W. R. Berkley Corporation Stock

Ladies and gentlemen, thank you for joining us, and welcome to the W. R. Berkley Corporation Third Quarter 2026 Earnings Call. This conference call is being recorded. [Operator Instructions]

The speakers' 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 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 with our 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. Berkley 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.

Christine, thank you very much, and good afternoon to all. Welcome to our Q3 call. Thank you very much for your time. Thank you for your interest in the company. Along with me on this end of the phone, you also have Rich Baio, our Chief Financial Officer. And we are going to follow our typical agenda where I'm going to offer a couple of very brief macro observations, and I'm going to hand it over to Rich to do the heavy lift, and he'll walk through highlights from the quarter, and I will trail behind him with a few more observations on our quarter, and then we'll be pleased to open it up for Q&A.

So before Rich runs with it, I think those without saying it was another strong quarter for us. But that's not really where I wanted to focus my comments at the moment. We can get to that in a few minutes. I really wanted to spend a bit of time just taking a moment to acknowledge the pace of change. And we see a great deal of change certainly in the industry, but we are seeing a great deal of change in society overall. The trajectory of that change is steep. The velocity is increasing. And before we get into the details of how the technologies that are driving this are being adopted by us. Maybe more macro, it's something that we are looking at as to how society is evolving and the risks that we are potentially taking on how they are changing. Fundamentally, our value proposition to society is helping it manage risk and our value proposition to capital is, yes, accepting that risk from society, but doing it in a controlled manner.

From our perspective, we are seeing a variety of the parts of the economy that face a great deal of risk evolving considerably. There has been a lot of discussion around autonomous vehicles. What does that mean for private passenger auto, what does that mean equally for commercial auto, and what will the consequences of that be. How will those risks remain within the auto space? How will they potentially be shifting over to product's liability and other parts of liability.

In addition to that, we can all see it coming, AI, and in particular, its relationship with robotics. What will that mean for the workers' comp lines, and how will that unfold? These are the types of questions that we and presumably others are actively grappling with and trying to make sure that we are not just thinking about them for how we position ourselves going forward, but ensuring that we have the knowledge and the expertise to underwrite and accept these risks in a thoughtful and controlled manner.

In addition to that, technology, obviously, isn't driving the broader economy, but it's even having an impact on the sleepy insurance industry, and how we operate. Fortunately, for us, as an organization, my colleagues many, many years ago, recognized the importance of data, and how that role was going to become ever more greater. We have been on a data journey for many, many years at this stage. And fortunately, for us, we are reasonably well positioned as we see many of the technology tools that are being brought to bear AI related, in particular, data is the fuel that drives those engines.

When we think about some of these tools and how we are utilizing them, we are finding ways to apply them to a variety of activities within our organization as we have discussed in the past. At this stage, the advantages are primarily coming or rearing their head in a manner that some might equate to speed. We are able to intake and respond in a more speedy manner than we could in the past. This certainly applies to the underwriting activities as well as the claims front. That having been said, while we are making our way well up that mountain, the next mountain that is before us is not just the benefits of speed but the insights that we will be enjoying or further insights that we'll be enjoying as it relates to decision-making.

From our perspective, this without a doubt, already is a competitive advantage and will continue to become an increasing competitive advantage for us. So maybe to put a little bit more data around that. Some of the activity that we are doing on the intake side is allowing us to become more efficient to the tune of 20% plus, and we're also seeing opportunities on the claims front as we have flagged with some of you in the past. While we are a specialty writer and much of our claims activity is highly complicated. At the same time, more than 50% of our claims are settling for $5,000 or less which would invite the idea that we should be able to have a lower and lower human touch when it comes to this. So long story short, I understand that we are here to discuss the quarter. Rich is going to lead us through that part of the discussion momentarily. But given the world that is changing at an ever-increasing pace, I thought it was worth noting our efforts to make sure that we are appropriately keeping up with that in both how we engage with the marketplace, how we think about Lyft, and how we operate day to day.

So with that, Richard, if you would, please.

Of course. Thanks, Rob. Appreciate it. And good evening, everyone. Our strong results in the third quarter were driven from both underwriting and investment performance, contributing to an annualized operating return on equity of 18.8% for the quarter and over 20% year-to-date. Record third quarter underwriting profit of $296 million, combined with double-digit growth in the core investment portfolio resulted in operating earnings of $456 million or $1.17 per share.

Drilling down first into underwriting income, the current accident year loss ratio, excluding catastrophe losses, improved 40 basis points to 59.5%, along with a relatively flat expense ratio of 28.6%, brought our accident year combined ratio ex cats to 88.1%. Pretax current accident year cat losses were $86 million or 2.7 loss ratio points. Despite almost twice the number of storm events named by PCS quarter-over-quarter, our cap losses only increased $7 million or 20 basis points. That brings our calendar year combined ratio to 90.8% in the current quarter. Both of our segments reported terrific underwriting results in the third quarter.

The insurance segment's current accident year combined ratio ex cats of 88.3%, improved 1 point over the prior year, representing growth in the pretax underwriting income of 10.6% to $238 million. The improvement was primarily attributable to changes in the mix between our 60 businesses and improved non-cat property losses. As it relates to premium production, the insurance segment's gross and net premiums written grew 4.9% to a third quarter record of $3.6 billion and 3.2% to a third quarter record of $2.9 billion, respectively.

Our reinsurance and monoline Access segment reported a very strong current accident year combined ratio ex cats of 86.9%, resulting in pretax underwriting income of $58 million. As the reinsurance market remains competitive, we've been steadfast in maintaining our underwriting discipline. Accordingly, you will take note that the segment's net premiums written declined 11.6% to $369 million, driven by casualty and to a lesser extent, property.

Turning to investments. Pretax net investment income increased to $384 million in the current quarter, driven by growth in the core portfolio was 12%. Income from fixed maturity securities increased 10.3% over the prior year's quarter attributable to both higher domestic yields and a larger base of invested assets. Income from investment funds was $2 million and as shared during prior calls, can be inconsistent quarter-to-quarter. On average, we expect each quarter to generate between $10 million to $20 million. And as seen year-to-date, we're above the high end of that range.

On the duration of invested assets, it has increased to 3.3 years at the end of the third quarter with a very strong credit quality of AA- remaining below the average life of our insurance reserves. And finally, as of September 30, 2026, stockholders' equity was more than $9.6 billion, relatively flat to year-end 2025, reflecting significant capital return to shareholders was $729 million year-to-date and an increase in unrealized losses on investments of $800 million due to rising interest rates. We generally hold our fixed maturity securities until they mature and as such, expect the unrealized loss on investments to reverse favorably into stockholders' equity.

Rob, with that, I'll turn it back to you.

Rich, thanks. Anthony, here are we on time. I don't like to use up all the time with me [ blabbing, ] 5:15. Okay, good. Okay, so just following on Rich's comments, a couple of observations. First off, the comment that people would have perhaps picked up in the release under the highlights as well, ex comp -- the rate popped back up a little bit to the 4%. Also would offer the observation that the renewal retention ratio, it just doesn't move. It's sitting at 80%. So hopefully, that gives people insight that the book is not churning, so to speak.

A couple of other observations and if people had a chance to flip through the release, you would have seen on Page 7, going through a couple of the different product lines there. The other liability, yes, it's up just shy of 4%. People might say, "Oh, well, they're just churning it with the rate that would be not the right view. Actually, there's a bit of a shift that's going on there, 2 smaller accounts. That's by design. No surprise. There tends to be a bit more competition with larger accounts. We like the margin in the smaller accounts, and we have the platform to be able to handle it efficiently. Shorter tail, we lump a lot in there, and that could be confusing as well. Included in that is commercial property, which is down considerably.

On the other hand, we are pleased with the continued growth that we're seeing in our private client business on the personal lines front as well as our A&H business. On the auto front, again, you may be scratching your head looking at the 5%. Please understand the exposure is coming off at this moment at a reasonable healthy rate. So speaking of the rate increases that we're taking are a multiple of that with our determination and commitment to keep up with trend.

Comp, I would -- the only thing I would call out there is we are pleased to see the bottoming out and incremental firming in California. The rest of the nation is still trying to keep up, but they are lagging professional liability, as we've talked a little bit about in the past, D&O is in the process of bottoming out. That having been said, there are several pockets within the professional space that we find very attractive. And no, I'm not going to go into the detail of where we find things attractive Rich touched on the reinsurance front. I guess there's no point in crying any further over the spilt milk. But when the day is all done, as you have heard us we've talked about for some number of quarters now, a dissatisfaction with market conditions within casualty reinsurance, and property, quite frankly, we are waiting with bated breath not in a happy way to see what happens at 1/1 and what will follow. And that in all likelihood will prove to be a challenging time. A little bit on the forward-looking front, so taking advantage of the safe harbor from as best as we can tell, we think the insurance business is going to be able to continue to grow all in on the unforeseen event at mid-single digits or better. And we think the reinsurance business is likely going to continue to shrink for the foreseeable at a 10% rate, somewhere between 10% and 20%, and that's fine with us. That's just the realities of the business, and we accept that.

Rich touched on the expense ratio. I would tell you that I think we sit in a pretty attractive place. The utilization of technology along with other disciplines that we are employing, I think, are helping us manage that. I would tell you that given the amount of business that we produce through the wholesale channel and the acquisition costs associated with that. I think it speaks well to the work that my colleagues, in particular, have done to manage the expenses. So on the underwriting front, from my perspective, it was basically right down the middle and exactly what we would have anticipated I would tell you that if you looked out, at least through our lens, some of the shorter tail lines, property, in particular, over the coming quarters and perhaps next couple of years. Will prove to be particularly challenging. And as we've discussed in the past, the liability lines tend to have more staying power, at least based on our historical experience.

Quickly shifting over to the investment portfolio. We did have a little bit of noise in the funds as perhaps people had taken note Rich touched on that as well. Our expectation, as we flagged the sort of $10 million to $15 million a quarter. It was a little shy due to that. We can get into more detail what people want later on, but we expect it to return towards a more typical historic norm. I think the only other piece that is worth flagging, and we've talked about in the past as it relates to the investment portfolio, but I do want to pull it back to the center of the radar screens here is the domestic fixed income portfolio, which is where the growth has been, and it continues to be as it relates to our overall portfolio. The domestic portfolio sits at just inside of $24 billion, Richie. Is that correct? And today, it has a book yield of about 4.7-or-so percent.

Our new money rate today is probably between 80 and 100 basis points above that. In addition to that, you would have taken note that, yes, the duration nudged out incrementally from 3.2 to 3.3. But life of our loss reserves is just a hair inside of 4 years. So we have lots of room, and we will be thoughtfully taking advantage of that room to push out the duration and capture the yield environment. In addition to that, this is a data point as far as how the portfolio rolls over. The portfolio every year role shortens, if it's just -- if you don't do anything, this left to its own devices, mats every year it shortens by this thief the year. So the point is that the combination of how we've managed duration in addition to how the portfolio rolls over, we are particularly well positioned capitalize on the rate environment that we see before us today, and we have every intention of continuing to do that.

So that's sort of the state of play. I think we can pause there. Rich, did you have anything else you want to flag, and we can open it up for Q&A, please.

[Operator Instructions] Your first question comes from the line of Rob Cox with Goldman Sachs.

So I wanted to go back to some of the comments you made last quarter around potentially revisiting recently favorable claim trends just based off of the comments from Rich there, it seems like the underlying loss ratio improved a good amount this quarter. So I'm just curious if you could share with us any further detail on the core loss ratio, and maybe if you have any early insights into how you're thinking about the design loss ratios for next year?

So as you can appreciate, it's something that we are looking at very regularly and continuing to reflect and refine as we see appropriate I would tell you that as far as trend goes with auto and auto-related being perhaps the exception by and large, other product lines, we are seeing trends, again, early days starting to quiet down a little bit. So it would be premature to declare victory at this stage, but aside from the auto line, we are seeing signs that the steepness of that trajectory is perhaps abating somewhat or certainly not becoming ever more steep. So that's something, Rob, that we're taking into account. To the extent that we are in a position to give you some math to put to that comment, not really at this stage. That having been said, we'll have to see how it unfolds. As far as the specifics in the quarter, it was a combination of non-cat property on the risk front running well. Thanks to the thoughtfulness of our colleagues and their discipline. And also we are gaining, as I just alluded to in some of the more recent years, a bit of incremental comfort on some of the liability lines.

Got it. That's super helpful. And then I just had a follow-up on reinsurance. You guys are exercising cycle management there. Can you just talk about the ROEs you think are embedded in some of the business that you're passing on? And just any general way to think about rate adequacy, especially from a property perspective.

Well, I think that at 1/1, it's going to be very telling around the property front. So there's not a huge amount of visibility at this stage. We're going to have to see what comes of it. Certainly, we are hearing commentary that people are expecting rates using a very broad brush to be off between 10% and 20%. So that certainly takes a lot of the fun out of it for many people. That having been said, for us as an organization, we buy more reinsurance than we sell. So we have a pretty good hedge on that front. But we'll have to see how it unfolds.

Your next question comes from the line of Elyse Greenspan with Wells Fargo.

In the past, you were talking about that you guys would probably in insurance, right, give up some on price for growth, right? In the quarter, right, you said price got marginally better, and it sounds like you guys are guiding, right, for premium growth, that's kind of more or less consistent with the second quarter, right? I am sorry, with the third quarter, you said mid-single digit from here. So as anything [indiscernible] you around giving up price and growth changed?

I missed the second part of that. This -- can you repeat the last sentence, what, Elyse?

I just wanted to know if anything related to your view about price. Sorry, I wanted to know if anything related to your view around price and growth [indiscernible] has changed since last quarter.

No. The answer is that we look at it with a very, very fine come. And from our perspective, we're looking at the rate need by product line, by territory. And as far as the rate moving around between Q2 and Q3, that certainly mix can have a play a role in that. So again, from our perspective, there are certain pockets that we find particularly attractive. Generally speaking, we think it's going to prove to be a more challenging time for the reinsurance market, hence, the comments that we offered earlier. We think that if you look at the commercial property market, that is going to get uglier before it gets prettier. And we think that much of the liability-related lines are going to prove to be the opportunity for the foreseeable. And when we put that all together, that's what led to how we were speculating around growth.

And then I guess my follow-up is on, I guess, the development in the quarter. I think if I backed into it, there was probably double digits maybe within the range of $15 million adverse in insurance, right? It seems like it was offset by the same amount in reinsurance. So within insurance, was there anything kind of within certain lines or years that you saw some that, I guess, drove the movement in reserves in insurance in the quarter?

Yes. It was primarily commercial auto, both in the primary as well as excess and how that can bubble up to excess and umbrella, but that was not the only culprit but it was the majority of it. And as far as the years go, I don't have that, but if you want to follow up with Karen or Rich, we can try and give you more insight.

Your next question comes from the line of Tracy Benguigui with Wolfe Research.

So capital returns were notably light in the third quarter with modest buybacks, special dividends and maybe less growth opportunities like we saw in reinsurance and monoline excess I would assume you would have undeployed capital. I'm curious, are the negative marks on security book weighing down, how you're thinking about deploying capital?

No.

Okay. So was there something else in your calculus that was...

Sure. I mean, the answer is that we are not of the view that we just come up with a number, and it doesn't matter where the stock price is, and we just go out and buy stock. We are -- we operate like owners, and we have a view that every now and then you get somebody's algorithm that does something that doesn't make sense to us. And when that happens, we step in as we see opportunity, or we'll see someone offer a perspective on the company that for whatever the reason, spreads like wildfire and that creates an opportunity, and then we will look to buy. So do I -- do we still have what I suggested in the past, a 9-figure -- or excuse me, a 10-figure number of excess capital? Yes, we do. Do I expect that we will continue to be thoughtful on how we return it to the people that it belongs to without a doubt. I would suggest that it would be a mistake, in my opinion, for you to read too deeply into what went on in the quarter.

Yes. I fully understand that. If I look at your insurance underlying loss ratio, and you mentioned improved 100 basis points year-over-year. So that -- now it looks like it's a touch below 60%. We haven't seen that level in a couple of years. I'm not sure if you're willing to answer this, but it might be worth asking what would have looked like under your former framework, just to get a sense of how much of that improvement was from your new methodology as you're looking at loss picks.

Sorry, I missed -- I'm not sure I'm fully understanding the question. What...

Yes. You mentioned last quarter -- sure, I'll just rephrase. You mentioned last quarter that you were rethinking your approach towards loss picks. And I'm just curious if you could contextualize how much of that year-over-year improvement might have been under a new methodology. If you're willing to answer that.

The answer is similar to what I suggested earlier, the majority of what you were referring to came through as a result of our property risk book or non-cat exposed loss activity. So the short answer is, no, it wouldn't have a consequential impact. It would be incremental. Rich, do you want to add?

The other point I would just highlight, Tracy, is that when you look at the composition of our portfolio, we've got 60 operating units. Some of those operating units are growing and others are shrinking at the same time. So the composition overall could shift from quarter to quarter. So it's not inconceivable to see that the accident year loss ratio could move some number of tens of basis points from quarter-to-quarter as well. So that is like a business mix, if you will. But those operating units obviously are very focused on particular things, whether it's an industry, geography, et cetera.

Your next question comes from the line of Andrew Kligerman with TD Cowen.

Rob, in your prepared remarks, when you were talking about AI, you touched on workers' comp and robotics and then you didn't elaborate. So I'm kind of curious, how do you see AI affecting workers' comp over time?

I think that, well, the reason why I stopped was because Rick started to own. But to make a long story short, I think that the advancements in robotics, which much of it is being driven off of AI, not all of it, but much of it, I think, undoubtedly, is going to have an impact on the workforce. And I think that there are a lot of people that are viewing AI is just having an impact on aspects of the white collar labor force. And I would suggest to you that I think there is material impact potentially over time beyond that.

I see, I see. And meaning that the workforce might decline a little bit?

I think that ultimately, the labor force in this country and around the world is going to be a challenge as to how quickly we can retool people's skill sets. And there are certain jobs that are going to go away, not just because of AI in an office environment but robotics can play an ever-increasing role, and we've seen it to a certain extent in manufacturing. And I think that there is likely the potential for it to go beyond how we typically think of that. And there could be implications for the workers' comp line as an example, at least some part of the economy.

Got it. And my follow-up is around agility. It was interesting in other liability, it inched up a little bit in insurance and or not for commercial auto per your comments, it may have been up materially more. And then in reinsurance at $144 million, it was off pretty sharply year-over-year. So what is it about the reinsurance area that that you don't like, and what are you liking a lot in other liability and insurance?

Well, I think what we're not looking, as we've chatted about for or commented on for probably not this quarter's maybe years at this stage as it relates to casualty reinsurance of the ceding commissions. We just don't think it makes economic sense. We think that other people are willing to rent their capital for a lower price than we are prepared to rent our capital for. And we think that there is more opportunity at this moment in time on the insurance front as it relates to other liability quite frankly, there's an opportunity for you to be less of a commodity in the insurance space than there is and particularly the treaty reinsurance space.

I see. And it's pretty broad in other liability?

The opportunity, look, we are grateful for what we have in front of us, and we think that there is an opportunity to continue to grow that business for the foreseeable.

Your next question comes from the line of Mike Zaremski with BMO.

First question on the excellent loss ratio on the insurance segment. Rich called out in his prepared remarks, checking it. improved non-cat property losses. So fair to assume you're calling it out to hit us maybe not to run rate the current underlying loss ratio because there was some good guy and there's obviously moving parts.

Yes. That's Rich being a measured CFO trying to measure -- manage your expectations.

Okay. Got it. Maybe just switching gears, higher level. Good to hear. I guess kind of if you double down or say again this quarter that you're seeing loss trend maybe come down a bit, just curious maybe to prepare us for the overall pricing power environment. Is it fair to think that at current kind of very healthy interest rate levels the downward slope in pricing power rate is still probably moving south over the coming years in most lines of business that are longer tail at this stage, sorry.

Look, at this stage, excuse me?

Excluding property, just kind of focusing on the casualty lines.

