W.R. Berkley Corporation

Ladies and gentlemen, thank you for joining us and welcome to the WR Berkeley Corporation fourth quarter and full year 2025 earnings call. This conference call is being recorded. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. 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 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 Berkley. Please go ahead, sir.

Kevin, thank you very much, and good afternoon all. And let me echo Kevin's welcome to our fourth quarter call, and we appreciate everyone finding the time to tune in and certainly are grateful for your interest in the company. On this end of the call, you also, in addition to me, you have Rich Baio and Bill Berkley. And we are going to be following our typical pattern as we have in the past. I'm going to offer a couple of quick sound bites, and we're going to hand it over to Rich. He's going to do the heavy lift as far as walking us through some highlights on the quarter and the year. Then I will trail behind him with a few more sound bites. And then, of course, we're very pleased to entertain questions. Before we get rolling here, though, it seems like perhaps The most appropriate place to start would be with a few words of gratitude. Those of you that have had an opportunity to review the release and certainly as you hear Rich's comments, I think it will come into sharp focus that 2025 was yet another great year for the company. As I've shared with some in the past, these type of outcomes, they don't happen on their own. They happen because people make it happen. People go above and beyond to achieve a goal. And I just wanted to express my gratitude and a heartfelt congratulations to approximately 7,600 people that all come together to really deliver a great outcome for the good not only of our shareholders but to all stakeholders that we serve. So, again, thank you and congratulations. A couple of macro observations, not particularly insightful, but perhaps it will invite some conversation a little bit later on. Number one is I think it is clear as day that the world is moving at an ever increasing pace. The world is becoming ever more complicated. And in my mind, and I think the minds of many others, is the simple question whether this industry is going to be able to keep up with that pace of change. We are not an industry that has been able to embrace change. In fact, I think the industry has really struggled with change over generations. but the challenges before us. Clearly one of the areas that is creating some of the greatest challenge and is driving this trajectory of change to be so steep and the velocity to be so significant is technology. And the tip of that spear without a doubt these days is AI. There's a lot of discussion around AI and what it means for the industry. Much of the conversation appropriately is focused on the adoption. How will the industry adopt these tools? What will it mean from an operational perspective? And these are certainly questions that we are grappling with actively, and we are well on our way to be utilizing many of these tools throughout our organization. But from our perspective, that's not the only question. One also needs to be grappling with the question of what does this mean for us as underwriters? How do we think about these new technologies and the impact they're having on society, the impact that they're having on our insureds, what it means for risk, and our ability to fully understand that risk so we can control it, select it, and price for it? We as an organization are particularly well situated or quite frankly built for this type of change. We have the best of both worlds. We have the scale to be able to participate at any level. At the same time, because of our structure, we have the agility to be able to pivot quickly. And in addition to that, we have the benefit of not putting all of our chips on red or black. In fact, we have 60 different incubators where we're able to experiment, learn, and then cross-pollinate. Another area of great change is the topic of distribution. There is no doubt that customers are changing, customers' priorities are changing. But in addition to that, the relationship between traditional distribution and carriers is without a doubt evolving. Once upon a time, it was a very simple, straightforward relationship. One was the factory, the other was the distributor. But today, traditional partners, traditional distribution oftentimes is not just a partner, but is actually a competitor. Furthermore, we are actively looking at changes, as I mentioned a moment ago, in the behaviors of customers. Customers are much more comfortable with a self-serve model. And it is becoming increasingly clear that convenience is more important to many customers than price. Please do not misunderstand my comments. We are very committed to our partners. At the same time, it is not lost on us that the customer is queen or king, and that we as an organization are gonna do what we need to do to meet them where, when, and how they wish to be met. Let me move on to a couple of comments about the marketplace more specifically. Let me start with the ugly. Auto liability is something that we have been talking about, I don't know, Richie, it's got to be a couple of years at this stage. It continues to be a challenge. And from my perspective, while we did speak about possibly seeing some green shoots, I guess it would have been early in 25, that proved to be a mirage. As it's turned out, the market has continued to find new lows, and our hope is as we make our way towards the end of 26, we find a bottom. In addition to that, I think last quarter, perhaps the quarter before, but certainly last quarter, we talked about large account property, particularly shared and layered. I would suggest to you that this market is a feeding frenzy at this stage, and furthermore, I would tell you that London, particularly Lloyds, is perhaps the hotspot for the speeding frenzy. On the topic of property reinsurance, maybe a little forward-looking because it relates to 1.1. A data point for you all as it relates to our property tax treaties, our main treaty, our risk-adjusted rate decrease was 19%. From my perspective, I think that speaks volumes to the challenges in the market and perhaps what will be waterfalling and making the marketplace more competitive. Let me also suggest that we are seeing early signs that the competitiveness in the property cat market would seem to be spilling over into the casualty market. I think many participants are struggling. quite frankly, with getting to their premium targets on the property front, and as a result of that, are trying to lean into the casualty to try and hit their top line. The big difference is the property cap market had a bounce a couple of years ago, so they are starting from a different altitude. Casualty never really had that bounce. Moving over to professional, as we've talked about in the past, D&O remains a challenge. And I would add A&E architects and engineers. Some of the brighter spots, because it is not all doom and gloom, I would suggest is the casualty market. In particular, I would tell you that the smaller end of town and the excess and umbrella market are both offering opportunity for meaningful rate. E&S also stands out, but there is clearly opportunity in the standard market as well. I would also flag within the A&H space, medical stop loss continues to be an attractive place from our perspective. Berkeley One, our private client operation, continues to see great opportunity to grow as they continue to be a preferred alternative for the marketplace. And finally, last but not least, what we've been talking about for some extended period of time, workers' compensation. While it is not rosy at this stage, there are early signs that are coming into focus that perhaps participants in the California market are starting to come to grips with reality and that there is some early signs of a backbone reemerging. So I went on a lot longer than I promised, but that's not the first time that's happened. But that's just because after they listen to you, Rich, they all tune out. I got it off my chest and wanted to go ahead and run with it, please. Okay.

