W. R. Berkley(US:WRB)2023-04-21 00:56Financial Data and Key Metrics Changes - The company reported an annualized return on equity of 17.4% for Q1 2023, despite significant catastrophe losses [7] - Stockholders' equity grew to a record level of over $6.9 billion, with book value per share increasing by 3.7% in the quarter [8] - Net investment income increased by almost 29% to $223 million, driven by a higher new money rate on fixed maturity securities [9] - The current accident year combined ratio excluding catastrophes was a strong 87.7%, while the calendar year loss ratio for Q1 2023 was 61.8% [7][11] Business Line Data and Key Metrics Changes - Net premiums written grew by almost 7% to approximately $2.6 billion, with the insurance segment growing 6.6% to $2.2 billion [13] - Underwriting income was $234 million, which included current accident year catastrophe losses of $48 million [11] - The Reinsurance & Monoline Excess segment increased 7.1% to $363 million, achieving record levels for the segment [13] Market Data and Key Metrics Changes - The company noted that the property market is in early stages of meaningful firming, with significant traction in rate observed in April [15] - The D&O marketplace continues to face challenges, particularly in large account D&O, which remains in a state of decline [16] - The casualty market shows meaningful opportunities, especially in E&S lines, although social inflation remains a concern [17] Company Strategy and Development Direction - The company is focused on building book value through a risk-adjusted return lens, emphasizing bottom-line growth [19] - The management is taking a disciplined approach to underwriting, avoiding exposure to inadequate pricing in the D&O market [41] - The company is looking to opportunistically expand its investment portfolio, particularly in commercial real estate, while being cautious of market challenges [65] Management's Comments on Operating Environment and Future Outlook - Management expressed guarded optimism about growth picking up in the second half of the year, with expectations of returning to double-digit growth [40][42] - The company is addressing non-CAT property losses through improved selection and rate adjustments [86] - Concerns about social inflation and its impact on claims remain a focus for management, with a commitment to maintaining appropriate premium levels [78] Other Important Information - The company returned almost $300 million of capital to shareholders through dividends and share repurchases, resulting in a growth in book value per share before dividends and repurchases of 7.2% [8] - The investment portfolio's short duration of 2.4 years and high credit quality helped mitigate unrealized investment losses [8] Q&A Session Summary Question: What drove the premium growth changes, particularly in workers' compensation? - Management noted that the growth in workers' compensation was primarily driven by payroll increases and some traction from new initiatives in California [29] Question: Can you provide additional color on Berkley's commercial real estate portfolio? - Management indicated that much of the commercial real estate is unleveraged, with a focus on occupancy rates and tenant credit quality [31] Question: What drove the accident year ex-CAT loss ratio deterioration? - The primary driver was non-CAT property-related losses, which management is actively addressing [38] Question: Do you expect to see double-digit growth in the back half of the year? - Management expressed a desire to return to double-digit growth, contingent on market conditions stabilizing [40] Question: How are you addressing non-CAT property losses? - Management emphasized that both rate adjustments and improved selection are key strategies to address these losses [86]