At this stage, we are pleased with the rate that we're able to achieve by and large and how that will maintain or enhance margins. So we feel like we're in a pretty good place. What will that mean for tomorrow? I don't know. Will the reinsurance market continue to be very aggressive and create more competition in the insurance marketplace Possibly, but I think it's probably pretty soon, in my opinion, to begin with. So look, the other reality is that different folks have taken different approaches to their investment portfolio and to what extent they're able to capitalize on a higher interest rate environment that varies by operation. When we look out at what people's duration are and give or take, given their mix of business, how that compares to where they can take duration I think many of our peers are somewhat stuck. They're not likely going to be taking it out much further, and it will be hard for them to reposition. So ultimately, I think that you should assume in my opinion, yes, will property maybe become a bit more choppy. Yes, I believe it will. So I think much of the liability market is going to be pretty stable for us, and there are some pockets where things could improve a bit here and there. Yes, I do. Do I think the big headline for us is learning with $24 billion that can get reinvested at 80 basis points to 100 basis points above where we currently are, yes, I think that, that is a lot of leverage in our economic model to be had. Hence, also the comment that I made about how the portfolio turns over and how quickly we are able to take advantage of the higher rates just with the existing portfolio, let alone the new cash flow. So do I think everything is perfect? No, sir, I don't. Do I think we have more of a tailwind than a headwind? Yes, I believe we do. And I think given our mix and how the business is positioned, that will likely be the case for a longer period of time than some of our peers that have a different mix and have positioned themselves for investment portfolio wise in a different manner than we have.

That makes sense. And maybe just sneaking one quick last one in. This past winter, I believe is on the 4Q call, you kind of talked about Berkley's expanding distribution to kind of more alternative means for the first time, I think you were referencing some MGAs or MGUs maybe now that some time has gone by, you could further unpack or comment on how that's going and whether you expect that to continue to be a bigger source of distribution going forward.

So the MGA, MGU thing that is not cornerstone of our distribution, though we do have some of that. Generally, I think what you're referring to is alternative distribution where we may not be going through traditional distribution. So we have some operations that are taking traditional wholesale products, taking it direct to retail. We have some operations that are dealing directly with customers. I think we may have also flagged our efforts around the area or the effort of embedded or point of sale, if you like, where we sell insurance along with another product that is the primary transaction that's occurring. If my recollection is correct, it was perhaps a comment that from our perspective, we are very committed, and we are very dedicated to traditional distribution. We are grateful for those partnerships, and we will continue to support them. At the same time, we are conscious of the fact that in the end, the customer is queen or king, and that we, as an organization, have to be willing to meet them where and how they wish to be met. So we will continue to partner and work in a traditional manner. But as customers may look to engage in a different way, we feel it is our obligation to meet them where they want to be met and not turn our back on them.

Our next question comes from the line of David Motemaden with Evercore ISI.

Rob, you had talked a bit at the beginning of this call, just some of the changes that technology and AI is having on some of the risks out there. And I was surprised you didn't mention some of the risks that are there from -- or out there now from your clients who are using AI in their own operations and potential liability there. I'm assuming you guys are insuring the labs, obviously, but -- and I think you guys had an exclusion out there. So I'm wondering if you could just talk about how you're thinking about that AI liability risk from your clients using the models and harm as a result of that. And maybe any sort of silent coverage that might be working or sort of floating around in some of your recent casualty vintages?

So long story short, we have a view that AI is a real exposure, and our colleagues are running the various businesses, particularly on the front end are actively grappling with that exposure and making sure that they understand it, they are comfortable with it and see that they are getting paid appropriately for it. We have done a lot of work, thanks to many colleagues and making sure that we have the appropriate wordings, and we are not just taking whatever is being served up by the industry. We need to make sure that it makes sense for what we are doing through our lens. So do I think that there is a severe latency exposure. I think that we are on it and we are focused on making sure that, that is not the case. Can I promise you that there is nothing out there, Mike. Absolutely not. But we are working very diligently to make sure the exposure, as I suggested earlier, is identified, understood, controlled, and we're getting paid for it. And yes, we were one of the companies that people were bitching about that we had exclusionary language that we were applying when we feel is appropriate. And quite frankly, we think that is our responsibility. And some people may like it, some people may not. But ultimately, that's part of our responsibility in managing capital.

Got it. No, that makes sense. And then maybe just switching gears, just on the insurance growth. And the growth, if I look at it, including comp, excluding comp, it decelerated a bit, still not huge numbers, but it did decelerate despite you guys you've had at slightly lower rates in the market now for a couple of quarters. Are you guys contemplating to sort of get to that mid-single digit or greater additional sort of easing on the pricing front? Maybe just comment a little bit on how you're thinking about that.

Yes. When our colleagues are forming views of how the next quarter quarters will unfold. There certainly is a component of that around rate. And that can evolve over time. Obviously, as we have more data, we're able to refine our view. But yes, growth and rates are not one and the same, but they're not exclusive of one another in our book.

Your next question comes from the line of Josh Shanker with Bank of America.

Bonds are trending at discount to par because interest rates have gone up, you wouldn't pay par value and you can buy it cheaper in the market. How does it make you feel about your own stock when you have a mark-to-market loss in the portfolio. Is the stock worth anything less when you're holding that loss?

Is the stock work anything less when we have an unrealized loss in the bond portfolio? Is that the question...

[indiscernible] different, we think how to purchase your own stock...

Look when the days are...

[indiscernible] loss position.

So if I'm understanding your question correctly, as Rich flagged in his comments, we're holding this stuff to maturity. It's super high quality, the average quality is a strong AA minus. And as you can see, the duration is quite short to say the least. So when you look at our organization, our portfolio and you think about it from a valuation perspective, no, I do not think that it would be appropriate to discount the bonds per Richard's comments earlier or when you think about what does it mean for book value? That's how we think about it for all the reasons that we just referenced. In fact, I think a different way to think about it is what is the opportunity for this organization to put more money to work at higher rates, push out the duration, lock those rates in and what does that mean for the earnings power of the business. That's how I would suggest would be an alternative view.

And do you have the ability to find some capital gains in your system that would cause you to want to offset it with the losses on some of these bonds, neutralize them in put that capital to work at a higher yield?

There are things that we look at all the time. And Josh, as we've shared with you in the past, from our perspective, we think that there are meaningful off balance sheet, if you like, gains or not fully reflected gains that could be had through some of our assets that we hold that we carry at something less than what we believe market value is. So is there something we could do?

You can liquefy them when you want it to, I suppose. .

That's correct.

Yes. Yes. And no, those are just my questions trying to understand this time. If interest rates go up higher, how that might change your investing ambitions. That's what I'm trying to get at.

I think you might think about it that given where interest rates are and given what our duration currently is and given the average life of our reserves, there's a reasonable chance we will continue to nudge out that duration and capture. And I think the higher you see rates go, the more that opportunity could present itself.

Your next question comes from the line of Mark Hughes with Truist.

Rob, the smaller account growth you described a little earlier, how material is that? What's been the catalyst for that? I assume maybe some of the technology advances you've talked about improved efficiency. Could you just give a little more on what you're doing with the smaller accounts?

Sure. It's really twofold, Mark, and thank you for the question. First off, larger accounts as the market becomes incrementally more challenging or competitive larger accounts, more zeros turn into [ eye candy, ] compromises people's discipline. We're a very disciplined shop to my colleague's credit. So that's one reality. The other reality is because of the investments that have and continue to be made on the technology front, we are able to be more responsive than many of our peers in turn quotes around. And speed is a huge advantage in the small account space, responsiveness in differentiating 1 cell.

Very good. And then the cash flow in the quarter was down from last year. Maybe just a couple of the key drivers of that decrease in the quarter?

Rich can give you more detail on it, but one of them had to do with a very large tax payment. So I guess that was taxes, when you have to pay more, I guess that's supposed to be happy news, but it doesn't always feel like when you send the money. And then there were a couple of other items. But Rich can unpack it, I would suggest that I would not read too deeply into it. There are a couple of onetime items, but the tax piece is the biggest. But give us a call, and we can go through a chapter and verse, if you like.

Your next question comes from the line of Brian Meredith with UBS.

So Rob, you made this comment about being 20% plus more efficient, given some of these technology investments that you've been implementing here. Where are we going to see that in financial results? Are we seeing it already? Is it going to drive lower expense ratios, lower LAE. How should we think about it from an outsider's perspective?

I think one of the ways to think about it is that, that contributes in our ability to be able to get to a lot more small accounts. So we are able to touch more business more easily than we could in the past. The comment that I was making and perhaps I should have been more specific is our ability to take in submissions and quote them, is up by that 20%. So we're getting that many more at bats, if you will. And that is allowing us what historically, when we lose the large accounts, we would struggle to make up for it with the small accounts. Right now, because of this efficiency, we're able to keep up and then some. So that would be an example just on the front end of being able to leverage that technology, and we have it in a couple of spots, and I think you'll see us push that out more and more across the organization. And we have a few different solutions that are able to do on this. So we are always trying to internally through different organizations create a little bit of a horse race between solutions and then we call less around fewer and leverage it.

Makes sense. And then, Rob, second question, I'm just curious, and you may have talked about this before, but this higher interest rate environment we're hearing the interest rates or your treasures are higher they've been in 20 years, right? How does that affect your, call it, pricing decisions when you think about it, right? Are you running to an ROE, and you're pushing that down to your business units? And therefore, can they be a little more competitive if we're thinking that we're sitting here at 5-plus percent treasury yields?

The answer is an element in the equation, but it is not sort of blindly introduced. So we have lots of conversations around with people where, quite frankly, the loss ratio or the combined ratio could tick up to a level that maybe some might be able to justify given where interest rates are, but we're not willingness to completely open that false it up. So it's really a combination. Are we conscious of the contribution of investment income to make? Absolutely. Does it play a role in how we think about loss ratio? Yes, it does. Does it drive it on its own? No, because when the day is all done -- when we write a piece of business, that piece of business is going to lock up capital for the life of that exposure, and we need to be mindful of that as well.

Your next question comes from the line of Katie Sakys with Autonomous Research.

Follow-up on the answer to the previous question about AI and where it shows up in financials. I think previously, Rob, you guys had discussed seeing an uptick in the expense ratio this year versus full year 2025. Are you still expecting that to be the case as we get into the end of the year here? Or is there a potential for some early realization of cost saves here at the end of the year?

I think the efforts of many colleagues throughout the organization to have the foresight, to invest in technology and the data that powers it for some number of years will not necessarily keep the expense ratio undoubtedly from ticking up, but it will help mitigate it from picking up. So as our earned premium may begin to slow due to market conditions, the technology will allow us to maintain a level of efficiency that will contain that expense ratio from moving up as it perhaps would have in the past. It does not mean it won't move up. It certainly doesn't mean we won't be potentially making other investments that could move it up, but all things being equal, we are more well positioned to control it today and even more so tomorrow than we could yesterday.

Got it. And then perhaps another follow-up to your discussion of robots and their impact on workers' comp. What kind of time frame are we looking at here in your view? And are you guys seeing any early signs yet of a change in workers' comp loss cost trend from automation or other use of AI?

So the short answer is, I don't know. Change is a funny thing. It doesn't feel like much changes from day to day. But when you look over -- back over a 2-year or 3-year 5-year, little on a 10-year period, it's shocking how much things actually change. When you travel to other parts of the world, particularly in parts of Asia, it's noteworthy as to how there are certain environments. There are fewer people and more robotic activity that's going on. I would think that over time, we will see more of this here. How quickly that will come to be? I don't know. But do I think it is on the horizon and getting closer every day, yes, I believe that's very likely. Are we seeing any specific examples impacting the business that we operate not through the lens of our -- the clients that we serve.

Your next question comes from the line of Meyer Shields with Keefe, Bruyette, & Woods.

Curious as to whether or what the house view is in terms of the historical relationship between interest rates and inflation outside of social inflation because I think that really it has broken down over the last few years. But as you anticipate higher interest rates if -- should we expect higher inflation on the non-casualty lines on the short-tail lines?

On the short-tail lines, we've quite frankly been pretty surprised over the past several years. How there wasn't more of an impact on loss costs even during that period coming out of COVID where there was financial inflation, we just didn't see the pop. Additionally, it's been surprising to us the tariffs along the way did not play a greater role. Do I think that there could be a greater impact that is more visible tomorrow than today, yes, that is certainly a possibility. But quite frankly, with market conditions as they are, it's starting to look for commercial property. It's rapidly looking reasonably unattractive even without that happening.

Understood. That makes sense. And the second question, this is more long-term thinking, but it seems from some of the news in the reinsurance world, like third-party capital is starting to break its way into casualty, and I was hoping to get your thoughts on how that plays out over the next few years.

I think that one needs to unpack those models and really look at where the capital is coming from whose paper it is, who's in control and really understand particularly some of the ability to force communication. So I would encourage folks as they are -- while I appreciate the point and agree that there is more activity. I think one needs to unpack it and really lead the fine print and understand what type of risk transfer is going on and what type of security is associated with it.

We have reached the end of the Q&A session. I will now turn the call back to Mr. Rob Berkley for closing remarks.

Okay. Well, thank you very much, everyone, for your time and your interest again in the company. From our perspective, it was a very solid quarter. And equally, if not more interesting, that we think the business is particularly well positioned to continue to deliver outstanding returns. We will look forward to catching up with you all sometime in January. Thank you very much, and have a good evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Thank you for joining us, and welcome to the W. R. Berkley Corporation's Second Quarter 2026 Earnings Call. This conference call is being recorded. [Operator Instructions]

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, expect, or estimates. These 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 other filings made with SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. W. R. Berkley 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 like to turn the call over to Mr. Rob Berkley. Please go ahead, sir.

Thank you very much. And let me echo your welcome to all participants. Thank you for finding time and your schedule to join us today. So I'm joined on this end of the phone by Rich Baio, and we're going to follow our typical agenda, where momentarily, Rich is going to walk us through some highlights from the quarter. I will then follow with a few of my own observations and then the two of us will be available to answer any questions that participants may have.

Before I do hand it over to Rich, I'd like to take a moment on behalf of my colleagues, my family and myself to express our gratitude for the very kind outreach and support we have received on the heels of the loss of our founder, Bill Berkley. His extraordinary contributions to society, our industry and our company cannot be overstated. His spirit, values and priorities remain foundational to who we are, and how we operate as a team. One of these great achievements while leading this company was the institutionalization of the business and making clear that this business is a team sport, not an individual one. While his vision and character remains central to our foundation, the performance and success of this company continues to be a reflection of the hard work and commitment of thousands of people that make up this team. Thank you again to all of those who have been so supportive during this difficult moment.

Rich, if you would, please?

Of course. Thank you, Rob. Good evening, everyone. Operating earnings per diluted share grew 21% to $1.27 or $497 million resulting in an annualized return on beginning of year equity of 20.5%. The company's second fast quarterly pretax underwriting income was $318 million and record quarterly pretax net investment income of $419 million contributed to the excellent second quarter results. We continue to generate meaningful excess capital as evidenced by total capital return to shareholders of $334 million through regular and special dividends as well as share repurchases. While there's no predetermined amount of capital to be returned each quarter, this amount is consistent with what we did in the first quarter. Underwriting performance yielded a current accident year combined ratio excluding catastrophe losses of 88.1% and a calendar year combined ratio of 90%. Cat losses in the current accident year decreased $37 million to $62 million in the second quarter of 2026, or 2 loss ratio points compared with 3.2 loss ratio points in the prior year's quarter. The current accident year loss ratio, excluding cats of 59.6% compared with 59.9% in the prior year. The overall expense ratio was flat quarter-over-quarter at 28.5% and remains below our previously shared expectations, that being comfortably below 30%, but increasing modestly over 2025 barring material changes in the marketplace. Drilling down by segment, Insurance reported growth in gross premiums written of 5.4% to a record $3.8 billion and net premiums written increased 3.7%, also to a record $3.1 billion.

The current accident year loss ratio, excluding cats is 61% comparable with the first quarter this year. Expense ratio of 28.3% was flat over the prior year, bringing our current accident year combined ratio excluding cats to 89.3%. The reinsurance and monoline access segment continued to experience heightens competition in both property and casualty lines, which resulted in a decrease in net premiums written to $306 million. Having said that, the underlying performance of the business benefited in the quarter from lower cat and non-cat property losses giving rise to a current accident year combined ratio, excluding cats of 78.7%.

Turning to investments. Net invested assets have grown to $34.2 billion. Strong operating cash flows have contributed to the growth despite the significant cattle return to investors. Over the prior 12 months, we've returned capital of more than [ $1.3 billion ] or approximately 14% to stockholders' equity and nearly 70% of the first half of 2026 earnings. Strong second quarter operating cash flow was $800 million and will continue to contribute to the growth in net investment income. Income from the core portfolio grew 13% over the prior year to $371 million, and in cement funds performed well, growing 5.6% to $28.8 million. The credit quality of our portfolio remains very strong at AA- with the duration on our fixed maturity portfolio, including cash and cash equivalents increasing in the second quarter to 3.2 years, which remains below the average life of our insurance reserves. The effective tax rate of 21.4% was below our normalized run rate of 23%, plus or minus due to the mix of earnings from foreign operations taxed at higher marginal tax rates as well as the nonrecurring utilization of certain tax credits. Stockholders' equity increased to a record of more than $9.8 billion and capital returned to shareholders comprised regular and special dividends of $223 million as well as share repurchases of approximately $111 million.

Rob, with that, I'll turn it back to you.

Okay. Rich, thank you very much. A couple of quick additional comments for me. And then again, we'll be pleased to open it up for questions. Maybe starting on the more macro side with regards to market conditions. Clearly, it is ever more a fragmented market as market conditions by product line. And that puts that much more emphasis and value around the combination of expertise and discipline key ingredients for cycle management regardless where you -- any product may be in the cycle.

Let me start by flagging a few areas where we're seeing some headwinds, and then we will pivot to where we're enjoying tailwinds and get into that a bit more, I guess, taking the approach of vegetables before dessert. Long story short, I guess a little reminiscent of press comments from us. We continue to have great concern around much of the MGU model, and how it's participating in the marketplace. We have always had questions around delegated authority and the lack of alignment of interest. That having been said, it just seems like this is just musing and ultimately is going to end in tiers for some market participants that are not having the appropriate control over the capital, and how it is being managed. From our perspective, the greatest stupidity can be found most easily in the property arena. Shared and layered, as we've been talking about for some number of quarters is particularly concerning, and we're seeing that water falling through to other parts of the property market. With that having been said, the casualty market, by and large, is offering greater discipline though there are a few isolated pockets within casualty that give us reason for pause. Two that I'll call out, in particular, would be habitational as well as liquor quite frankly, examples of where we're seeing business where rates are being cut by 20%, 30%, and we kind of look at it from a distance and say, you could have had it if you cut it as my father used to suggest this is the type of behavior that turns long tail lines into short-tail lines, but we will see how that unfolds.

Continuing on some of the challenging areas. As Rich referenced, reinsurance is particularly concerning. From our perspective, yes, property is eroding rapidly, but casualty never enjoyed the balance that property got. So you can see in our numbers, as Rich alluded to, actually, we are shrinking more quickly on the casualty side than we are on the property side.

Turning to some of the more encouraging areas. I would tell you the broader casualty market overall with a few exceptions that I referenced remains attractive. We continue to find ways to put capital to work and we believe will generate very attractive returns. In addition to the broader casualty market, I would tell you there are a few pockets within the short tail lines that we also find attractive as we flagged in the past couple of quarters. Two of those that I'll call out or one would be within the A&H space, and the other one would be private client personal lines, which, again, on both those fronts, we continue to get great traction. Rich walked us through, again, a bit on the results. I'll just echo a few quick comments on that front specifically. The top line growth clearly is being driven by what we're able to achieve on the insurance front with the growth coming in at mid-single digits.

Just to be clear, much of that is being driven, obviously, by the margins that we find attractive and also while we're still very good contribution, I should say, coming from rate increases. So the rate increase for the quarter was -- ex comp was 3.8%. And now before anyone overreacts, I would remind you, this is exactly what we said we were going to be doing when we talked last quarter. And I believe the quarter before that, where we see that there is attractive margin in the business, and our priority is to increase count or exposure and where we will keep our foot on the rate pedal, but we may not be pressing down on it as hard. So this is in line very much with our expectations and quite frankly, is keeping with our historic approach to cycle management and trying to maximize the opportunity, and again, grow where the margin is that's the approach, that's the game plan, and that's what we're executing on.