Great. Thanks, Rob. Good evening, everyone. As Rob mentioned, the fourth quarter closed out an outstanding 2025 full year with record quarterly operating earnings of $450 million for $1.13 per share, growing 9.5% over the prior year with a 21.4% return on beginning of year equity. Net income of $450 million, or $1.13 per share, also resulted in a 21.4% return on beginning of year equity. Record quarterly prepax underwriting income and strong net investment income from our core portfolio contributed to the excellent quarterly results. Beginning first with our underwriting performance, continued rate improvement, lower catastrophe losses, and prudent expense management, resulted in record quarterly pre-tax underwriting income of $338 million, an improvement of 14.9% over the prior year. Current accident year CAT losses in the current quarter declined to $48 million, or 1.5 loss ratio points. The expense ratio improved to 28.2%, driven by record net premiums earned of $3.2 billion, as well as operational efficiencies arising from investments in technology, business process outsourcing, and a non-recurring benefit for commission-related accruals. We expect that our expense ratio will continue to be comfortably below 30% in 2026, barring a meaningful change in the marketplace. The current accident year loss ratio excluding caps for the quarter was 59.7%, slightly better than the two preceding sequential quarters. the shift from one quarter to the next is largely driven by each operating unit's contribution to the whole, which is influenced by where we may be growing or pulling back based on market conditions. In sum, the current accident year combined ratio X caps is 87.9%, and the calendar year combined ratio is 89.4%. By segment, current accident year loss ratio X caps for insurance improved to 60.6%, and remained relatively flat to the full year results for 2024 and 2025. The reinsurance and monoline excess segment was 53.9%, resulting in a strong current accident year combined ratio XCAS of 83%. Strong operating cash flows of nearly $1 billion for the quarter and $3.6 billion for the full year have contributed to the increase in our invested assets, which grew 11.4% during 2025 to $33.2 billion, reaching a record level. The combination of investable assets like cash and short-term assets, as well as the roll-off of fixed maturities at book yields below the new money rate, positions us well for future growth in net investment income. This improvement was evident in our investment income attributable to the fixed maturity portfolio, which grew 13.3%, quarter over quarter to $346 million. Partially offsetting this growth in the fourth quarter of 2025 was investment fund losses of $32 million, bringing our overall pre-tax net investment income to $338 million. The credit quality of the investment portfolio remained very strong at a AA-, while the duration of our fixed maturity portfolio, including cash and cash equivalents, increased to three years. As a reminder, the duration was 2.6 years as of year-end 2024 and has been increasing throughout 2025, yet remains shorter than the average life of our liabilities. The effective tax rate in the fourth quarter was 20.5% and benefited from a lower effective tax rate relating to foreign earnings and the utilization of foreign tax credits. We expect the annual expected effective tax rate will approximate 23% for the full year of 2026. Turning to capital management, we returned $608 million of capital to investors in the fourth quarter, comprising special and regular dividends of $412 million and share repurchases of $196 million. Earlier in the year, we returned an additional $363 million made up of dividends and share repurchases bringing a total for the year to $971 million. Besides returning more than 10% of stockholders' equity to investors, we grew stockholders' equity by 15.6%. We continue to thoughtfully manage our capital position, which is further evident by our historically low financial leverage ratio of 22.6%, with the next scheduled maturity in 2037. In summary, 2025 was an outstanding year with record top line, both gross and net premiums written of $15.1 billion and $12.7 billion, respectively, underwriting income of $1.2 billion, net investment income of $1.4 billion, operating income of $1.7 billion, and net income of $1.8 billion. These record results culminated in growth in book value per share, before and after dividends, and share repurchases of 26.7% and 16.4% respectively. Rob, I'll stop there and pass it back to you.