W.R. Berkley Corporation

Ladies and gentlemen, thank you for joining us and welcome to the W.R. Berkeley Corporation First Quarter 2026 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 press star 1 to raise your hand. To withdraw your question, please press star 1 again. 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, 2025, 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 Berkeley. Please go ahead, sir.

Alexander, thank you very much, and good afternoon to all. Thank you for finding time in your calendars to join us. My colleagues and I, we appreciate your interest in the company. So speaking of colleagues, joining me on this end of the phone, we also have Executive Chairman Bill Berkley, as well as Group Chief Financial Officer Rich Bale. We're going to follow a similar path to what we have used in the past, where I'm going to offer a few more quick comments. then Rich is going to provide us a summary on the quarter. I will follow behind with a few additional thoughts, and then we will be very pleased to take your questions and the conversation in any direction you wish to take it. Before I do hand it over to Rich, just a couple of observations for me, perhaps a bit stating the obvious. One is let there be no confusion. This continues to be very much a cyclical industry. As we've discussed in the past, the cycle is driven by two human emotions, greed and fear. And without a doubt, these days, it would seem as though the fear is fading and the greed is fully percolating in many of the corners of the marketplace today. One of the things that we've talked about in the past couple of quarters is where is some of this competition coming from or much of this competition coming from? We've talked about MGAs and MGUs, delegated authority, a lot of that capacity coming from a variety of different sources, in particular the reinsurance market, as well as we talked about Lloyd's as a marketplace, providing a lot of capacity to delegated authority. One of the things that we've taken note of over the past 90 days or so is a notable shift in the appetite of the standard market, in particular national carriers, who seem to be broadening their appetite and having reached a new level of, I would suggest, competitive nature that we haven't seen in some number of years, though it tends to be focused in certain pockets. A couple other comments on the marketplace, focusing on the reinsurance market for a moment. I think no surprise, property and property cap within the reinsurance space It has been more and more competitive. We're not surprised with it directionally, but we have been taken aback a bit by the pace of change and how that level of competition has really taken hold at an accelerating pace. In addition to that, the casualty market or the liability market within the reinsurance space never seemed to have gotten much of the bounce that we saw in the property market. Nevertheless, it remains very competitive. And we remain... concerned for the health and well-being of that marketplace over time. As there is more competition in the property market, that will undoubtedly, at least history would suggest, create more irrational behavior that will be plentiful in both the property cap market as well as the liability market. Couple of thoughts on the insurance marketplace. Speaking of property and how it can turn into a marketplace that quickly erodes. We are definitely seeing that particularly with cat exposed a property on the insurance side. GL and umbrella I would suggest are areas where rate is still available with good reason. Professional as we've talked about in the past continues to be a mixed bag. DNO remains one that we are very focused on and seems to be continuing to flirt with the bottom. On the other hand, EPLI in certain jurisdictions is an area from our perspective to be very cautious. I would call out California, particularly Southern California, as one that we are paying close attention to. Speaking of California, as it relates to workers' compensation, we've talked about in the past and we remain convinced that California this time around is out in front of much of the broader workers' comp market. And without a doubt, all eyes remain on the WCIRB and what is to come in the not-too-distant future. And at the possibility of, I guess, finishing on a bit of a low note, I guess auto would continue to be an area of great concern from our perspective. It's unclear to us that the marketplace has really wrapped their head around loss-cost trend and what action needs to be taken. The punchline, before I hand it over to Rich, is that at the intersection of a cyclical industry, a focus on risk-adjusted return undoubtedly is a concept that we subscribe to and hopefully others do, known as cycle management. The good news for us as we exercise cycle management is The decoupling of product lines as to where they are in the cycle combined with the breadth of our offering allows us to be more resilient than many of our peers that have a narrower offering. So why don't I pause there and speaking of resilience, Rich, over to you, please.

Great. Thanks, Rob. Good afternoon, everyone. First quarter marked an excellent start to 2026 with record net investment income and strong underwriting profits, contributing to a return on beginning of year stockholders' equity of 21.2%. Net income for the quarter was $515 million, or $1.31 per share, while record operating income was $514 million, or $1.30 per share. Other drivers benefiting the quarter compared to the prior year included lower catastrophe losses and an improved effective tax rate. Starting with underwriting performance, current accident year combined ratio excluding CAT losses was 88.3% and the calendar year combined ratio was 90.7%. The difference was current accident year CAT losses of 2.4 loss ratio points or $76 million compared with the prior year of $111 million or 3.7 loss ratio points. Unlike last year, which was heavily influenced by California wildfires in the first quarter. This year, the industry experienced significant winter storm activity occurring in January and February. The current accident year loss ratio XCATS for 2026, 59.7% compared with 59.4% for the prior year, which reflects a shift in business mix as we look to maximize profitability. The insurance segment's current accident year loss ratio, XCAT, increased 10 basis points to 60.9%, while the reinsurance and monoline excess segment increased to 51.1%. The expense ratio of 28.6% is comparable to the recent sequential quarters and reflects a small impact from the decline in net premiums earned from the reinsurance and monoline excess segment. We continue to believe that the 2026 expense ratio will be comfortably below 30%, barring any material changes in the marketplace. On top line production, despite heightened competition in certain pockets of the market, the insurance segment grew gross premiums written by 4.5% to $3.4 billion, and net premiums written by 3.2% to $2.8 billion. As you can see from the supplemental information on page seven of the earnings release, net premiums written grew in all lines of business apart from workers' compensation. The reinsurance and monoline excess segment reported net premiums written of $395 million, reflecting decreases in property and casualty lines of business. Net investment income increased 12.2% to a record $404 million, driven by growth in the core portfolio of 11.8% to $354 million, and an increase in investment fund income of 46.3% to $40 million. As a reminder, we report the investment funds on a one-quarter lag, and an average quarterly range for investment fund income is 10 to $20 million. We expect that strong operating cash flow of $668 million in the current quarter should continue to contribute to the growth in that investment income. The duration of our fixed maturity portfolio, including cash and cash equivalents, increased during the quarter to 3.1 years, which remains below the average life of our insurance reserves. The credit quality of the investment portfolio continues to improve to a very strong AA minus. The effective tax rate in the first quarter was lower than our normalized run rate of 23% plus or minus which is usually attributable to higher taxes on foreign earnings and the ability to utilize such foreign tax credits. In the current quarter, we reflected a net non-recurring tax benefit reducing our effective tax rate from 22.8% to 16.3% as reported. We expect the remainder of 2026 will return to our normalized run rate. During the quarter, we repurchased approximately 4.5 million common shares amounting to $302 million and paid regular dividends of $34 million. Stockholders' equity increased to approximately $9.75 billion despite the significant capital management. In summary, another positive quarter with meaningful growth in earnings and 21% plus return on beginning equity. Rob, I'll turn it back to you.