On the loss ratio front, I guess the only thing I would add is a moment like we just went through, we certainly benefit from somewhat of a relatively benign Cat quarter given the time of year. That having been said, for us as an organization, you really see us stand out when it comes to cap when there's serious or significant activity, that is when our approach to Mannington volatility comes into sharper focus.

Moving over to the expense ratio. Rich obviously covered this in some detail. I would just offer a couple of additional comments. One being, and -- I was surprised that Rich didn't show this caveat in because being the good CPA, he's usually trying to manage expectations and nobody more than me. But we do believe that we'll be able to keep the expense ratio at 30% or better. That having been said, we are making significant investments in the organization as we have in the past, and we continue to lean into it harder and harder. Certainly, on the tech front, the data front and maybe to give a few specific examples very much on the AI front. AI is an interesting topic. There has been a moment of remarkable activity in the broader economy and certainly we're seeing it in the industry. And there have been moments in time where we've seen people talking about AI, and it's almost as if they felt like I need to do something because I can't not do anything. We are big believers in doing something, but we're not going to participate within AI for the purpose of the headline. We are clearly looking to make investments. We are looking to create value, and we expect to generate returns on those investments.

In addition to that, we have a recognition as to what our strengths are and what our limits are. And we are certainly not in a position that we are going to go out and try and create our own large language model. For our purposes, the notion that we are going to try and recreate with the likes of an anthropic or open AI or anyone else and spend tens of billions of dollars. That is not our strength. What is our strength is to take the tools that are out there and then layer on our own approach on top of that. What is our strength is to use our 60 different laboratories, each one of our businesses to be experimenting with tools and then to coalesce around the best solutions and leverage those. So two examples amongst many, but two that I thought we would call out in this conversation. One would be on the underwriting side and the other one would be related to claims.

On the underwriting side, we focused very much on underwriting work benches and the idea of how we digitalize activity right from intake straight through to quote. Early returns on that front where we've begun to utilize it, that we are getting 20-plus percent uplift in efficiency, and we're reasonably confident that there's significant additional juice to squeeze out of that. So plenty of upside from there. And the second area would be claims, which is our efforts to try and use AI and other tools to move in the direction of straight-through processing where it is appropriate where it makes sense. Ultimately, if you have a look at our claims profile, if you will, approximately 50% of our claims settled for $5,000 or less. And there are lots of examples where we are showing up to a situation with a sledgehammer when a fly water is really what is required. So using some of this technology, where appropriate, we are able to deliver a better solution for clients in a more timely way. So more to come on both of those fronts, but we are making good progress and we are, quite frankly, as an organization, very excited about our ability to reallocate people's time in other directions and utilize the technology to drive these improvements.

A couple of quick soundbites really just echoing some of what Rich said on the investment stuff. Long story short, we're in a pretty good place, and it's pretty clear -- we have a pretty clear sight to an even better spot. Rich mentioned the strength of the cash flow at $800 million in the quarter. Just as a point of reference, which you would have seen in the release, that's up from $700 million in the corresponding period. That kind of growth is really driving how you're seeing the investment portfolio to continue to increase in scale. That, combined with the reality of a new money rate that is well above our book -- domestic book yield of 4.8%. So if you say the domestic book yield is 4.8%, and you think about a new money rate that certainly comfortably starts with a that gives you a lot of upside from here. So we look forward to being able to continue to deliver on that. And obviously, the duration piece Rich flagged that is [ 3.2. ] And just as a reminder, we are -- the average life of our reserves, or how long we hold on to the money is 3.9. So we have a fair amount of room to take that duration out if and when we believe it is appropriate.

There is no doubt that in certain product lines, as I mentioned earlier, there are clouds building. Those that are weighted towards certain lines such as property, it is going to get tougher before it gets easier I think we're going through a period of time where Mother Nature is lowing the property market into a false sense of comfort. And this will go on perhaps for some period of time. And then once again, the industry will learn the hard way. Fortunately for us, as an organization, if you look at the parts of the market that we participate in. Those parts of the market are not getting cloudy. In fact, there's still plenty of sunshine, and we continue to lean into those opportunities whether it be much of the casualty market or some of the shorter tail lines that I called out earlier.

So with that, Kristen, we'll open it up for questions. And Rich and I will do our best to address any topics people would like to discuss.

[Operator Instructions]

So that's one question with how many parts, Kirsten?

You have one question and one follow-up.

Okay, okay.

Here, your first question comes from the line of Elyse Greenspan from Wells Fargo.

Before I get into my questions, I just wanted to express my sympathies to you and just everyone at Berkley on the passing of Bill, I'm sure he'll be missed right by everyone on the buy and sell side. So I want to extend my sympathies there. And then I get getting into my first question, going to the premium growth and pricing conversation that you hit on in your prepared remarks, you have spoken about top line growth improving as rate slows. So like as you think about just think out from here, not only in the back half of this year, but for '27 as well. Do you expect an incremental slowdown in rate? And then how are you expecting insurance growth when you think about what happens to pricing from here?

So it's, in some ways, easier to predict longer -- farther out than it is because I think directionally, we know where a lot of things are going, but it's not necessarily clear how quickly that will unfold. Based on what we're seeing and early returns in July, we're reasonably encouraged as far as the top line the month isn't done. And nobody knows exactly what tomorrow will bring. But from our perspective, we have many pockets where we're very, very pleased with the margin that we believe is available. And as a result of that, if the situation warrants it, we feel as though we have considerable room in the rate to adjust we are not going to do that prematurely. Ultimately, our goal is to try and optimize between rate and growth. So long story short, do I think that things are going to fall off considerably from here? No. And do I think things can improve from here? I think it is certainly possible.

And then my follow-up is, I guess, triangulating some of that pricing commentary to just the underlying loss ratio, right? I mean if you guys are taking the insurance pricing down, would you expect to start to see more compression on the underlying loss ratio? Or are there other things, mix or whatever it might be that would kind of offset compression from the level of earned rate going down?

Well, obviously, there's several components to that at least one of them would be business mix and how that unfolds and how that gets weighted over time. In addition to that, as we get more comfortable with the margin that we believe is in the business that could have implications for how we think about what the loss ratios are that we need to book the business to. Said differently, the rate we charge and the loss ratio, as you point out, they're not exclusive of one another, and we may feel as though there was more room in the pick than we recognized.

Your next question comes from the line of Rob Cox from Goldman Sachs.

I just wanted to ask you maybe on other liability and commercial auto, a couple areas where I think just looking at what you disclosed on pricing, maybe you're not growing exposure quite as much. Obviously, we don't know your pricing by product. But can you just talk about if there's more growth in those two lines? Or if you are shrinking exposure, why you don't think it's a good time to grow there?

So as far as the other liability goes, we continue to find opportunity to grow. But as you point out, there is a rate component there. As far as the auto goes, we are taking much more rate than this at first blush would suggest. In fact, and the exposure is coming down considerably. That having been said, the auto line, we're lumping together Berkley One, along with the commercial auto piece and that we continue to see opportunity. So that's offsetting it a little bit. But long story short, the auto -- commercial auto line, the rate is up a lot, and the exposure is coming down pretty quickly.

Okay. That's helpful. And then I just wanted to ask you on competition that you're seeing from admitted markets on E&S products, has there been any sort of change there throughout this year?

We were seeing it incrementally more. But as I suggested earlier, the big thorn in the side of the marketplace tends to be these people running around with the pen for someone else, and they get paid based on the policy they write as opposed to the underwriting results they achieved. And so that's really the challenge. As far as the standard market coming in, yes, incrementally, could that become more an issue over time, certainly possible.

Your next question comes from the line of Michael Zaremski from BMO Capital Markets.

[

Just wanted to start off at going Elyse's comments about -- my sympathies regarding Bill's passing. He'll obviously be missed and also remembered.

Thank you, Michael.

Yes, of course. My first question, regarding the deceleration in pricing power, I wouldn't say it's surprising given the data points we've seen in the industry's profitability level. But would you say it's also coming with maybe a better view of loss cost trend as well? I know that travelers alluded to slightly different views to every company is different loss cost trend, that could maybe rationalize some of the kind of the decel, the industry is experiencing.

Yes. Obviously, I'm not in a position to comment on travelers. That's a better question for Alan than me. As far as what we are seeing is we have a pretty clear view as to how much margin is in the business, and there are some places where the returns are exceptional. And to the extent the choices backing off on the rate incrementally and having more of that exceptional business, then that's a trade that my colleagues are willing to make and has our support. In addition to that, that will certainly in some situations, perhaps invite an examination of the loss ticks that we've been carrying for the past couple of years and a further examination as to whether there's more room in those than perhaps had been recognized at the time that they were originally booked. But as far as trend goes, that would be one component of a variety of components that go into the analysis as I know you appreciate.

Understood. And just regarding kind of the still constructive view on top line growth. Does some of that underpinning, I think you alluded to, that come from what you discussed in previous quarters about new means of distribution with certain new partners that are -- where you could be accessing different types of risk that have the same business classification and what we see, but just coming from different actual underlying risks.

So the short answer is yes. And as we do reference and we've spoken about in the past, as far -- we are very committed to our traditional distribution at the same time in the end. Our view is that the client or the insured is queen or king, and we need to meet them wherever they and however they wish to be met. So we are fully committed to traditional distribution. At the same time, we're not going to ignore the shift in behaviors of customers as well. And specifically to your question, does that contribute to this Yes, it does contribute to this today, and we expect in all likelihood, it will contribute more tomorrow.

Got it. And just as a follow-up, in still, we heard that expense ratio guidance. So if those distribution methods came with a slightly different expense ratio, obviously, maybe a different loss ratio, no, still not impactful enough to call out any expense ratio changes, right?

Not at the moment. Rich has had -- was going up and down. So clearly, that was the right answer as far as he is concerned.

Your first -- your next question comes from the line of Andrew Kligerman from TD Cowen.

Unfortunately, I had some technical difficulties for the first 10 minutes. So hopefully, I'm not covering old ground. But the first question is prior year development by accident year. Could you share a little color on the liability lines, and how that played out in the quarter?

I do not have that here. I don't think Rich got into those details, but if you wouldn't mind us circling back up with Karen or Rich afterwards, and they'll give you whatever it is that we're that have been sensitized by a herd of attorneys.

100%. It sounds like there wasn't much going on if you're not calling anything out. So you mentioned the...

No, pretty benign.

Yes. So you mentioned 3.8% rate ex comp. Did that include exposure as well, or was it just purely rate? And with that, could you elaborate a little bit on how property played out and how casualty played out? And what's the loss cost underneath that...

Sure. So long story short, and I know that there are different organizations throw around different metrics, and we have a very -- a variety of different metrics. But the one that I was referring to and that we are sort of laser locked in on is rate. So from our perspective, what it's all about is how much are you charging -- how much more are you charging relative to a unit of exposure. So if we think about a trucking account as an example, if the trucking account has 10 trucks and the rate goes up 5%, that means you're getting 5% more per power unit. If the trucking account ends up adding another 10 trucks, but the rate -- the premium only goes up 5%, that's not a very good answer. So long story short, what we focus on is how much more are you getting per unit of exposure irrelevant as to how many more units you actually are covering. That is something we watch, but that's not what we obsess about. Pure rate per unit of exposure is what I was referring to and what we are focused on because ultimately, that's what drives or impacts margins. As far as how we think about trends or product lines, that's something that we, generally speaking, are just not sharing with the world.

Okay. And how about loss cost underlying the 3.8%, how did that move?

So again, a loss cost trend is not something that we publish by product line or for that matter in general.

Your next question comes from the line of Josh Shanker from Bank of America.

And at the risk of repeating, there's no reason not to repeat. I mean, Bill Berkley was a giant and he always made time for me, which was I'm grateful for, and I appreciate everything that he accomplished and the organization he built. So congratulations to you on what he's done in his memory will be always cherished. Thank you.

Thank you, Josh.

One thing that I was curious, I noticed that basically, over each of the last few quarters, the duration, the main question for Rich has moved up by about 1/10 in a year, and it's been going on for a couple of years now. I realize the duration of the portfolio was exceptionally short but a lot of market prognosticators are things that we're in a higher for longer cycle. And maybe that's not what Berkley think or maybe just there's so much gap between the asset liabilities that you feel you need to narrow it. Can you talk a little bit about where...

Yes, we don't -- it's not that we -- it's a conscious decision. We do not feel obliged to narrow it. is based on how we think about where we are, how we think about interest rates and where they're going to be going. And as you pointed out, we were at one point, very, very short. We are still short and we're comfortable incrementally nudging that out. We are not racing to push it out, but we are comfortable incrementally nudging that out and locking in the yield for a more extended period of time.

And with that, one thing that we -- if you look over, of course, a 50-year period, the amount you can earn on float has been an indicator of profits for the industry for a long period of time. It hasn't been for the recent past as and states have gone up underwriting margins have improved. And I know that you talked about markets and whatnot. And -- but is there a potential to be willing to compromise on underwriting margin, not necessarily but the but the industry in general because there's so much opportunity to earn attractive returns on float, or is that relationship growth for foreseeable future?

I think it is going to be impacted by how, and how long they stay up there. Do I think today that we're drifting into a cash flow underwriting environment I don't see that happening in the short term or today. If rates keep ticking up for long enough, then certainly, that could potentially invite that thinking. As far as the MGUs go, while there are some that are responsible operators, generally speaking, as we've been reasonably outspoken about I think it's inherently in many cases, a flawed map. And do I think people are just throwing around the pen and putting in people's hands and not carrying what the underwriting results are because they're looking at the cash flow. No, I think that it's a more fundamental error than that, that it's just our responsible management of capital.

Your next question comes from the line of David Motemaden from Evercore ISI.

I also want to extend my sympathies to you, your family and also the entire Berkeley team on Bill's passing. He obviously will be very missed. So on to my question, just on the rate front, the 3.8% that you disclosed. I'm just wondering if we're right to assume I guess, the main areas where you guys are taking the foot off the gas and have talked about that previously. Is that really more on the short-tail lines, or is that dynamic happening at all on the casualty side as well?

So I would tell you that it's more select than you're suggesting. It's not this property or casualty, it's much more of a sample than a clever as to how we think about rate and it gets quite granular, not just by a broad product line, but we will be looking at a subclass within a state and have a position as to how we feel about what we can or can't, should or shouldn't do to rates. One of the benefits of our organization where we have a collection of different businesses each one with its own management team, again, very focused at a granular level around their P&L and what kind of margin that they have, and we are having conversations with great regularity around incremental changes that are appropriate and in some cases, significant changes that are required. So I don't have specifics for you by product line.

Yes. No, that that makes sense. And then I think it's early, I guess, just given the decline in the pricing or the decel in the pricing this quarter versus last quarter. And I know it takes time for that to sort of work its way through the distribution system. But I'm wondering, are there any like early indicators that you can share, particularly around retention because I would think it would show up there a little sooner than on the new business front. So I think you've...

The renewal -- so in the aggregate, yes, in the aggregate, our renewal retention ratio continues to hover right -- sit right around 80%. So that would suggest that the book is quite stable.

Your next question comes from Mark Hughes from Truist Securities.

you've described how you've leaned in and a meaningful part of that is you're doing absent or...

Just to be clear, to define you, I think it's our doing because they don't let me select our price risk just to be clear.

Yes, yes. And I didn't mean that in any negative way, but I think you're -- you've made in that you're seeing opportunity and are pursuing those opportunities. If you look at the market just absent that, how would you describe the pricing if you hadn't been pursuing those opportunities I think...

It varies dramatically by product line. No surprise, I'm sure, to you perhaps most pronounced and much of the commercial property market. I flagged a couple of pockets, isolated pockets within liability that has really made us pause and scratch our head. But long story short, markets, it's a fine brush, not a broad brush.

Appreciate that. Then the follow-up on casualty reinsurance, you described more pressure there. Does that have any impact on the primary markets? Are you seeing any knock-on impact or what is going on in casualty reinsurance?

I think that there are people that are willing to write the business on the reinsurance side, it's ceding commissions that don't make sense to us. And our colleagues that are running our reinsurance businesses to their credit, they have the knowledge, expertise and discipline to do the right thing. And many of us refer to as cycle management, and they're doing it, and we are grateful for that. And the -- what will that mean over time, we'll have to see but I assume you would have taken note in the growth of our gross versus our net. And we are not naive to market conditions within the reinsurance marketplace and what that means for us as a buyer.

Our next question comes from the line of Brian Meredith with UBS.

I just want to express my condolences as well. Bill is going to be hugely, hugely missed.

Thank you, Brian.

So my first question for you is when you talk about rate and kind of going down to 3.8%, tell me a little bit what's going on in terms and conditions? Are you starting to see terms and conditions loosen up? Are you thinking about loosening terms and conditions as well because that's just as important as the rate.

So generally speaking, we are not seeing a loosening of terms and conditions. It's -- quite frankly, it's just been more of a rate conversation in our shop. But the terms and conditions, we're not seeing those come unraveled at this stage, at least in our activity. What other people are doing, I can't speak to that. I think there are some folks out there that are very aggressive. And as I suggested, we'll see how that story ends for them. But as far as our ability to operate with our terms and conditions remaining intact, that's not an issue that we're dealing with today.

Great. That's perfect. And then my next question, we're hearing about retail agents out there doing their best to keep business in the admitted market and not go to the E&S market. Are you seeing that happen in the market? Is it affecting your E&S business at all? Kind of what are the kind of things you're seeing right now with the E&S versus admitted?

Well, I think if you look at how the E&S market has grown as a percentage of the overall, to the extent they're trying, it would seem as though they haven't succeeded particularly over the past couple of years. That having been said more recently, if I was a retail agent, I do everything in my power not to have to bring it to a wholesaler, which is obviously the path that most of that business would take. Why would I want to have to split the commission with a wholesaler. So yes, I think any retailer unless they had direct access to wholesale like product through retail distribution, of course, they should try and place it in the standard market. Almost hold the economics for them. I would, wouldn't you?

Yes. Make sense.

Your next question comes from the line of Tracy Benguigui from Wolfe Research.

Huge condolences. You mentioned that there may be room...

Thank you, Tracy.

Yes, I'm really sorry. You mentioned that there may be more room in loss picks. Curious how many years of experience do you rely on to justify lower pick?

Totally depends on the product line. Obviously, as we both appreciate different product lines have different tails, both -- especially on the incurred front. So the way we take a view and develop confidence on outcome varies by product line. And again, the incurred tail is really what drives that.

Just a quick clarification on that. So the 3.9 year duration of your reserves, I'm assuming that's on a discounted basis, what would that be on a nominal basis?

I don't -- the answer is I don't have the math if you follow up with Rich, he can do it for you, but it's -- or Karen, for that matter, but it's not radically different. Because really the only consequential area of a discount in our reserves are many consequences excess comp. The rest of it -- maybe a little bit on the reinsurance, but the rest of it, which is the lion's share of our reserves are undiscounted, and we don't discount.

Okay. Got it. And then a cycle question. I'm curious if you think the soft cycle is any different than prior cycles, whether it be the key drivers or the duration?

I think that this cycle is radically different from past in some ways. In other ways, I think it's remarkably similar. I think it's remarkably similar because it's still as we've talked about in past calls, human emotion that drives it fear and greed. I think it's different because product lines have decoupled as to where they are in the cycle. When I got into this business for 1 million years ago when Rich got into this business. All product lines by and large, marked somewhat in lockstep. So it was either a hard market or a soft market. Today, you really unpack it a bit. It's notable how different product lines are different places in the cycle. So yes, I think that yes, similar fundamentals, but also radically different in how they present.

And what would that mean in terms of the duration of the cycle? Because what we've seen is past hard market cycles, the soft cycle tended to be much longer.

I think a lot of it has to do with the pain, and how long it takes for the pain to come into focus. That's really what it boils down to. And just a comment a little while ago about incurred tail. I think ultimately, what gives people the discipline and the courage to raise rates, is when all of a sudden they recognize the current situation is not sustainable and they're effectively destroying capital or not appropriately utilizing it. We see that happen time time again. So you saw it happen in the property market a few years ago, and all of a sudden, a Rush discipline entered. You've seen it happen at a different moment in time of the professional liability, particularly D&O. And I would offer an observation that we are on the eve of seeing that happen with California workers' compensation.

