that we are grappling with. Obviously, there's applicability to both our underwriting activities and how we think about selecting and pricing risk. And furthermore, I think it goes without saying there's meaningful applicability to the investment portfolio and how we think about positioning that. So as always, lots of moving pieces, trying to not just interpret what they all mean for today, but also how we think about positioning the business going forward. So let me pause there and hand it over to Rich, and I will follow him with a few more sound bites.

Rich, over to you, please. Great. Thanks, Rob. The second quarter marked a continuation of strong performance in both underwriting income and net investment income. Net income per diluted share increased 8.7% over the prior year to $1 per share, or $401 million, with an annualized return on beginning of year equity of 19.1%. The definition of operating earnings commencing with this quarter has been changed to exclude after-tax foreign currency gains and losses. Accordingly, operating earnings were $420 million, or $1.05 per share, yielding an annualized return on beginning-of-year equity of 20%. Starting with underwriting performance, our current accident year combined ratio before CAT losses of 3.2 loss ratio points was 88.4%, comprised of an accident year loss ratio excluding caps of 59.9% and expense ratio of 28.5%. The calendar year combined ratio was 91.6%, resulting in $261 million of underwriting income. CAT losses were $99 million in the second quarter of 2025, compared with $90 million or a 3.2 loss ratio points in the prior year's quarter. While the industry saw an above average frequency of severe storms, the point impact of CAT losses on our combined ratio remained flat, even as the dollar amount of losses marginally increased with the growth in our property book of business over the prior year. Drilling down further, the insurance segment's quarterly accident year loss ratio, XCAT, was relatively flat year over year and sequentially at 60.7%, bringing the accident year combined ratio before CATs to 89%. The reinsurance and monoline excess segments accident year loss ratio ex-CATs increased to 54.1%, with a strong accident year combined ratio before CATs of 83.8%. The expense ratio overall was flat at 28.5% and continued to benefit from the growth in net premiums earned, which was a quarterly record of $3.1 billion. In addition, net premiums written increased to a record $3.4 billion in the quarter with growth in all lines of business in both segments. Record net investment income of $379 million benefited from the ongoing growth in the invested assets from strong operating cash flow and new money rates on fixed maturity securities that remain comfortably above our average book yield. Investment income from fixed maturity securities including Argentine inflation-linked securities, improved 16.5% year-over-year, with an increase in book yield of 20 basis points to 4.7%. Our investment funds performed above our expected quarterly range of $10 to $20 million, with strong results of $27 million driven by transportation, infrastructure, and financial services sectors. The 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 2.8 years. Foreign currency losses in the quarter are $55 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 $69 million. The effective tax rate was 23.2% in the quarter, which is in line with our expectations for the full year of 2025. The rate exceeds the U.S. statutory rate of 21% due to taxes on foreign earnings at higher rates and state income taxes. Stockholders' equity increased by more than $380 million, or 4.3% over the first quarter of 2025, to a record $9.3 billion. After-tax unrealized investment losses improved by $120 million to a balance of $249 million as of June 30, 2025. From a capital management perspective, we paid ordinary and special dividends of $224 million in the quarter, bringing our growth in book value per share before dividends to 6.8% in the quarter and 14.3% on a year-to-date basis. Our balance sheet remains strong with cash and cash equivalents of more than $2 billion and historically low financial leverage of 23.4%. So in summary, another great quarter with exceptional risk adjusted returns and excellent underwriting and investment performance. Rob, with that, I'll turn it back to you.