Your next question comes from the line of Andrew Anderson with Jefferies.

I think this was asked a little bit ago, but I'll try again. Could you maybe just discuss how the hit rate or quote-to-bind improvement has been in line where you've lowered price and maybe how that's compared with expectations with expectations and if there's still meaningful room to improve that quote to bind.

So I don't have quote-to-bind data. What I did share with someone else earlier was our renewal retention ratio. It continues to sit at approximately 80% that number doesn't move a tremendous amount. But as a data point, hopefully, that gives you some visibility as to the book isn't shifting dramatically. And our colleagues are adjusting to the market where they see appropriate.

Okay. And in the past, you've described workers' comp as a market where you're waiting for firmer conditions. I imagine that's still the case, but any update maybe in terms of where we left it last quarter in terms of price or how loss trends are moving on comp?

Yes. As far as comp goes, maybe as we've said for an extended period of time, California, and our estimation is ahead of the rest of the country as far as where it is in the cycle. And you would have seen perhaps some of the information coming out of the state recently where they shared that the 25 year, I believe it was running at an excellent year of [ 1.29. ] So I don't know how the marketplace can make that [ 1.29 ] work. And historically, for the industry overall, comp and other product lines, when it looks bad, it's usually worse. So it would seem as though that there is a growing amount of catalyst for a shift in behavior, and we're seeing early signs of that in the rate market. But we'll have to see how it unfolds from here. As far as the rest of the country, as we have suggested for some time now, we think it's trailing California, but coming as well.

Your next question comes from Meyer Shields Keith Bretton Woods.

Rob, your debt was a good and great man, and I hope you find comfort in his memory. Two quick questions, if I can. One, firstly was one of the first companies, I think, in 2016 to talk about social inflation. And I'm wondering whether you're seeing any signs of it maybe tempering as part of the reason for smaller rate increase pushes?

Certainly, it is a topic that, as you point out, we've been very focused on for an extended period of time. And it has gotten the attention of many, including policymakers. And we've seen some examples of action being taken in certain states. What the consequence of that will be, and how that will come into focus over what period of time, we'll have to see, but are we aware of it? Yes. Do we feel as though we can quantify what that impact will be at this moment in time, not fully enough that we are taking credit for it.

Okay. That's helpful. And then I apologize for having to ask this question, but you talked about a 20% productivity improvement on policy ingestion. Is that 20% more accounts or submissions that you can look at? Or what is that 20% actually measuring?

That's -- we are getting to 20% more business, and we are able to run it through, and it is converted -- we're touching a lot more business, and we're getting able to get far more at bats and that is converting to, quite frankly, more productivity. And I would tell you that early returns are 20%, and we -- as I tried to suggest earlier, we think it grows from here.

There are no further questions at this time. I will now turn the call back to Mr. Rob Berkley for closing remarks.

Rich, anything you want to add before I -- sure? Okay. Well, thank you all very much for tuning in. We appreciate your time. We appreciate your interest in the company. I think that as we pass the 50-yard line here, the business continues to fire on all cylinders and perhaps what's most encouraging is that when we look out on the horizon, there's nothing that we see that we expect can get in the way of us continuing to generate really outstanding returns. Thank you again for your time. Have a good evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to the W. R. Berkley Corporation First Quarter 2026 Earnings Call. This conference call is being recorded. [Operator Instructions]

The speakers' 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. W. R. Berkley 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.

Alexandra, thank you very much, and good afternoon to all. Thank you for finding time and your challengers 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 Baio. 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 year 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 of other comments on the marketplace, focusing on the reinsurance market for a moment. I think no surprise, property and property cat within the reinsurance space. It has been more and more competitive. We're not surprised with it directionally, but we have been taking it back 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 cat market as well as the liability market. A 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 property on the insurance side. GL and umbrella, I would suggest are areas where rate is still available with good reason.

Professional, as we talked about in the past, continues to be a mixed bag. D&O 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 closed 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 that 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 punch line 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, 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 narrow offering. So why don't I pause there and speaking of resilient, 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 $540 million or $1.30 per share. Others 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 ex cats for 2026 was 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 ex cats increased 10 basis points to 60.9%, while the reinsurance and monoline access segment increased to 51.1%. The expense ratio of 28.6% and is comparable to the recent sequential quarters and reflects a small impact from the decline in net premiums earned from the reinsurance and monoline Access 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 7 of the earnings release, Net premiums written grew in all lines of business, apart from workers' compensation. The reinsurance and monoline access 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 under 1 quarter lag at an average quarterly range for investment fund income is $10 million 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 if some. 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-. 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 nonrecurring 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.

Thank you, Rich. A little disappointed that this isn't our new run rate on the tax front. I guess you got a whole quarter to figure that out.

Yes.

So let me just offer a couple of more quick sound bites and then we'll move on to Q&A. First off, you would have taken a note on the rate came in reasonably healthy at the 7.2% ex comp just as another perhaps relevant data point. The renewal retention ratio continues to sit at around 80% and that thing fluctuates between 78.5% and 81.5%. It doesn't move very much. And I look at it as one barometer to really understand whether we are turning the book or not in our efforts to get rates. So that's an encouraging sign from my perspective. Just another quick sound bite on the topic of rate. And we touched on this briefly when we had our fourth quarter call, and I think you're going to see it come into more and more focus we've taken a tremendous amount of rate over not just the past couple of quarters, the past few years. I think there are many pockets of the organization we're feeling very good with what the margin is. And the -- I guess, the need for rate is perhaps not going to be as strong going forward. So what's the punchline? We are actively rethinking what the balance is between rate versus growth. And over the coming quarters, you may see us take our foot slightly off the rate pedal and look to push harder on the growth in particular lines where we see the margin is particularly attractive and exposure growth is of more interest to us than rate. Rich talked about the top line overall growth. It was obviously some pretty separate and distinct pieces, and it does map back at least in my mind, to the topic of cycle management you would have seen. We took a pretty firm position, which, quite frankly, given our comments in the Q4 call and earlier last year, shouldn't have surprised anyone. We all know what's been going on with the rate. We've been very transparent about our view on the casualty or liability lines. And the discipline that we'll be exercising there and kudos to our colleagues that are actually putting that discipline into practice.

The other side of the coin, as Rich pointed out, we are still finding opportunities to grow within the insurance space, clearly, a bit of a mixed bag I think the note between the gross versus net, again, highlights, hopefully, in the eyes of those that are observing that this is probably a moment, generally speaking, where it's better to be a buyer of reinsurance than a seller of reinsurance, hence the delta between the gross and the net.

I do think just a final quick comment on the top line in the insurance space. there is a reasonable chance that we will see a bit more growth as the year unfolds, and we are revisiting this notion of balance between growth and rate. Pivoting over quickly to the loss ratio. I think in a nutshell, it's winter storms. We had more exposure to that than some. That having been said, we think it is still a good trade. The comments on the expense ratio. I share very much Richard's view that we'll be keeping it below 30. The movement that you would have seen in the reinsurance and excess segment, was primarily a result of a reduction in premium on the reinsurance front.

Switching over to the investment portfolio for a moment. And Rich flagged for you all the strength of the quality with a very strong AA minus, almost flirting with a AA. But a couple of other points that I would flag is that the book yield on the portfolio is about 4.7%. New money rate is 5% plus. So we still got some room there for improvement. In addition to that, the duration, as Rich pointed out, is sitting at 3.1 years. As a friendly reminder, the average life of our loss reserves, which is a big part of what we're investing is a hair inside of 4 years. So what's the punchline? The punch line is a couple of things. One, the quality is high. There's opportunity with the book yield moving up and we have flexibility around pushing that duration out which is a plus as well. So even if you discount the growth in the portfolio due to the strength of the cash flow that Rich was referencing, which is there is real and you see it quarter after quarter. But even if you put that aside, there is meaningful upside on the depending on whether you look at the overall including cash, $28 billion or if you want to back out the cash $25.5 billion, there's meaningful upside from there, both because of growth of investable assets as well as the new money rate, which, again, with the duration we have flexibility.

On the topic of flexibility, and I promise last topic for me, at least for the moment, is capital. And I know it's not something that we spend a lot of time talking about on these calls, but I did want to draw folks' attention to it. And that is our financial leverage, which is sitting at about 22.6% these days, which is a -- I don't know if it's an all-time low, but it's an all-time low in my -- some number of decades at the organization. I think it's important to take note of that for a couple of reasons. Number one, when you look at the returns that we're generating, we're generating it with a much higher level of capital or equity for that matter, more specifically in the business. Number two, I would draw your attention to the fact that we, as an organization, do not have an expectation for 22.6% to keep going down from here. This is a very comfortable place. We think we've got lots of room if an opportunity presented itself. So what does that mean? That means if you look at this business that's earning, I don't know, between $1.750 billion and $2 billion and something a year, give or take. And you think about where our leverage ratios are, what that means is we are generating capital significantly more quickly than we can consume it and that we will have significant amounts of capital to return to shareholders for the foreseeable. And to that end, even with us doing that, we still have a tremendous amount of flexibility to take advantage of whatever unforeseen opportunities may be coming our way. So I flagged that because what you saw in the quarter with the repurchase, what you've seen us do with special dividends and recognizing the earnings power of the business, and how we see the growth opportunities before us that we are going to, in all likelihood, have large amounts of capital to continue to return to shareholders and what we believe is the most effective and efficient way that is in the best interest of our shareholders. So I know we talk about repurchase every now and then. People talk about special dividends, but I just wanted to put those data points out there. And again, we can talk more about it during the Q&A if people wish to, but it seemed like that was a relevant topic of the day.

So why don't we take a pause there, Alexandra, if we could please open it up for questions.

[Operator Instructions] Your first question comes from the line of Elyse Greenspan with Wells Fargo.

My first question, I guess I'm just trying to, Rob, square away your comments, right? You started off by saying just pointing to read and fear in the market and then you were talking about standard market carriers especially national carriers, right, that brought in appetite and pointing to the market getting more competitive. But then you also right ended your comments by saying that there's perhaps some better opportunities to push for a little less price and show better growth. So can you just help me square what felt like introductory comments that...

Thank you for the question, Elyse. And what perhaps was not as clear as I should have been with my opening comments is that I think there are still pockets where there is good opportunity. I think a lot of those pockets tend to be more casualty related. We, as an organization, have a bent towards casualty as opposed to shorter tail lines, particularly property where the competition is most pronounced. So do I think overall, the market is a bit more competitive today than it was yesterday? Yes, I do. Do I think there are still pockets of the marketplace that we are a meaningful participant that offer opportunity? Yes, I do.

Okay. And then as we translate that in terms of just thinking about premium growth? And I guess, my comment is more focused on the insurance segment, right? It got slightly better this quarter. But I think from your comments on last quarter's call, right, I think you had insinuated growth in January might have been within range of 7%, right? So we could see the things -- it seems like slowed in February and March. So how are you thinking about just the level of pickup of growth that we could see...

I don't know -- you're right, Anthony, there's a lag. Sorry to interrupt you, Elyse, that your part there's a bit of a lag on the line. But I think to answer your question, and maybe we confuse the situation if we did, apologies. But we actually saw the top line improve as we made our way through the quarter as opposed to the other way around. So January was not -- did not prove to be our best month.

Okay. But then -- so for your comments about growth getting better, I guess, my last question, is that a Q2 comment? Is that more maybe Q3, Q4, just based on how you see that today.

We are hopeful that we will be able to do better in Q2, but I can't promise that right now. What I can tell you is that we, as an organization, oftentimes our quoting 90 days out, sometimes 60 days out, sometimes even longer than 90 days out. So the -- as we identify pockets where we are willing to make a trade as far as maybe a bit less rate in order for a bit more growth, it takes a little bit of time for that to come into focus. How that will play out, I can't promise that. I know what I've talked to my colleagues about, and I hear from them how they're thinking about things, and that's what I'm trying to share with you. So I can't promise that in Q2, we will grow x amount more. We'll have to see how it unfolds. But I am trying to give you a little bit of a flavor as to what the dialogue is within our club house.

Your next question comes from the line of Rob Cox with Goldman Sachs.

Just first question on property. I hear your comments this quarter and in recent quarters that the property dynamics are repeating themselves I'm curious where you think property is from a price adequacy perspective, whether it's ROE or whatever metric, and how you would bifurcate across insurance, reinsurance and maybe by geography?

So I think that's a pretty big question from my perspective. I think that there's still margin in a lot of places, but it's fallen off pretty quickly. I think it's fallen off most quickly in the reinsurance marketplace. I think then it would want or fall down into cat exposed or E&S property and probably the place where there's been the least level of sea change would be the admitted or standard risk property market overall. That having been said, that part of the market probably got the least bounce. But in my mind, the reinsurance market led the way up and the reinsurance market is leading the way down.

Okay. That's helpful. And then I just had a follow-up. Professional lines, you mentioned pricing trying to bottom there? Looked like your strongest growth at Berkeley since the first quarter of 2022 in professional lines this quarter. I don't think a lot of that was pricing. It seems like exposure grew. Do you anticipate seeing further opportunities in professional lines? And is there any other color you could provide on the quarter?

Sure. So I think Professional is a pretty broad category. I tried to fashion my comments around two areas that gave us reason for pause D&O, particularly public D&O and certain components of the EPLI market. That having been said, a lot of the growth that you saw on the professional front, much of it came from outside of the United States. My earlier comments were really focused on the U.S. market. So that's really what I can offer on that. As far as the places specifically where we think it's the best opportunity, that's not something we're going to unpack publicly.

Your next question comes from the line of Alex Scott with Barclays.

First one is on reinsurance. I know you mentioned better to be a buyer than a seller at the moment. So I just wanted to take your temperature on what to expect there for the full year. And when we look at the growth numbers for this quarter, is there anything funky in there around like restatement premiums or anything like that, that we should consider? I just want to make sure I understand the right kind of run rate to that business.

Nothing funky to use your words in the reinsurance numbers. And I think it's just a reflection of market conditions from our perspective, and you're seeing a combination certainly of a more competitive market. And simultaneously, you're seeing a couple of signs of ceding struggling to get their top line where they want it. So they're increasing their net. And that may feel good in the short run, we'll see how it works out in the long run.

Makes sense. Okay. I wanted to come back to the casualty reserves a little bit. I know this is sort of old news because you guys put out the for results -- sorry, the 4Q results. But would we be interested if you have any comments you'd share on the other liability and just what we see in there related to some of the early years is releasing on shorter tail casualty versus some building reserves in longer tail. I mean what would you say to us to help us kind of wrap our arms around that and get more comfortable with the trends we see.

As far as that goes, I think that's probably a bigger conversation than probably makes sense to hold up everyone's time on it. We have put a fair amount of information out and supplements out. In addition to that, I think some of our folks in an effort to help piece it all together, have reached that to yourself and to others. And if you'd like to further the conversation, we're happy to help you piece together the public information. Obviously, there's a bit of a constraint as to how far we can go, but we'd be very happy to pick that up with the Alex offline, but I think that's not going to be a quick answer.

Your next question comes from the line of Andrew Kligerman with TD Cowen.

The first question is around the capital management, Rob. I'm trying to frame your appetite in terms of what's bigger? Is it the buyback, the onetime big dividend, special dividend? Or is it growth in a challenged market. Because as I look at what you did in the first quarter, $302 million, that's a lot of buyback as much as you did in all of 2024 when the stock price was about 20% lower and the earnings were very similar to what we're seeing today. So yes, where do you do a big dividend like you did in '24 or '25? And then where should that leverage ratio be? You said 22.6% is too low, where would you like it to level out? So sorry for the long wind on this one, but why the big buyback in the quarter? And what's the appetite buyback versus dividend and where will the leverage be? So a lot to unpack.

Okay. Well, thank you for the question, Andrew. I guess a couple of things there. First off, as far as the 22.6%, I did not suggest or and if I misspoke, Shame on me, but I didn't suggest that we wanted to go lower or higher. I think what I tried to suggest to you is that we didn't see it going much lower than that. I'm not suggesting that we want it to go considerably higher. It really depends on the circumstances at any moment in time, and how we're positioning the business for what we see today and what we envision for tomorrow. Number two, the point that I was trying to articulate earlier is that the opportunity for growth for the organization today and what we see in all likelihood tomorrow is -- we think we'll be able to grow, but it's not going to be the growth rate that we enjoyed some number of years in the past or for some number of years. So that's just a reality of market conditions. So again, will there be growth? Yes. Was there going to be the kind of growth we saw in the past? Probably not. So with that all having been said, the reality is with the company generating, call it, 20-plus percent returns or said differently, call it, flirting with $2 billion of net income that is a lot of capital that we need to figure out if we don't need it, how we're going to return it to our shareholders. And that's just the reality. As far as what levers we utilize to return capital to shareholders, that's something that we grapple with every day and we think about what is in the best interest of all shareholders as far as -- whether it's special dividend, whether it's repurchase, whatever it may be. As far as what we did in the past and when we bought back, I'm not we can take it offline and try and unpack what we did this quarter versus that quarter. A lot of it has to do with valuation at the moment in time. A lot of it has to do with how we see growth opportunity. So there's a lot of things that we consider. If you're looking for more guidance as to what we're specifically going to do to be returning this surplus of -- significant surplus of capital that we're generating at this today and expect to be generating tomorrow. I don't have a particular road map to share with you but it's certainly something that we will continue to be transparent about on a quarterly basis.

Okay. And with regard to the gross versus net written premium, the net being 3.2 against the gross at 4.5. Any read through there with the lower net? Any color that you can share on why that net was materially lower?

It's a combination of mix of business. And in addition to that, as we tried to flag earlier, there were opportunities to buy some reinsurance of what we believe to be attractive terms.

Got it. And just to sneak one last one. Prior year development, anything unusual in the casualty lines, plus or minus?

Nothing particularly exciting. If you want to do a deeper dive at least to the extent we're able -- we'll share with you whatever we're allowed to share with you on that. And obviously, there'll be more detail available in the queue.

Your next question comes from the line of Michael Zaremski with BMO Capital Markets.

First question kind of pivoting back to social inflationary lines. Rob, loud and clear, we heard your comment, I think most would agree with you that the industry is still getting their hands around loss cost trend. Industry is doing very well, though overall. Would you be willing to come in paint a broad brush on kind of how brokes loss trend in GL, umbrella, commercial auto, because like back to Alex Scott's questions, we all do see Berkley like peers adding truing up your loss picks a bit higher as well. So curious if you could add any color there.

If you're asking me to share with you what our trend assumptions are by product line, that's not something that we put out, generally speaking, for public consumption, as it relates to our loss picks. We are constantly looking at our data. And what is it telling us? We're constantly looking at industry data, and we're looking at other data sets as well, both traditional and nontraditional and trying to respond to that. We put it all into our sausage maker and then a lot of folks sit around and try and apply our judgment to the best of our ability. So I'm not sure what more I can add, Mike, at this stage other than we are very focused on making sure that our picks are appropriate. And based on what we conclude on that front, we are looking to actively respond from a rate perspective, terms and conditions. And I think one of the points I should have made earlier that we tend to not always focus on as much as we could or should is the role that jurisdiction or territory plays as a component of selection. So anyways, I suspect there's not a satisfactory answer amongst my commentary to you. But the long and the short of it is, we just don't get into that level of detail by product line, what our view around trend is. But I can assure you, we are very focused on it, and we are responding in what we believe is a timely manner, not just for the PIC, but the action that, that would suggest we should be taken from a selection and pricing perspective.

That's fair. Yes, I just thought worth asking some of your peers have reluctantly, I guess, disclosed some broad-brush trends. Just kind of pivoting back to the debt-to-cap discussion. And maybe I'll try another way, you gave the context earlier, but we can see, as you kind of alluded to, your very long-term average at the cap escalates low 20s, mid-30s, but it's averaged 30 plus. So can you maybe remind us, are there like circumstances when you when you are increasing your leverage, is it when you feel there's -- you're very bullish about the marketplace, or any additional context you think worth mentioning.

The answer is that when we see opportunity in the market, we are very happy to, in the short run, flex that leverage up. But quite frankly, we are very comfortable where we are today, but we certainly have the ability to flex it up if the opportunity presented itself.

Your next question comes from the line of Bob Huang with Morgan Stanley.

So my first question is also on the capital side in a different way, right, I think you talked about willingness to grow your business you clearly have capital. Is there some way to think about the balance between growing organically versus buyback and dividends? Are there lines with...

Bob, what -- to make sure I'm following, when you say inorganically as opposed to organically, are you talking about like M&A?

Yes, sir. Yes, sir. Yes. So like if we think like it does M&A make sense for you guys? Are there lines where you think M&A makes sense?

It's certainly some. Most things at investment bankers are out trying to sell. We get a phone call on most of the time when you hear about a transaction, we're already somewhat aware of it because we got the phone call. But as we've shared with some, we tend to err on the side of being cautious and cheap. And we recognize that most M&A transactions in this industry, not all but most. If folks could do it all over again, at least the buyers, they probably wouldn't. So I would never say never. We certainly look at things from time to time, but we are very comfortable with the organic growth model. We are pretty disciplined in how we operate the business, and we are willing to be patient because of this philosophy around risk and return. But again, you never know what tomorrow will bring, but there's a reason why we have not been historically active on that front. SP1 Really appreciate that.

My second question is on the growth side of things, right? And this is some of the thing that's been asked somewhat. And I'm just curious, in the beginning of the call, you kind of talked about the market is in a greedy environment, so to speak, right? And as you think about pivoting to growth, are there areas where you feel the market maybe is too greedy and then you just kind of have to avoid. Are there areas where you think maybe the market is too cautious, and it represents a very big opportunity for you or a semi big opportunity for just maybe if you can give us a little bit more of a breakdown there.

So the answer is -- and again, maybe I created more confusion than clarity with my opening comments and apologies for that. There is no doubt that if we want to use a broad brush, the market is overall more competitive today than it was a year ago, let alone 2 years ago or 3 years ago. That having been said, there are still pockets particularly within certain aspects of the liability space that offer some what we believe is attractive opportunities as far as available margins. It is not as broadly available as it once was, but it is still there. The shorter tail lines, not all, but much of them have become notably more competitive in certain aspects of the liability lines have become more competitive. But because of the breadth of our offering, we are still able to find opportunities where we still think that there are attractive margins that are available. And attractive enough to the point that we are willing to take our foot off of the rate pedal a little bit, which is why I'm suggesting as our colleagues are contemplating that and pivoting their behavior, there is a likelihood that you will see some level of growth that is coming from these niche opportunities. And we saw our colleagues pivoting more and more throughout the quarter, which is why I was suggesting to -- I believe it was a lease earlier that January, the growth was less relative to March, and that was primarily a result of our colleagues pivoting reminding you and others that we are oftentimes quoting 90 days out in advance. So it takes time for that pivot to convert into binders or written premium. What does that mean for Q2? Honestly, I can't promise anything. I can only share with you what the narrative is that's going on within our organization, and how we are seeing in the marketplace, and how we are adjusting our approach.

Your next question comes from the line of Tracy Benguigui with Wolfe Research.

Since casualty reinsurance never got the same balance as you saw on property reinsurance, I'm curious, is this business rate adequate now, or is it approaching rate in adequacy?

So I think you would have heard for some number of quarters or beyond us bitching and moaning about the casualty reinsurance marketplace, and how we didn't think seating commissions made sense, and that's a pretty broad brush that I'm using there. So if we're writing the business, we believe that it's an acceptable margin. But as you would have seen, our casualty portfolio within reinsurance was down considerably in the quarter. And that is not just because -- not because we're charging less for the same exposure, it's because that book of business is shrinking. I can't speak to the broader market. I can only talk to what our colleagues are doing as I understand it.

Understood. Also, you mentioned potential upside from net investment income, and you also noted certain insurance pockets like casualty, you might prioritize growth over 8%. So are you taking more of a total return approach when setting combined targets for your underwriters, maybe putting more weight on net investment income, which will allow you to grow?

The answer is no. We have a view on loss ratios. And to take your comment to an extreme, we, as an organization, have never subscribed to the notion of cash flow underwriting or anything akin to that. Are we conscious of what the contribution is from the investment portfolio, of course, we are. We are acutely aware of that, but we are not willing to throw the underwriting discipline out the window because of where interest rates are today. We look to each component of our economic model to stand on its own 2 feet and justify the capital that it utilizes.

Your next question comes from the line of Mark Hughes with Truth Securities.

Rob, you mentioned that -- yes, you mentioned that the large standard carriers are ramping up their appetite you saw a step up in competition. Is that largely on the casualty side you're referring to? Is that influencing the balance in the E&S and standard markets? A little more on that would be interesting.

They are active on the property side and to the extent that it's on the casualty side, ironically. It's been in pockets of the casualty market that are okay, but not great. So it's really bizarre. They're not going after the good stuff. They're going after the marginal stuff. And in some cases, I mean, they're taking it for 30% off, which is bizarre because they could have had it for 10% off. So as we say around here, and certainly, my boss over here has reminded us, even long tail business, you write a cheaper tail business. So they'll -- they can keep going with 30% off, and we'll look forward to seeing it back in a couple of years.

Yes, very good. And then to the extent that you're successful in pivoting to growth here in the second quarter, does that have a meaning for your loss picks? Could we potentially see loss picks a little higher?

Sorry, Mark, you broke up a little. Could you please repeat that?

Yes. The question was if you do -- Rob, can you hear me now? .

Yes. Thank you.

Okay. Well, very good. If you're successful in generating some better growth in the second quarter, does that have a meaningful loss pick could you possibly see loss fix go a little bit higher if you're not pushing as much on rate?

I don't think that, that would be something that I would lead to, in my view. I think what we're really seeing is that there are pockets of the business where we've been very, very focused on rate, and we think we have room, and maybe it will prove to be that the picks were -- had more room in them than we had originally anticipated. But we'll have to see with time.

Your next call comes from the line of David Motemaden with Evercore ISI.

Can you guys hear me? .

Yes. Thank you.

Great. So just back on the topic of just maybe letting up a little bit on the rate increases in some lines. And I may have missed this, so I apologize in advance. But is there any like broad class of business that you had referred to? Is that short tail, is it casualty, is it professional lines? I'm not looking for like specific sub lines within those, but I was hoping you could elaborate on like a little bit just which broad area you think that you guys might have opportunities to let up on price and maybe we can see growth accelerate?

Yes. We just haven't put that detail out there. We'll think about if there's something we can tuck into the queue. That could be helpful along those lines. But at this stage, we just haven't put anything out there yet, thank you.

Got it. And then the growth in the insurance business in the short-tail lines continues to tick along I was a little surprised at that, just given the pricing pressure on the commercial property side. So I was hoping maybe you could unpack that a little bit more for us and just how we should think about the durability of the growth there.

I think that you're focusing on it through the lens of commercial, and I would encourage you to broaden your lens to incorporate our A&H business that we've spoken of in the past as well as our private client business.

Got it. And then maybe just just one more, maybe just a high-level question. I think you talked about the average life of your reserves at about 4 years. I was a little surprised that it hasn't really changed that much. I think it's been there around like the last few years. But I guess I was wondering, it does feel like claims durations are extending. So I was hoping maybe just philosophically, just taking a step back, what you guys are seeing. Do you think we're seeing more stability here in claims payment patterns as we think about looking through the reserves?

I think that at this stage, we feel pretty comfortable that -- maybe just take half a step back, David. I think that we all know that the industry got caught a bit flat-footed with inflation, particularly social inflation, and it's been a bit of a process of catch-up, I think that picture, as we've all discussed ad nauseam was clouded by COVID for us to a great extent. And I think at this stage, the industry and ourselves included, have adopted and adapted to the new reality of the claims environment and what we see coming out of the legal environment.

Your next question comes from the line of Joshua Shanker with Bank of America.

So I guess I want to talk about your go-to-market strategy or maybe apps go away from market strategy. As I see the decline in the reinsurance book. I'm trying to understand the complexion of your book. Sometimes people participate on syndicates and time as you have some unique one-off deals. I know your program business is in the program management -- in that reinsurance bucket, and that's probably seen some competition MGAs. Can you talk about as the business is leaving, are you walking away? Is it being completed away? What's the process? And what exactly are you losing?

A lot of -- the lion's share of what we're losing would be a treaty reinsurance business. And it's due to how we think about appropriate pricing.

[indiscernible] on that, or are those are one-off deals that you're managing?

No. They tend to be a subscription market, if you like, or a treaty that has multiple participants.

And so someone else is coming with the capital, you're walking away and there's plenty of...

Here coming into the capital or the cedents looking for better terms than we're prepared to offer and maybe they choose to keep it. Certainly, a trend that we're starting to see more of is cedents in some cases, if they can't get far better terms are looking to keep it as a way to bolster their own top line.

And then switching to the competition from MGAs right now to something we talked about in past calls. I mean the insurance growth looks fairly healthy. Are you seeing less competition in the past, or is it heavy as ever?

No, we are not seeing the delegated authority model in MGA, et cetera. We're not seeing that subside in any way at this time.

And then one last one. As you're thinking about deployment of capital, obviously, returning capital is a big deal, but you'd like to yield in the market. Is there anything attractive in the alternative spaces compared to past quarters where you might be deploying money into more illiquid products.

We certainly have a participation in the alternative space. I would add that we do not have a participation in the private credit space, just to make sure there's no question about that. But right now, given what the public fixed income market is offering as far as yield, we don't feel much need to look beyond that.

Your next question comes from the line of Katie Sakys with Autonomous Research.

Really quickly, how do you describe your approach to managing auto exposures today versus your comments last quarter on shrinking exposures. I think with your very frank description of the auto liability market today, I'm just kind of curious as to what's giving you confidence in the growth showing that but it's not resulting in adverse selection.

Well, just to be clear, the growth that we are experiencing is premium, not unit growth or exposure growth. So the rate that we are taking far exceeds the growth rate. So exposures shrinking and the rate is increasing. So the growth that you saw on page or whatever it is of the release it's all rate and then some.

Yes. Makes sense. And then any new news on Berkeley embedded. I realize it's only been a couple of months, and I might be ahead of my skis here. But are there any products that have gone live with that? And if so, how are you guys thinking about channel conflict with your traditional distribution partners there. So as far as Berkeley embedded, they are off to a great start, and they do have one product offering that is chugging along in the consumer space. And as it relates to channel conflict, right now, the type of business that we are entertaining through that avenue is really not something that we would be accessing in any other way. That having been said, there is a reality, as we've talked about in the past, once upon a time, there was a defined swim lane for carriers, and there was a defined swim lane distribution. And I think what we're seeing more and more of is those lines are getting somewhat [indiscernible]. And while we are very committed to our traditional distribution, ultimately in the end, our focus also has to be on the insured, and we need to be willing to meet insurers where they wish to be met.

Your next question comes from the line of Andrew Anderson with Jefferies.

Just on workers' comp growth has been a little bit lighter there the last couple of quarters. To what extent is there an opportunity for that to pick up again, or is there maybe a binding constraint here you're thinking about with regards to price or medical trend uncertainty?

Yes. We're just I can't tell you exactly what the next quarter will be, but generally speaking, directionally, we have had somewhat of a defensive posture with much -- not all, but much out of the comp market that we participate in. And we're looking forward to that market, experiencing some type of firming at some point. And when it does, I think you will see us expand. And hopefully, the opportunity will be there for us to expand dramatically.

Got it. And I know we've touched on this a bit, but just kind of high level here. When you're talking about the standard or national carriers taking back some business, would you describe this as more of normal ebb and flow, or are the standard national carriers may be going deeper into E&S and more into lines of business that have been stickier in the E&S channel historically.

I don't think that they are going to derail the E&S marketplace, certainly not today and likely not tomorrow. But we certainly do see them more present in the market with an appetite that is seemingly a bit broader today than it was yesterday. And at times, it would appear as though they are misclassifying risks. I don't know how else you could get to some of the rates that they are entertaining. And we'll have to see how it unfolds. I think it's, again, more pronounced in some of the shorter tail lines it exists, but less visible in some of the liability lines.

Your next question comes from the line of Meyer Shields with Keefe, Bruyette, & Woods.

I appreciate you taking my call. First question, I guess, Rob, last quarter in this quarter, you talked a little bit about taking the collective foot off the gas in terms of pricing in some lines. Should we think of that as a top-down directive or is that bubbling up from the various underwriters?

Look, we, just to be clear, are not a top-down organization in that sense. We certainly pay a tent, and we ask lots of questions. We want to understand. But we are not top-down directing our colleagues throughout the operations as to what they should or shouldn't charge. We looked at the data and grapple with them. But again, this is an organization where those types of decisions are driven by our colleagues that run the various businesses, and that's just part of our philosophy. That having been said, we do use group data that gets aggregated and other data sources to bring it to bear and put it in the hands of our colleagues running the businesses, so they have as good an information set as possible to make their decisions.

Okay. That's very helpful. And then very briefly, whether it's Lloyd's or Reinsurance business, does Berkley have any exposure to the Middle East conflict?

Nothing of consequence and to our -- we're just not a big player in the war space. We're a very modest player in certain aspects of the marine market, and we are very active users of or exclusions.

Alexandra, anything else?

There is one phone question. This comes from the line of Brian Meredith with UBS.

I'll keep it just one question here. I'm just curious, in your growth thoughts for the year here. Is any of that related to perhaps your incubator type businesses transitioning into segments. And I'm thinking something like the Berkley Edge. Maybe you can talk a little bit about Berkley Edge, and how is that doing so far?

So I think that some of the new ventures are off to a good start, but relative to the overall size of the group, while we look forward to their meaningful contributions it's not likely in the short run that they are going to get enough traction to move the needle for the group on their own. I think the opportunity is certainly going to come from their contributions, but will come from many others throughout the organization. As far as Berkley Edge, they are up, they are running, and they are off to a good start. But just to level set expectations, it was a standing start that they've begun from, but we're very pleased with the progress that they're making, and we think it's an outstanding group of people that are going to bring value to distribution customers and certainly to capital.

There are no further questions at this time. I will now turn the call back to Mr. Rob Berkley for closing remarks.

Alexandra, thank you very much for your assistance this evening. Thank you to all who tuned in for, again, your interest in the company and the questions. as I hope people would have gathered by any measure, a very solid quarter. and perhaps equally, if not more exciting, how well positioned the businesses to continue to grow, prosper and generate value for stakeholders. We look forward to speaking with you over the summer. Thank you very much. Have a good evening.

This concludes today's call. Thank you for attending. You may now disconnect.

[Audio Gap]

U.S. Financial Services Conference. If you're listening to this podcast here in this room, you're in the insurance fleet, and we have the session with W.R. Berkley Corporation beginning now. We're really pleased to have Rob Berkley, CEO and President of the company and the time of the Berkley management in general and breakout meetings, thank you for being here.

Pleasure. Thank you for the invitation.

And as I was coming in said that Rob will actually tell you what's really going on. So we're going to find out in terms of where the state is.

Certainly, I'll tell you what I think. It may not be spot on, but it's not for a lack of effort.

Well, I will -- I'll start with the hard question then.

All good.

So one thing that you -- that -- I feel it's dogged you a little bit over maybe about 2 years ago, you said you thought that normalized growth is a 10%, 15% situation. And obviously, we're coming to low single digits right now. Does that mean there's a bunch of 30% years as well? Is 10%, 15% a CAGR for normalized over the long term? Or how do you think about that sort of predictive sort of view of what the growth rate of this business in this industry based on the latest experience?

A couple of comments, Josh. I think that one thing that is worth noting, at least from my perspective, is without a doubt, we all appreciate the world is moving faster changes abound and coming at us more quickly, and that includes even the sleepy insurance industry.

And I would tell you that the softening of some product lines that we have seen over the past 12 months has been far more rapid than we would have anticipated. I was chatting with a colleague just the other day and talking about the property cat market as an example, even though we're not a big player. And just taking note of how what would have been a softening over a 2- or 3-year period, felt like it happened in less than a year. So what do I think that we, as an organization, should be able to grow at? I think we should be able to grow that throughout a cycle, give or take, at about 10%. I think the math that I had done once upon a time that you were referring to was I said that I'm going to see social inflation going away anytime soon. So it means you're going to need rate of more than 5%, less than 10%. And then I said, what do I think, all things being equal, that we should be able to grow at above and beyond that. And that's what led me to the numbers that I had shared.

But for a comment a few moments ago, I think there are parts of the market that got much more competitive, much more quickly. And there's good news and bad news with that. The bad news is that it creates a bit of discomfort sooner than you had anticipated. The good news is that it means that we will likely get to an unpalatable place more quickly and will create opportunity. So we -- that's how I think about it more specifically. Do I think that we will be able to grow as an organization going forward? Yes, I do. Do I think that we will be able to grow at the same rate that we've been able to grow at over the past couple of years? Probably not. And that's just a reflection of market conditions.

I know that you alluded to the notion, will you be able to grow at all in some conversations that we've had. And my view is, I think the breadth of our offering and how product lines have decoupled from one another and where they are in the cycle will allow us to maintain some level of growth. That having been said, for companies, some of our peers that are more of a monoline play, I think that when they have a tailwind, they will definitely benefit from that. But when they have a headwind and if they do appropriate cycle management, they will have no choice but to shrink. And if you look at us as an organization and you'll unpack us, we have 60 different businesses at any moment in time, there is some part of that bouquet that is shrinking and then some part of that that's growing.

Two items. If anyone in the crowd wants to ask a question, you can just interrupt me at any time, raise your hand and happy to do that. And to the guys over here, I think that one of the mics might be a little too sensitive, if you can -- a bit of a rumbling. A little rumbling. So just to make it...

All right. So one other item, which -- so when you try and pin things down into a single number, you wind up getting too obtuse in terms of it being as a tool and Berkley has been kind enough to give us a renewal pricing number every quarter for everything in aggregate, which is -- doesn't really tell us what anything independently is going on. But when you look at the pricing up for you guys, 7%, 8% at a period of time when ex workers' compensation, which is above the growth rate of the premium volume of the company. It may seem to be the case that, that is -- means that the company is in the state of shrinking. So I think there's some nuance here, and I think it might be worth sort of clarifying.

I think to unpack that a little bit, Josh. The answer is yes, that is very much the case in some parts of the organization. We good?

I don't hear the rumbling anymore.

I need to stick with insurance. Thank you. So long story short, back to the point I was making earlier, Josh, there are parts of our business that are taking meaningful rate. Let's just -- for purposes articulation, let's pick on commercial auto as an example, if we could because it's at least to me, a very obvious one. That is an example of a product line where -- I mean, it is, in my opinion, from an economic model. It's a complete sh** show. And some people may try and put -- am I allowed to say that? I guess it is. I don't know. We took it one more step.

So a lot of folks are trying to put lipstick on the pig. When the day is all done, that's just not reality. And if you look at us in commercial auto, yes, you'll look at what we published on a quarterly basis in our earnings release and other stuff we put out there that looks like that product lines are growing. But the truth is it's all rate. So when the day is all done, yes, Josh, if you look at it in the aggregate, your point is correct. But if one were to unpack it, there are certain parts of our portfolio where we say, you know what, we like the margin a whole lot. And to articulate a point, we don't need to generate a 23% if we can generate a 20% return and grow the portfolio by a meaningful amount, we're very happy to do that.

There are other places where we say, you know what, come hell or high water, we would rather not write the business unless we can get this amount of additional rate. So I appreciate your point. I think at a macro level, it very much holds water. And yes, we do provide this as a macro data point as far as rate goes because we want to give people like yourself and others a little bit of visibility. Could we unpack every product line? Yes, I guess we could. But at some point, you just end up going down too many rabbit holes.

So look, no 2 times are going to be the same. I just -- I'm going to throw out some numbers here. In 2006, Berkley hit a premium volume peak at $4.9 billion. And 3 years later, a firm-wide premium volume was down 25% to $3.7 billion. It's a cycle, sometimes you pay your underwriters to grow, you pay them to deliver profits for you. But it does seem like that the cycle in my mind works is there's periods of growth and periods of stagnation. Do businesses shrink in size?

Some of our business is absolutely shrink in size in response to market conditions and our view about cycle management. We are not in business to issue insurance policies. We're in business to make good risk-adjusted returns, and we are entirely on apologetic when it comes to that.

So when we think about this, I know that you are a student of history, and I am too, and I very much appreciate the notion of what you can learn from history. And I also appreciate the comment that those 2 cycles are the same at the same time, in some ways, they're all the same. They're all the same in the sense that what really drives the cycle remains consistent, that being human emotions, fear and greed. But the reality is that when we look back in history and we try and learn from that, extrapolate and apply to the present and the future, one needs to also take into account what some of the differences are. So once upon a time, back to use your point in 2006, the organization that I work for, as you pointed out, was not just a fraction of the size, but it was a fraction in the number of operating units that make up the group.

Our businesses that we had back then were much more concentrated around a limit -- a more limited number of components of the marketplace. So going to this notion of how product lines have decoupled as to where they are in the cycle relative to how it once was, the breadth and the diversity of our offering today, which is 60 businesses as opposed to approximately 30 back then and how many different parts of the market we play in, whether it be accident and health, whether it be private client on the personal lines front, and whether it be our footprint outside of the United States, we are a far more diverse organization. So yes, we will absolutely 100% continue to focus on cycle management, but the decoupling of product lines, combined with the breadth of our offering today compared to '06, I think, puts us in a materially different place for more stability around.

For more stability around?

For more stability in the top line. But what you will see throughout the cycle is the way we get to a place will be radically different because of the 60 businesses that make up the group, some businesses at any moment in time are growing, some businesses are shrinking. And that's just a reality as opposed to once upon a time when we didn't have that diversity.

Those that can't do teach and they usually sit in the cheap seats. At the risk of being completely wrong, I'm going to say that had you not renewed that business when you were at a 4.9 peak 3 years later, if you kept it going, probably that a lot of that business that you thought you needed to renewed turned out to actually be profitable for somebody else.

Josh, I think what you're highlighting is one of the great challenges of this industry, and it is a component of what drives the cycle. It is, without a doubt, the timing mismatch that exists in this industry between when you make the sale and when you know your cost of goods sold. And they are without a doubt -- and the longer the tail, the more susceptible you are to that. And without a doubt, we have a history of, quite frankly, erring on the side of caution more often than not. And what -- thank you for ripping open the scad, though it's an old one. But yes, we erred on the side of caution and we probably shrink too early.

And it's one of the great questions that we are grappling with right now today with some of our product lines where we have taken a huge amount of rate in response to inflation, both economic as well as social inflation. And how well do we understand our loss costs? Are we having the right posture? Should we be, quite frankly, more offensive than we are? Are we going to look back on this time 10 years from now, 15 years from now? Or are you going to be sitting here politely telling me, jeez, you really blew that. You tapped the brake too early. And you know what, I think there's probably a better-than-average chance. The answer will be yes. We are desperately trying to get the porridge not too hot and not too cold. And I promise you, we will not succeed perfectly, but we are doing our best to try and optimize that in our quest to understand loss costs, but it's hard.

And are you of the mind that you will be reflecting on this time 10 years from now, think that we were too cautious? Or do you think that you've gotten better at trying to measure that caution properly?

I think we're better at it than we once were, but I think there's still plenty of room for improvement. And I think that more likely than not, in my opinion, it may possibly prove to be that our more recent years are more comfortable than is fully appreciated.

So in students of history, if we go back 20 years ago, I think that the '97 to '01 period was so traumatic for people that you went about 10 years where everybody said they want to be a property writer. And Berkley said, we like the long tails. We like the float. We like understand our losses. And it's only really recently that you sort of found more -- your mix of business become more property-oriented now than probably any time in the history of the company. Maybe I'm wrong about that. It's a long history. But there's a higher property component now. Should we expect that the business is permanently more volatile when it comes to cat exposure? Or is that -- will that change over time?

I think actually, the business today on a relative basis is no more volatile than it was back then. You need to please keep in mind how much larger the business is today overall.

Now the other piece is we've been through a period -- let's bifurcate it between commercial lines insurance and reinsurance and other if we can. So we are not blind. We are not death, and we do our best to try and pay attention. We understand what's gone on in the past couple of years within the property market as far as rate adequacy, both through reinsurance as well as certain aspects of the insurance market, we leaned into it. You should expect as that market erodes, there will be a moment in time where that portfolio starts to shrink and it will shrink considerably. When the day is all done, no different than many of your guests here today at your conference, we view ourselves as capital managers. We're going to expose the capital when we think we can make a good risk-adjusted return, and we will have no qualms about dialing that down when we think the window shrinks.

I think the other piece pivoting over to the noncommercial, if you will, is our efforts to build out our private client business, which certainly has a meaningful property component to that. We spend a lot of time focused on that portfolio and looking at it through the lens of ERM and cat management. We have some great partners on the reinsurance front. And again, if you look at our history of managing volatility, including the recent events that have plagued the personal lines marketplace. I think that we've demonstrated again how we manage volatility. It is true also over the past couple of years that the reinsurance market had it more disciplined, hence, why we leaned into it as a writer. But as a cedent, there was -- we have enough capital and enough flexibility that we can dial up and dial down our net depending on the value that we think we're getting and buying reinsurance.

So do I think that you or others should view us as though we've gone through some type of sea change as far as our appetite for volatility and specifically cat? Absolutely not. Do I think you should view us as an organization that's focused on risk and return and when the margin is there and the rates are attractive, we'll lean into it? Yes. At the same time, when it's not, we will dial it down because volatility is a component of risk when we think about risk and return.

As I mentioned before, we started talking, I'm aware of a mind who was a claim with Berkley one. And I only know like 45 people and like 4 of them have insurance claims this winter. I've asked this a couple of these things, and I actually get, is 1Q '26 a large claim quarter for the industry?

I think it's a little bit early to reach a conclusion on that. I think the -- and quite frankly, until things fall out, there can be a bit of a latency to it, relatively speaking. Do I think that there will be claims activity? Yes. I think there will be. Do I think it is going to be something that is overwhelming? No, not likely. Do I think it is just going to be an insurance event as opposed to a reinsurance event? I think more likely than not, you're going to see reinsurers maybe not get hit hard, but I think at a minimum, it's going to tickle them.

All right. And as I said, if anyone has a question, please ask one thing that I argue when you are an owner of Berkley stock, you're not just getting a company with a long history of underwriting track record, you're also getting a long investment track record as well. And you've done very different things in your investment portfolio than a number of your competitors. One of them was taking private fund risk through private equity and other investments.

And the market, Dow hit all-time high just the other day. And the Berkley fund investments, which have been a huge generator of return for investors for a very long time. It's been a couple of years where they've lagged the market more or less. And what's been going on in that portfolio? Is the mix changing in response? And are there some lessons learned?

Yes. I think a couple of things there, Josh. First off, as far as what are we doing today, the vast majority of where we're putting new money is into the fixed income market. From our perspective, if you go back in time, what invited us or the invitation to the alternatives was really when interest rates were so low and people needed, including ourselves, had to explore the alternatives.

I think what we have put some money with some third parties. Some of that has proven to be rewarding, some of it less rewarding. But I think the other piece under the broader banner of alternatives for us is and real estate being an example of that is where we will -- and we do some other things as well, where we will invest money and we don't get the same marks on it that you would see from like a third-party fund. So I think that can skew the picture a little bit. But in the end, aside from a disappointment experience with one third party, I think that it tends to be lumpy. And you should -- I don't know what kind of forward-looking stuff I can say. But the punch line is I think that, that continues to be an opportunity. And I would expect over the next couple of years, you're going to see yet another harvesting of some of those rewards.

Well, somebody who is often viewed as part of the insurance ecosystem is Mr. Buffett, who I guess is retiring, and he's sitting at $400 billion of cash and can't do anything with it. You guys also have a cash and you're investing in fixed income. But is this a signal from the Chairman that right now, the markets are frothy?

I think that well, first off, I'm just to be mentioned in the same sentence as Mr. Buffett is, I think, overly generous. That having been said, I think that our view is that the equity markets, by and large, though it's somewhat concentrated our icy. And again, I think that's somewhat concentrated. And when the day is all done, when we think about, again, risk and return and we think about the overall returns that we, as an organization, are able to generate, we think about where, again, interest rates are, and we think for us to be pushing our money into AA- flirting with AA average quality and the duration sitting at, give or take, about 3 years, we're still generating high teens, low 20 returns.

So there is not a lot of broad incentive for us to introduce more risk unless we're confident we're going to get paid for that risk. And when we look out in the market, we're not in a rush to take more risk.

Does -- perhaps in May, I guess, Mr. Powell will step down, and we'll see there will be a new Fed Chairman, maybe some new ideas. Does that cause you to want to lengthen the duration of the portfolio or maybe take it down one notch in terms of credit to lock in some higher rates here?

It's certainly something that we're looking at, but compromising on quality is not something that you should expect us to do anytime soon.

We certainly, without a doubt, have room to play with the duration, whether we take it shorter, whether we take it longer. Just as a reminder, the average life of our loss reserves is, give or take, 4 years. So we certainly, at some point, if we wish to, can take it out longer. But we are -- we tend to be not opportunistic on the credit quality. We tend to be much more opportunistic on the duration.

Speaking of reserves, I think that you're not the only one, but certainly, people associate a discussion of social inflation, you entertain the top of a great deal. I think we've been duly worn. And so if something happens, we'll know that we got the signal. Are you seeing currently anything new in the market? We're going to look at your triangles in a couple of weeks, I guess, and we'll make our own determinations. Has something happened? We know in this state, for example, obviously, the tort forms come in and tamp things down a little bit. Is the social inflation continuing to advance in our regular sort of way? Or has the change been moderating?

I think it varies by state and the position one finds themselves and varies by company. There are some companies that got queued into the social inflation issue earlier and with some companies that even once they were queued into it, responded earlier. There are others that saw it and responded later. So where people are and getting caught up and then staying on top of it, I think it varies by market participants.

As far as the broader legal environment goes, I think there is a lot of chatter. We certainly have seen quite a bit of discussion around litigation funding, which is turbocharged a challenging environment. We're seeing some action taken in certain states around this. So what's the punchline? The punch line is, I think the trend continues upward. I think by and large, the industry is either catching up or has caught up. And do we see it abating? Not as much as we would like. And certainly, in some product lines, it continues to be remarkably challenging. I mentioned auto liability earlier. I would say, under that creeps into excess and umbrella in some respects. In addition to that, I would tell you, interestingly, medical professional has also been very challenged under the banner of social inflation.

So I think for us, as an organization, I think we've done -- we are in a good position having caught up, and we just need to calibrate whether we're more than caught up, a little bit less than caught up or what the rate need will be going forward. There may be some product lines that were more than caught up and we'll be willing to maybe be a little bit more adjust our approach, I should say, to rate increases.

The one thing I never really understood, let's just say that social inflation, jury judgments and litigation finance is out of control. And therefore, you need a margin of safety in your pricing in order to account for that. And the more out of control, the more margin of safety you need, which I think has -- may separate the wheat from the trap in terms of who the good underwriters are and aren't and two, might ultimately increase your margins because you had a higher margin safety. To what extent is the difficulty in forecasting claims outcomes positive versus negative for a great underwriting organization? And we like it to be unpredictable because that's where we really excel. Or is that a wrong way to think about things?

Well, I think, Josh, if I'm understanding your question correctly, you're getting towards isn't an advantage for there to be unknown, if you will. Is that correct?

That's correct.

So yes, I think that ultimately, that does create an opportunity, but even too much of something can give you a bit of a bellyache. So when the day is all done, I think that for us as an organization with expertise certainly on the underwriting side and on the claims side as well and in many activities between those two, the expertise and if we have better expertise than someone else, that certainly helps.

That having been said, I think one of the challenges that the marketplace has faced is the challenges with social inflation have been that this is not a stationary target. This is a moving target. And you look at an outcome and that will instruct you to think a certain way or a series of outcomes, and that will instruct you to think a certain way. And you can take that information and do that math and say, as opposed to charging x, you need to charge 1.25x. But the problem is that's the information you had at that moment in time. But when trend continues to go, and it's not a stationary target, it's a moving target, that's when it becomes more complicated. And trying to calibrate how steep that trend is, trying to interpret the social mindset that pervades society is a hard thing to do. Trying to anticipate how juries will act is proven to be complicated.

So long story short, Josh, I think we have, as an industry, and certainly us as a company, learned a lot over the past several years. I think that one of the reasons why I think some of our more recent years, in my opinion, may prove to be more comfortable than recognized is because I think that we've gotten on top of it. I think how we think about certain things has evolved in response to this environment.

So I think you're sitting on probably more excess capital than you have many time in the company's history. Maybe you don't -- I mean certainly numerically, that's correct. The questions on percentages, I don't know. You have a unique capital return model, a combination of regular, special dividends as well. And you do buy back stock. Also, you have a new friend and partner in the company who owns 15% stake in the company. And if you buy back stock, their stake will go up in value. Does their presence in terms of how much they can own restrict your appetite for one of your 3 main channels for returning capital to shareholders?

No. Would you like me to expand that or is that enough?

Please do.

Okay. The answer is it does not. Ultimately, our focus is on to the extent we feel that we have excess capital above and beyond what we need plus a cushion, plus anything we may want to do from a strategic perspective, then we are going to look to return that to the people that it belongs to. The 2 obvious levers for us are share repurchase as well as dividend activity.

Your point about MSI and their shares, they are in the process or have reached exactly their 15%. In the agreement, there was headroom built in that as a result of share repurchase, they are able to go up to 17.5%. Once they reach 17.5%, that is a hard cap regardless of repurchase. And if they were in a position where the company bought back enough stock where they would be going through that 17.5%, then there is a mechanism for them to dispose of whatever that surplus is, which is articulated over 75 pages that have been filed with the SEC. The Reader's Digest version is that their partner, that being my family has an option to buy the surplus. If they don't, the company has the option to buy the surplus. And if we get to step 3, then it would be offered in an orderly way in the marketplace.

The only thing I would add to that in terms of complexity is that from the end of 2006 through the end of 2010, you bought back more than 1/4, not quite 1/3 of the stock in the company. Is the lever to do something as dramatic as that's probably no longer available to the company? Is that wrong? Is that right? Or anything is possible?

I think anything is possible. I think we've got a lot of excess capital right now. And putting that aside for a moment, as much as we would like to be able to put more capital to use, we're generating capital more quickly than we can consume it, which is, again, not our first choice, we would rather be able to find ways to grow. But at the moment, we have not found those.

So yes, I mean, the business is earning something just shy of $2 billion a year, give or take, barring the unforeseen event and we got to go somewhere.

In terms of thinking about -- I think I've asked this question and never quite get a perfectly satisfactory answer. Maybe there's buybacks versus special dividends. I don't -- I understand you don't want to signal when you're going to buy back the stock, but in terms of rule of thumb that we can understand how you think about.

So my friend, Mr. [ Bayer ] in the back is trying to keep a low profile, but it's not working, at least not at the moment. He and colleagues, we have all kinds of complicated sausage maker models. And I think the punch line is, Josh, it would be appropriate to expect us to continue to consider both of those levers.

And do you have -- of course, the answer is yes, this question, but is there any indication about how much equity there is on the balance sheet due to the conventional accounting that investors cannot see?

Meaningful.

Meaningful. Is that -- and you're saying that's in terms of unrealized gains on illiquid investments or in terms of a potential margin of safety on the reserves, which probably I would not include the latter, but I would include the former.

So Josh, I think that from my perspective, as far as the illiquid assets that you're referring to, yes. And as far as the reserves go, I think people have a tendency to, quite frankly, do the best they can when they crack open a K and they try and look at triangles and piece it together.

But our organization and the industry have a long distinguished history of looking at the data at a moment in time and then you leap forward and you realize that view proved to be very mistaken. If you sort of 2007, 2008, sort of somewhere in there, people had a view about our reserves and you roll the movie forward a bit, it proved that our reserves were more than $1 billion redundant at that moment in time. Nobody thought that was the case. You'll have perhaps some recollection, certainly I do, that we had much discussion over time regarding excess workers' comp and how that is a very different product in many respects than primary comp. So when we look at our reserves and obviously, we have visibility that in fairness to you and others, you don't have, we feel like, as I suggested, I'm not going to go too far with this because I'm getting all kinds of trouble. But in my opinion, I believe that we're in a pretty comfortable place.

Let's close on talking about Monday. Although the entire insurance sector was down, it was really concentrated in insurance distributors. And this idea that ChatGPT in Spain came out with a direct-to-consumer homeowners, some sort -- I don't know exactly what the thing was...

It's kind of weird. I thought the whole situation was weird.

But to the extent -- I'd frame it in 2 ways. One is the last 20 years in my mind have been a one-way pendulum swing in favor of distribution over underwriters. Maybe you disagree with that formulation. But two, what is your view on how future tech might be changing insurance distribution as an intermediary in the marketplace?

So maybe to at least attempt to take them in order that you put them forth. I think as far as distribution goes, there have been a couple of really helpful drivers there. A, I think through thick and thin closer to the customer is always a better place to be, all things being equal. Number two, I think on the distribution front as well, we have seen a remarkable level of consolidation and a noteworthy arbitrage that existed oftentimes between what the multiple is that some of these consolidators were trading at relative to what their targets were being valued at.

And the folks that they were buying, they thought that they hit the jackpot, but relative to the multiples in this natural are somewhat arbitrage that was created, I think that worked really well for them. I also think that they caught the wave of commissions being fixed or in some cases, maybe going up a little bit as rates were going up and keeping up with inflation, both economic and social, that proved to be a windfall for them as well.

So maybe turning our attention more specifically to your point regarding this announcement coming out of Spain, blah, blah, blah. I found the whole situation, as I mentioned a moment ago, to be a bit bizarre. A bizarre for a couple of reasons because it's not really this new a remarkable thing other than it got tagged with AI. But when the day is all done, these are very simple straightforward exposures that yesterday or the day before, the day before that, there are a lot of folks running things through an algorithm and you layer on some kind of chatbot on top of that and boom, you kind of have the same thing.

In my opinion, also, it was bizarre the reaction that the world had because as I mentioned to somebody yesterday, it was almost like all of a sudden, somebody in Spain like discovered fire or something like that. It was just weird because we've been on this journey for some number of years where you can just see data, analytics, technology playing more and more of a role. And simultaneously, with all due respect to our partners on the distribution side in some of the consumer space and even in some of the small business end of town, the value proposition of a retail agent, I think, is coming under greater and greater pressure. And even if they're getting paid on a small business policy, call it, $3,000 premium, they get 10%, $300. They can't afford to invest the time to really generate a value proposition.

So I think what I'm suggesting is that I think AI is a remarkable, not step but leap in what we, as a society, we as an industry, and quite frankly, the organization I work for and what we can do with data analytics and tools from an operational perspective. And I think that, that applies to distribution as well. But this notion that this all of a sudden was this remarkable finding that came out of nowhere, I respectfully think about it differently in that I think that we've been on this path for a while. And because there's so much attention around AI and ChatGPT and so on that they got people to think about it and focus on what's been under their nose for what's been measured in years.

Well, what I was told is that in Spain, they have a siesta and they woke up and just -- it was boom. So it was fast there. It might not have been for you, you were here the whole time, but for them, it was...

Change is good.

Maybe change is good. All right. With that, we'll bring it to an end. And we really appreciate Rob's time, Richard and Karen's time. Thank you for being here. And there's still more to come in this exciting U.S. Financial Services Conference. So stay tuned. Thank you.

Thank you all for your time, Josh.

Thank you, everybody. Thanks for joining. I'm Brian Meredith. I am the property casualty insurance analyst here at UBS, and thank you for joining us for our latest fireside chat with W.R. Berkley. It is a great pleasure to have Rob Berkley here with us, the President and CEO of W.R. Berkley.

I've known Rob forever, never and never, right? So it's been a great time. He's a great executive. W.R. Berkley is an amazing company, leading specialist, call it, commercial insurance company, great businesses and a really interesting unique structure that we'll get into as well.

But I figured the best way to start off right now is just, Rob, give us kind of big picture key strategic priorities for 2026, and maybe over the next several years as we look at the commercial P&C landscape?

Well, first off, Brian, thanks for the invitation. I appreciate the opportunity to participate and thanks for the kind word. Great company and insurance. They don't necessarily go hand in hand. So I appreciate the efforts on your part to throw some kudos in our direction.

So it's an interesting time without a doubt, for the world, for the industry and for our organization. And clearly, there's changes abound and it's moving at an ever-increasing pace, and that creates a lot of opportunity and it creates some challenge, too.

When we talk about the -- what's going on and what are we focused on, we are, without a doubt, trying to make sure that we are understanding shifts in exposure, our clients in the world and how we think about risk and how -- what does that mean when you're in the business of accepting risk from clients. On the other hand, we're spending a lot of time thinking about not just the risk that we accept and how we approach that, but also how we operate.

From our perspective, there's really two areas of focus. One is, no surprise day-to-day operational excellence, if you will, that we need to continue to block and tackle at a very high level and deliver that value proposition to customer because ultimately, that is foundational to our ability to deliver value to capital. But it's not just about daily execution. It's also simultaneously about how are you thinking about positioning yourself for tomorrow because we are, every day, setting the table for tomorrow. And again, much of that maps back to certainly tools and maps back to people and maps back ultimately to strategy.

So again, the way I would answer it, Brian, is when we think about where we are today, we're very much focused on executing, executing, executing every day at a high level. but simultaneously making sure that we are conscious of how do we see the world, how are we positioning our organization for that value proposition tomorrow.

Makes sense. And in that context, how you see the world, maybe we talk a little bit to set the tone here with the P&C pricing cycle, right? How do you see the competitive conditions we're seeing right now, particularly, I know we've got property, casualty is a little bit better. But how are we kind of seeing it right now and, kind of, over the next 12 to 24 months? And then maybe a little bit on the reinsurance markets and how it's kind of spilling over maybe into the primary?

Sure. I mean, clearly, one of the things that is different today, and you alluded to it a moment ago, and it's certainly different from when I entered the industry is how, yes, it is still a cyclical industry across the board. The behaviors in the industry are driven by two human emotions, as Brian, you and I have talked about, fear and greed, and that's what determines more disciplined or less disciplined.

But one of the things that also, as you alluded to a moment ago, that is different today is a decoupling of product lines and where they are in the cycle. When I got into the business some number of decades ago, all product lines, by and large, marched in lockstep through wherever throughout the cycle. Today, we have different product lines, as you suggested, that are at different points in the cycle. That all having been said, without a doubt, some of the major product lines are becoming more competitive today than they were yesterday.

I would suggest that the leading example of that would be the property space, where, again, it has very clearly exemplified how fear and greed are what drives behavior. The property cat market, if we focus on reinsurance initially, went through an extended period of time of high competition, which was then followed by a frequency of severity of cat loss, and ultimately year-after-year, destruction of capital. And it got to the point where those organizations said, we don't really care anymore. We are not going to continue to do this. We cannot destroy capital any longer and discipline returned.

You saw a waterfall effect from that, which then brought firming into the insurance marketplace as they charge more for renting capital to insurance carriers. And that's what led to a firming in property pricing across the board. Certainly saw it in the commercial space, but arguably, the greatest outcry came from what you saw in the consumer, or particularly the homeowner space.

So all things being equal, we are seeing a property market in some stage of eroding or softening. We are seeing a casualty market that at least for the moment, continues to have some level of discipline and firming in response to social inflation, which is driving claims costs up at a continuous pace. There are some outliers to that.

But generally speaking, when we look at what is on the horizon, our expectation is that cat-exposed property, you'll likely continue to see rates erode for some extended period of time and the casualty market, at least for the moment, seems to have greater resilience. For us, as an organization, that's good news. We certainly caught the property wave. At the same time, if you look at our book of business, we are weighted towards the liability lines where there seems to be more staying power.

Terrific. So with that as a backdrop, maybe we can talk about your premium growth outlook for the insurance business in 2026. On your last conference call, you talked about kind of, call it, a flattish October, November, a little bit of rebound in December.

Talk a little bit about what's kind of factors that are influencing your outlook for premium growth in 2026? And maybe break it down a little bit by which lines of business kind of look better and worse?

I think that no surprise, it's market conditions, which are really driven by level of competition. and capital coming into the marketplace. And not just capital coming into the marketplace, but it's coming in, in a disciplined or not manner. What we have seen more recently is, quite frankly, less discipline in the property and property-related products, whether that be reinsurance or that be insurance. And it's some version of what we've seen in the past.

So we have a view as to what is rate adequacy. We're different from some of our peers. We are not driven by budgets. We are driven by opportunity, opportunity to make good risk-adjusted returns. So when the day is all done, we have been -- not surprised, but nevertheless disappointed by what we're seeing going on in the property market. Equally, we have been quite outspoken about our disappointment when it comes to some of the professional liability lines, D&O being an extreme example of that. And furthermore, I think we have shouted from the rooftops how unhappy we are with the lack of discipline in the commercial auto space.

On the other hand, there are other aspects of the casualty market, which we think are offering great opportunity. Whether that be in the excess in the umbrella space, whether that be in the primary casualty lines. In addition to that, we think workers' compensation is likely going to provide an opportunity, maybe not as much today, but we are increasingly encouraged with tomorrow.

So the punchline is, Brian, we are a collection, if you will, of 60 different businesses under a holding company. Back to the point earlier, different product lines are at different places in the cycle. That naturally lends itself well to us as an organization given the breadth of our offering. And at any moment in time, we have some businesses that are taking more of a defensive posture, others that are able to take more of an offensive posture with a laser view on risk-adjusted return.

I think as you've heard me say too many times, perhaps, Brian, I'm not sure you can ever say it enough. We are not in business to issue insurance policies. We are in business to make good returns, and that is a differentiating mindset between us and many of our peers. And in practice, what does that mean?

It means in parts of the market where the opportunity is there, we have no problem letting the business shrink. At the same time, parts of the market where the opportunity is there and available, you will see us lean into it considerably. Punchline is, do I think we will grow in '26? Yes, I do. Do I think that we will grow at the same rate that we're able to grow in '23, '24 and '25? That could be more of a challenge.

That makes sense. Let's pivot over to kind of the hot topic that everybody wants to talk about, and that's AI, artificial intelligence. So I think maybe the first way we kind of hit it right now is let's talk specifically about W.R. Berkley.

The investments you've made and are making in artificial intelligence, data technology, what are they going to improve underwriting efficiency, claims efficiency, call it -- let's talk a little bit about what you're doing right now to embrace AI?

So I think AI is -- it's a broad category that the world seems to be using a very broad brush in my opinion, I think the view is shared by others. I think the reality is that we, as an organization, and for that matter the industry and the world, have been on a data and technology journey for what would be measured not just in years, but in decades. And if you are really committed to it, that journey, the pace is -- the pace is ever increasing and the trajectory is becoming steeper.

AI is without a doubt, I think anyone who thinks that they have AI figured out and specifically how it applies to the insurance industry with all due respect, I think it's early stages, and that would be naive to suggest that anyone fully wrapped their head around it. I think we are all learning. And I think that it is just the next very big, very important chapter in this data technology journey that I referred to earlier, one person's opinion.

So more specifically, so what are we doing as it relates to AI? You can go in countless different directions. Ultimately, what we've tried to do is focus on where do we think the greatest lift is for us over what period of time. We think going in every different direction simultaneously is one -- is certainly a way to go no place. So the specifics are two big areas of focus.

One is intake, if you will, where we're able to increase the efficiency of our quotes by approximately 30%. That's early returns where we're experimenting with it. And the other area is claims, where we as an organization, a very large percentage of our claims are -- ultimately, the value is $5,000 or less. And as a result of that, that's certainly in spite of the fact of it being specialty business, there's opportunity for us to explore quicker, something more akin over time to straight-through processing.

So both of these are providing opportunity of greater value to customer, distribution, and ultimately to the business and by extension, our shareholders. Do I think that this is the beginning? Yes. Do I think it is the end? Definitely not.

Got you. Got you. I mean on that just kind of topic, I think you kind of laid out that your -- a couple of things that should start to hit in 2027. We'll start to see some benefits for some of these investments that you're making.

Talk about what specifically they are? Are there any KPIs we should be looking for as far as what potentially how this kind of...

So on the front end, for example, it would be about the number of submissions, how we prioritize them and how we're -- what we're able to get to and then how that converts into hit ratios. And ultimately, what we're going to be able to do is become far more productive when the day is all done.

And we will not just get more at-bats, we'll get more higher quality at-bats. And it's just going to create a lot of efficiency. And we are experimenting with it and the early returns are quite compelling.

That's good. That's good. It'd be great if you give us the statistics here for the next 12 to 24 months because...

Are you going to invite me back?

So next question, as you mentioned, 60 operating units and kind of act as incubators here. There's all sorts of stuff going on. I mean, I think of W. R. Berkley literally is, it's like 60 different companies, right?

It's not quite the organized chaos that you're suggesting.

I know. It's not. It's not. They're all great little organizations, small businesses, let's call them -- are actually pretty good-sized businesses. But I guess the question I have then when you've got all these 60 different units, how do you ensure best practices and technological advancements are shared and scale throughout the organization? What governance structures support kind of cross-pollination of kind of all these different units and the ideas that are going on?

So I think it's a couple of fold. We are big believers in creating community, because community is a natural form that you can create for sharing of ideas. When we talk about AI, of course, we have governance. And of course, we have guide rails to make sure that we do not inadvertently color outside of the lines. Of course, we have controls to make sure that the environment is well thought through and appropriately managed.

But when the day is all done, our approach has been, I guess, multidimensional or multilayered, if you will. So there are some initiatives around AI, which are somewhat top down, if you like, where there's an opportunity for us to be exploring something at a group level, and that will be something that we are looking to try and push through the organization. Now it may not apply to all, but the vast majority.

Then there are initiatives where it's not going to apply to the broader majority, but it's certainly not going to be a local opportunity. And then we'll create certain cohorts, if you will, based on commonality -- of need and commonality of opportunity to ensure that there's collaboration there. And then finally, perhaps to a part of the point, Brian, that you were making, we will have -- or we have empowered colleagues at each one of the businesses and extended an invitation to them in a controlled way to be exploring how they can use AI to, quite frankly, improve the tasks that they are doing every day. And then we take that knowledge, and because of the community that I was referring to earlier, are able to cross-pollinate.

So one way to think about it is we have essentially 60 different laboratories populated with people with great skills, experimenting every day, and we're able to get a somewhat of a groundswell of experimentation coming from the operations simultaneously with efforts that are at a broader level. So it's been really encouraging the number of colleagues that have been willing to engage, and learn, and play with these tools. And I think that some of our colleagues were reluctant and I think, quite frankly, may have been a little bit intimidated. But thanks to the work of many people on our team, we've been able to help people understand that this is a tool for you to do your job better, as opposed to something that is going to marginalize you or something you need to be fearful of.

This also is not a surrogate for Google. This is not an alternative for search. You need to be thinking about this more as an assistant.

That makes sense. And then another aspect of AI that you brought up in your conference call that I think is really important is there's clearly a lot of opportunities. But as an insurance carrier, there's a lot of risk, right? And what are the new emerging risks that AI could potentially present for the insurance industry, be it in the GL policy, be it property policy, I don't know.

Maybe talk a little bit about what do you see as far as the risks here from an AI perspective over the next several years as this evolves? And then how are you as an organization making sure that your underwriters are kind of staying ahead of that curve?

So I think that we're always looking to try and unpack, and understand what these types of changes -- and this is a big one, means for society and by extension, what does it mean for risk in society? And how do we, as an organization, want to responsibly engage with that as an acceptor of risk, or risk being transferred to us.

I think it's multilevel. I think that one needs to be really thinking very carefully about concentrations and systemic risk, and how things map back. Now the easy way perhaps -- or one of the easier ways to think about it is, okay, a data center that is going to be providing, God only knows, what to however many businesses and people around the world. Well, how do you think about business interruption when it comes to that type of exposure? What does that mean? How do you price for that? In addition to that, with AI and all of the things that it can do, and many of them are wonderful, but some of them are pretty scary, how do you think about that from a cyber risk and an identity issue and so on and so forth?

So the answer is, Brian, from our perspective, one needs to be focused on it, unpacking it. It needs to not be something someone is trying to figure out in a vacuum, but we -- again, back to this idea of community, we create working groups within the organization and talk about all the things that can go wrong, and how do we approach that? How do we anticipate that? How do we prepare for that in a responsible way? So long story short, there's a lot of moving pieces. Clearly, it is driving -- going to be driving a big part of the economy, and we need to be prepared.

I think the other piece that I should add is some carriers are taking a wait-and-see attitude when it comes to policy wording. We, as an organization, have been more proactive than some. And quite frankly, looking at policy wording and trying to address exposure to AI in somewhat of a stand-alone manner. Because from our perspective, we don't think it's just something that you throw in. We think it is a real exposure that needs to be considered and priced for. So I think there have been some that have taken issue with some of our policy wording and the exclusions that we're using. We don't have a problem offering coverage, but we want it to be separate, considered appropriately and priced as fit. And also, we want to control the limits because of the systemic exposure.

Yes, that's what I was going to change limits management, which I know you all do a great job at. Particularly with all this, I think, of these data centers and things that are being built and the huge limits are getting thrown out.

Big numbers.

Big numbers. Big numbers. And then maybe just last question on AI, and I'll throw a little bit in there from some stuff that happened yesterday. But want your perspective on what this means for the industry over the next 5 to 10 years. I know there's a lot of talk about will it lead to consolidation? Will there be the haves and have-nots?

And then maybe as an add-on to that, because I know we'll get this question, yesterday, we probably had close to $50 billion, or more than $50 billion of market cap knocked off all of these insurance brokers because of a Spanish homeowners insurance company. I'm just curious your...

Must be a hell of a company.

It's a great company, I guess you're right. AI and ChatGPT...

Did you pick up coverage with them yet, Brian?

Yes. Maybe your perspective on that. Is this something that's going to disintermediate the industry?

I don't pretend to understand the capital markets as well as you do, I'm sure, or for that matter, people in the room. But just having observed what went on yesterday, I found it to be a little bit, quite frankly, puzzling. Because if you, on one hand, unpack what this business is doing, I'm not sure that it's really this so remarkable. And I'm not a believer based on what I know so far that it's this canary in the coal mine. And it just struck me as bizarre when -- yes, it's -- they're using some AI models. But if you really peel a few layers back, all it is, is a really sophisticated algorithm, which is really just a decision-free on steroids and they layer a chatbot model on top of it. And the reaction of the world as a couple of my colleagues and I were talking about earlier, was like these people just discovered fire. It was just bizarre to me.

That all having been said, what was equally bizarre to me is that there was this shock and awe when from my perspective, what was brought into focus has been there for a long time. I think we all understand the path that we are on, and the role of data and analytics and technology, particularly around what I would define as simpler exposures where there's more homogeneity and ultimately, you can underwrite it by going through somewhere between half a dozen and a dozen questions.

So I've been of the view for some extended period of time that we are seeing in society a meaningful shift in customer behavior that, being in this case insureds, and how they think about what's their definition of service is, what the experience they're looking for is, how they're comfortable with a self-serve model, how they're comfortable transacting online and self-educating. And I think that, that is creating a huge headwind over time for traditional distribution, particularly in the consumer space and even in the small commercial space.

And this idea that there was this announcement yesterday and all of a sudden, like the curtain was pulled back, this struck me as odd because I think we've been on this trajectory for some period of time. And I think there's more to come. And in the end, we're putting aside carriers, putting aside distribution. Ultimately, in the end, it's the customer that is going to drive the change. And what we are seeing is a customer that is more emboldened than their parents and grandparents. And we are going to see more and more of that as they become more and more the decision-maker.

Why don't you talk a little bit also about how W.R. Berkley is embracing this evolving distribution, some new initiatives? I know you've talked about, be it embedded direct-to-consumer, those types of things.

Yes. So just -- I think we may have touched on this in our earnings call for the fourth quarter recently in the year. And I think that I may have unintentionally, but just ever transparent, offended some of our partners on the traditional distribution side. And essentially, the notion or the idea is -- and I think this is what you're referring to, Brian, is that -- and it goes back to what we were just talking about a few moments ago.

Our view is in the end that the customer is queen, king, whatever fancy title you want to label it, and they are not -- they are empowered too. And we, as an organization who provides a product for risk transfer to help society manage risk. We have a great offering because there's more risk every day in the world and society wants to manage that. At the same time, we're conscious of the fact, to your point, Brian, that we are going to meet customers where and how they want to meet -- be met, excuse me. And for our purposes, if they want to be met in a traditional manner, whether that be wholesale, retail, whatever that may be, we will be there for them as we have always been.

But at the same time, we are conscious of the fact that this world is changing, and we need to be there, particularly for younger generations in new, different and alternative ways where they wish to engage and want to be met. So what does that mean? That means that we are offering some product direct to customer. We are offering some product that has traditionally been wholesale direct to retail. That means we are also investing and actively pursuing a point embedded or a point of sale.

What does point of sale mean? It means that we are selling an insurance policy as an add-on to another type of transaction. Brian, when we were visiting earlier, I think an example that we provided is somebody here walks into Zales, or Signet Jewelers, or whatever to buy an engagement ring. And you pick one out, you go to the counter, they start to ring you up and they say, would you like to buy insurance with that? And boom, you push the button and all of a sudden, you have an insurance policy for that asset that you just bought. That's what point of sale is, or oftentimes referred to as embedded. It's certainly -- if we all sort of take a moment to think about it, has clear application within the consumer space, but I would suggest that there is plenty of opportunity in the commercial space, and you will see us on both fronts very active over the coming years.

So mapping back, Brian, to your point or question, for us, the consumer is who we serve. That is how we look to generate a return for our shareholders. We need to have a value proposition to the customer that allows us to have a value proposition to capital. And that's it in a nutshell. And part of it is meeting customers where they want to be met. And they want to be met in a different way often -- not always, but oftentimes than their parents and grandparents wish to.

Makes sense. I just want to make sure everybody knows anybody has a question. I've got plenty of them, but feel free to raise your hand or put it up here on the board, and I'm happy to do it.

While we're waiting on that, let's pivot over to the E&S market, right? You are a major, major player, one of the leaders in the E&S markets. It's been a rapidly growing market for the last 8 years, I would say, at least -- almost double the amount of share of the commercial insurance market it now represents.

Where are we right now? Because when I talk to investors, people are concerned that we're all of a sudden going to soft market, and we're going to pivot back the other way. That all of a sudden business starts to flow back to the standard markets and these growth rates that we're seeing are going to potentially go negative. Thoughts?

So I think in order to answer the question, and apologies in advance for the long-winded answer, but one needs to take a half a step back and think about how did we get ourselves into this situation where there was this explosive growth that went on in the specialty space, E&S being the tip of that spirit, if you like?

And what happened was when we were, sort of during COVID, coming out of COVID, all of a sudden there were two things that reared its head, and it was very dramatic from the perspective of loss costs, the cost of claims. One was economic or financial inflation where due to supply chain and a whole host of other things, including economic stimulus, prices took off like a rocket. That had an impact, particularly on the shorter tail lines.

Simultaneously, we saw this phenomenon that many have coined the phrase social inflation, which drove, quite frankly, loss cost on liability lines. And really, when you boil that down, what we saw was a situation where the legal system, particularly juries, were coming down with awards that were multiples of what we had seen in the past. Those realities came into focus, both financial and social inflation drove loss costs through the roof. And the standard market in an effort to respond to this increase in loss costs said, holy cow, our claims are a lot more expensive than we thought. So we need to go to insurance departments across the country and ask them for permission to raise our rates, and in some cases maybe change terms and conditions, but particularly raise the rates.

Insurance departments either said no or said, we'll get to you later. So the traditional carrier had a choice. Their choice was, I can either write the business at a rate given what's happened with the loss cost that is not acceptable, or I could say goodbye to the business. What drove the growth in the specialty market was the standard market not being able to get their rate increases approved and saying goodbye to the business. So you saw this flood of business coming out of the standard market into the specialty market.

What we have seen more recently is early signs of a slowing of that flow. It continues to flow, but it is slowing. We are not seeing the standard market, which, by the way, the insurance departments are responding to them now. We are not seeing the standard market's appetite expand dramatically. History would suggest at some point, we will see that. To the extent we see it, I would suggest you will likely see that in some of the shorter tail lines before you see it in the longer tail lines for a variety of reasons, including how financial or economic inflation has come down, though social inflation persists.

As far as us, what does that mean? Our submission flow continues to be quite robust. The fact that we are more weighted towards the casualty lines as opposed to the property lines means that we will, in all likelihood, have more staying power as far as opportunity. But when the day is all done, the reality is that the specialty market, in particular, the E&S market, picks up the crumbs that fall off the table of the standard market.

We've been through a period of time when there were a lot of crumbs falling off the table. Will that persist? Probably for some period of time, but will slow. And more likely than not, over a more extended period of time, you will see it erode. And you will see it erode again, more likely than not first in the property lines and down the road, maybe you'll see more competition in casualty.

Yes. That's a good point. One observation, too, on that, that I find interesting is that a lot of these standard commercial lines carriers actually started excess and surplus lines operations, right? And I don't think they have any desire to push it back to the standard market.

Yes. And I think some of them have done well and some of them are learning that it is a different animal, and maybe learning some lessons.

Absolutely. Any questions in the audience? Perhaps we can pivot to capital management, right? And how do you think about capital management? Growth rates are slowing a little bit. You've got ample excess capital on your balance sheet. How do you think about using that for, call it, buybacks, dividends, reinvestment in the business, M&A, whatever? How do you think about it?

So when we think about capital, our view is we want to have -- what we would define as an appropriate amount of capital plus a cushion. A cushion is there for the unforeseen event, which doesn't necessarily have a negative connotation. It could be an opportunity that presents itself tomorrow. Anything above and beyond that cushion, we have a view if we're not able to use it, then the question is what is the most efficient way to return it to the people that it belongs to, that being our shareholders.

We have the problem, a high-class problem but still the problem, that we are generating capital more quickly than we're able to put it to work today. So that is pressurizing the surplus of capital circumstance. So there's three levers that people have to pull.

One, which we can rule out very quickly, which is repurchasing debt. If you look at our capital structure and the work that my colleague, Rich Baio did, who's towards the back of the room, and positioning our balance sheet and our capital structure during COVID, did a great job. And quite frankly, we're not eager to touch that. So let's put repurchasing debt aside that leaves us two other tools that being share repurchase and special dividend. We are opportunistic. We have a mindset of an owner. And we return capital to shareholders and whatever we think is in the best interest of shareholders from a value perspective at any moment in time. As you would have seen last year, in particular in the fourth quarter, we are not shy to do both the dividend as well as the repurchase.

Got you. Excellent. Let's pivot over something I'd be remiss not to talk about, particularly with your company because you do a great job, and that's the investment side of the balance sheet, right, and the investment portfolio.

Maybe talk a little bit about duration, what you're doing with your fixed income portfolio, outlook maybe for your investment funds? And then one other one, too, that I'm just curious about because it's been negative here for the last 2, 2.5 years is your real estate line keep saying. And what's going on there? And is there any outlook for that to pivot maybe?

Yes. So a couple of pieces there, Brian. So maybe to start, as far as the portfolio goes, the portfolio overall is growing at a very healthy rate. The cash flow for the organization is exceptionally strong. So more money to invest.

In addition to that, I think we've been reasonably well rewarded for how we've positioned a whole host of things, including the fixed income portfolio. And we're still today, our new money rate is comfortably above our book yield. So the combination of the growth in investable assets, along with that new money rate will likely continue to be a positive for the foreseeable.

Given where interest rates are, we -- from a risk return perspective, we have found the public markets, particularly or specifically the fixed income market, to be a much more compelling opportunity than alternatives. We certainly have some alternatives. But if you look at where the new money is going, it's going into the fixed income market. We've had a little bit of noise here and there with the funds as you referred to. And specifically on the real estate piece, Brian, I would just remind you and offer the thought for others consideration as well that we take a total return approach to that. And sometimes the contributions and how it comes through in the numbers because we're making certain investments and there are costs associated with it, so on and so forth, it's maybe a less pretty picture.

That having been said, I think we believe in the assets and the long-term value creation. But again, that comes into focus on exit as opposed to -- doesn't really do us much good from an operating perspective.

Makes sense. Makes sense. I think that's all the time we have, Rob. I really appreciate it.

Thanks for the invitation, Brian. Great to be with you. Thank you all for your time and interest.

Ladies and gentlemen, thank you for joining us, and welcome to the W.R. Berkley Corporation Fourth Quarter and Full Year 2025 Earnings Call. This conference call is being recorded. [Operator Instructions]

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. Berkley 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, where 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 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 today 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 the change of our 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 insurers, 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 clean or [indiscernible] and that we, as an organization, are going to 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, Rich, 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, their 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, we -- I think last quarter and perhaps the quarter before, but certainly last quarter, we talked about large account property, particularly Sheraton 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 Lloyd's 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 cat treaty, our main treaty. Our rate -- risk-adjusted rate decrease was 19%. So 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 cat 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. Berkley One, our private client operation continues to see great opportunity to grow as they continue to be a preferred alternative in 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.

So I got it off my chest, and why don't you 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 or $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 pretax 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 pretax 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 nonrecurring 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 cats for the quarter, was 59.7%, slightly better than the 2 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 ex cats is 87.9% and the calendar year combined ratio was 89.4%. By segment, current accident year loss ratio ex cat for insurance improved to 6.6% and remained relatively flat to the full year results for 2024 and 2025. The Reinsurance & Monoline Excess segment was 53.9%, resulting in a strong current accident year combined ratio ex cat 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 and 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 pretax net investment income to $338 million. The credit quality of the investment portfolio remains very strong at AA- while the duration of our fixed maturity portfolio, including cash and cash equivalents increased to 3 years. As a reminder, the duration was 2.6 years as of year-end 2024 and has been increasing throughout 2025, yet remain 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 effected 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 the total for the year to $971 million. Besides bringing more than -- beside 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 evidenced 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.

All right. Thanks, Richie. That's tough to follow. So just a couple of more sound bites and then as promised on to Q&A. Regarding the top line, First off, unpacking that a little bit for folks. I think it's worth noting that October and November from a growth perspective, were particularly disappointing, I would call it flattish. And December, I don't have the net number in front of me. I left it in my office, unfortunately, but the net and the growth track pretty closely and the GWP was up 7% in December. So I would caution people not to lead to the conclusion that what you saw for the quarter is the new reality. I think it's quite the contrary in all likelihood. And to that end, early returns on January, again, we haven't even gotten to the end of the month, but we are seeing some encouraging signs as it relates to the top line there. You would have seen the rate ex comp just a little bit over 7%. I would tell you that they are -- given what we're seeing in some of the more recent years, granted it's early, but how they seem to be developing out, we are not feeling across the board the same level of pressure to keep pushing on rate.

I think we will continue to be diligent. We will continue to stay on top of it. We are not interested in our margins eroding, but we think that we're in a pretty good place, and we are looking at that carefully. The expense ratio, again, I'm not going to do a deep dive on that. Rich touched on it already. But I would tell you that the 28.2%, excuse me, a very comfortable number. That having been said, we are going to be making some pretty meaningful investments some we've already made, but we're going to be leaning into it a bit harder, both on the tech side and the broader banner, both data, AI, et cetera, and that will come at a price, but we're confident that these are going to be investments that generate very good returns. I think one of the things that's worth noting about this organization, and it's something that we talk about from time to time is the consistency of the results. We are not an organization that looks to have a lumpy performance. We are an organization that is very focused on hitting base hits every day consistently.

From our experience, assuming that one of the leading goals is to build book value through making a good underwriting margin, we look to manage volatility through thick and thin. So we are very pleased with the results that we've delivered in the quarter and the year. But again, part of what distinguishes us is the consistency of those results. Rich talked about the investment portfolio. I would just highlight that the AA is teetering on almost becoming a AA. And in addition to that, yes, while we have pushed the duration out to neutral for us is probably closer to just inside of 4. If you look at the average duration of our loss reserves or I should say the average life of our loss reserves. Still room if you compare what's rolling off the portfolio over the foreseeable, call it, give or take, 4, 6 is coming off, and we're still able to put money to work, you call it 5. So when you look at the situation, the business is really firing on all cylinders. We are generating very strong returns. We already had a surplus even after the capital management of capital that would be measured in 10 figures. And quite frankly, given the returns and the market conditions, well, we would love to have an opportunity to put the capital to work right now, we're generating capital more quickly, and we can utilize it, and you should expect us to continue to look for thoughtful ways to return the excess capital to those that it belongs that being our shareholders. So I will pause there.

And Kevin, at this time, if we could please open it up for questions.

[Operator Instructions]

Kevin, you run a tight ship. One question per person. All right. We'll see if anybody pays attention.

Your first question comes from the line of Elyse Greenspan with Wells Fargo.

I thought you said one question and one follow-up, but we'll see. I guess my first question was just in terms of premium growth, Rob, I appreciate the color on October, November and then also on January. But just given your view of the market, right, your -- just the growth you saw in the quarter, I think you also said, right, that there is probably perhaps less of a need to continue to push for the same amount of price. How are you seeing this all translating into premium growth, I guess, with your expectation that '26 is better than the fourth quarter, maybe weaker than the full year '25. How does this all come together in your mind?

I think it's likely that the insurance activities will primary and perhaps an excess. We'll likely do better than what the total number was in the fourth quarter. I think that the reinsurance marketplace, some version of history may be repeating itself. A little early to declare that, but it would seem like the table is being set.

And then I guess my second question is on the expense ratio. You guys guided to comfortably below 30% in '26. It sounds like '26, based on commentary, you described it like an investment year if saying that correctly, you can correct me if I'm wrong. So would you expect like the AI and the tech type investments, I guess, would be higher in '26 and then we start to see a return on those investments in '27? Or how are you thinking through the moving pieces there?

I think it's exactly what Rich and I alluded to that we are going to be making meaningful investments in '26, and I expect we will continue to make meaningful investments in '27. I mean this space, and it's in part what I was alluding to earlier in the call, Elyse, I just did it in a very clumsy way, was that this is a trajectory of how the tools are coming to be available and how we, as an organization, are adopting them. And it's not a one and done. This is just an ongoing process. So do I think that when are the benefits going to show up? I would like to think that we're going to start to see benefits certainly in '27. And I think it will scale from there. But it's going to -- it certainly does take some time because it's not just you drop it in, it's a more complicated process than that.

Your next question comes from the line of Tracy Benguigui with Wolf Research.

I always appreciate hearing your market commentary. You sounded it's had more constructive on workers' comp. You were mentioning that while it's not rosy now, California is coming to grips. But if we zoom out of California, one of the large brokers had said at their Investor Day that medical inflation is rampant and it'll show up in rate. Are you seeing something similar? I mean can you also comment about the reduction in premiums just in 4Q, if that was largely exposure based?

Yes. So a couple of things there. So first off, as far as medical trends and how that ties in with severity, I think that's something that we've been talking about at least as long as we've been talking about auto liability. And I think it's finally coming into focus for many. From our perspective, we think the medical costs. And just quite frankly, claims activity in general within the space of workers' comp has been somewhat artificially suppressed because of how it gets -- the benefits get priced and reimbursement gets priced in many, many states. Regarding our growth in the quarter, it was primarily exposure based where we -- as there were certain pockets where we didn't see the opportunity at those rates.

Got it. And also, in your press release, you were talking about exceeding 15% ROE and maybe 15% not new, that's a longer-term goal throughout the cycle. And some estimates are well above that. How should we think about a nearer-term ROE given your comments about returning excess capital?

I think that we believe that the company is firing on all cylinders at the moment. And we got a lot of momentum, and that momentum is both on the underwriting side as well as the investment side. So I can't promise you that the return will be this or that. But I can tell you that this is the nature of the business, barring the unforeseen event, and now to a great extent, '26 is almost the results, again, barring the unforeseen event, they're kind of cooked, right, because of how the premium earn through and the way the investment portfolio unfolds. So again, I can't sit here and promise you what a return will be. But barring the unforeseen event, it's not that hard to connect the dots, so it should be another very good year. And with every passing day, we're setting the table for '27. .

Your next question comes from David Motemaden with Evercore.

Sorry, guys. Can you guys hear me now?

Yes. Thank you.

Yes. Sorry about that. Just wanted to just go back just on the PYD. And so it looks like a little bit under $11 million in insurance of adverse offset by about $13 million of favorable in reinsurance. Could you just talk a little bit about what is driving the adverse on the insurance side, any different accident years, you would point to just sort of keeping in mind your comment, Rob, on maybe not seeing the same level of pressure to keep pushing on REIT. Just trying to understand that given what's going on, on the PYD side in the insurance business.

Yes. So if you don't mind maybe -- I don't have the answers in front of me just because in the scheme of 18-point-something billion of reserves, I didn't do a deep dive on the $11 million. But if you wouldn't mind, we'll have Karen and/or Rich a follow-up with you tomorrow, and we'll give through all the detail that we're able to.

Got it. Okay. That would be great. And then also -- just trying to get the right jump-off point on the expense ratio. Rich, I think you mentioned a nonrecurring benefit for commission-related accruals that helped the expense ratio this quarter. Could you just size that benefit?

Sure. That was about 30 basis points impact on the expense ratio.

And your next question comes from Bob Huang with Morgan Stanley.

Thank you for just the detailed commentary there. Maybe just a follow-up on pricing and what you said about pricing trend in casualty. I understand that some lines are softening. But you -- are there any lines of business right now where you feel within casualty or you feel the pricing trend is beginning to not make sense anymore. In other words, are there any lines of business where you feel like you might need to start cutting exposure as we go forward into 2026 and 2027?

Yes. I mean auto liability would be one where if you look at what our top line is and relative to our rate, we are clearly shrinking the business from an exposure perspective. So that would probably be a leading example.

Got it. And then in other businesses, you don't feel the other lines of business are as bad or as obvious. Is that a fair statement?

We certainly have some concerns and reservations about some of the professional lines that I alluded to earlier. And I think that also we don't do a lot of it. So it doesn't really move the needle for us in a huge way, but the large account property stuff, the Sheraton layered stuff, we're that's getting pretty tight.

Got it. I really appreciate that. My follow-up is your -- the next stage of the AI growth. It is very clear that you're really leaning into the capabilities here. I think previously, you've talked about early stages of hybrid model where both the group-wide and individual tools can be implemented. And then that's been -- like are there any things going into the rest of the year and next year where you feel that are somewhat of a low high-end fruit where the payoff realization can happen relatively quickly? Or are there any specific capabilities you feel that are more closer to reality in today's environment that gets you really excited?

I think probably what is underway now if we focus on the underwriting side, we can talk about claims separately. But on the underwriting side, what's here and now and happening is on the intake side, where we are able to utilize certain technologies, and they are enabling us to increase our efficiency dramatically. So we are able to get to more business and we are able to effectively prioritize.

Yes. So said differently, we -- people's time is utilized much more effectively.

Your next question comes from Brian Meredith of UBS.

So 2 questions here. First, Rob, I wanted to dive into your comment about maybe laying off rate a little bit, but keeping margins, I think, is what you also said. And I'm wondering if that implies you think that trend is starting to moderate some here. And then as we look into 2026, that maybe loss picks are kind of stable then if you don't want margin to deteriorate?

So my take on that is it's premature to reach any conclusions with confidence but some of the activity that we are seeing or lack of activity in some of the more recent years would suggest that we're in a comfortable place. I think as we've discussed in the past, Brian, a trend is a moving target. So I don't think it's that we take our foot off the pedal, but maybe the foot doesn't have to be stepping down on the pedal quite as hard selectively.

Got you. And then just with respect to loss ratio loss picks?

I'm sorry, I didn't hear you. I beg your pardon?

No. I mean with respect to your kind of jumping off point here with respect to loss picks, if you're going to keep margins stable and it sounds like your expense ratio is going to be flat to up a little bit. It would imply that loss ratio is going to be pretty stable, too.

We are looking to preserve our margins to the best of our ability as long as the market will allow us to. And right now, we think we can do that. [indiscernible] to be in the insurance business, I think the reinsurance marketplace is probably going to become more challenged more quickly.

That makes sense. And then just quickly going back to your comments about distribution and distribution competing with you a little bit now, and customers want simplicity. Does that mean that perhaps one you may lean into a little bit more utilizing MGAs and/or buying MGAs and that maybe that's a quicker way to kind of get to where you want to get to with respect to distribution?

No. The short answer is, I don't think we're going to necessarily be leaning into or acquiring. Generally speaking, I think as we've torqued you all in the past, we have a real caution around delegated authority. And quite frankly, the valuations of some of these businesses, we think have gotten to the point where oftentimes it's irrational. And there's a lot of private equity money still trying to figure out how they're going to make it all work. But in the meantime, we're pleased to continue to partner with traditional distribution. But I think the point is it's not lost on us that some of the traditional distribution is looking to have the pen or, in some ways, have a different relationship with capital. We're aware of that. We are responding to it. And it also means that we're thinking about distribution maybe a little bit in a way that we wouldn't have thought about it 5 years ago.

And your next question comes from Alex Scott, Barclays.

All right. So first one I had is just a follow-up on the technology improvements you're working on. How would you characterize the way you're thinking about that over the medium term? Is that something that as you bring the expense ratio down, some of it can drop to the bottom line? Or is this something that is going to potentially just help to make it more competitive? You might be able to get back on price a little bit, get a little more competitive and improve growth. I'd just be interested in how you're approaching those investments.

I think the answer is all of the above. I mean, ultimately, we certainly are looking to have efficiency and savings. And how much of that we hold on to versus how much gets passed on to the customer in part depends on the marketplace and quite frankly, competitors what they are doing and what kind of efficiencies they're capturing and what they're passing on to customer. So look, when the day is all done, I appreciate that a lot of the focus may be around pricing and margin. But I would suggest to you that a lot of these tools, it's not just about dollars saved it's also about value creation. And I think that, that's an additional way to consider these tools, how they will be incorporated and how they will attack the business that the 3 of us work for.

That's helpful. And I guess just looking at the growth and thinking about increased competition. I was just interested if you could talk about to any degree you're seeing a flow back into admitted at this point? Like is that something that's affecting the growth rate at all? Or is it more just competition within the E&S market?

I would tell you in the very, very small end of town as far as account size. You might see a standard market slip in there a little bit. But by and large, they are, for the most part, for the moment, staying within their swim lane. That having been said, national carriers in particular, but some of the regional carriers on the standard side. within their swim lane, they are being remarkably aggressive at this stage of the game.

And your next question comes from Rob Cox with Goldman Sachs.

First question, could you just unpack some of your comments on the property cat environment leaking into casualty dynamics a bit. Just curious how that is playing out, how meaningful you think it is? And if you think the strong net investment income contributions are contributing to that as well?

The answer is, I think we'll know more when we all have an opportunity to reflect on Q1 and see who did what. But my sense is that, again, a lot of people that have a lot of capital and they feel pressure to put it to work, and they're trying to hit budgets and so on. And as a result of that, when the premium is coming in short on the property cat, they're looking to try and figure out what other levers they can pull. And casualty would appear to be one of them or a liability, including the professional. So we'll have to see over time. Do I think investment income is a component of it? Yes, probably. Can I quantify for you how much is one versus the other? No, not with any confidence, but I do think that -- I think that one proved to be more competitive. And from our perspective, it seemed to spill over into the casualty lines more than we would have anticipated. Now having said that, we buy a lot of reinsurance and that's not a bad thing for us. Where we assume we'll deal with it just as we have in the past. Our colleagues are interested in making money not writing business.

Rob, that's helpful. The follow-up on home insurance I think you mentioned Berkley One is one of the good places to grow right now where you see some opportunity. Curious of your views on the excess profit discussions from regulators and particularly the New York state in the -- with regards to the 2-year look back. Is that something you think is rational? And do you have any views on the rationality of that?

I think that regulators tend to focus on a moment in time, and I think that they need to look at historical results, particularly given the volatility that exists in the homeowners line in particular. I think that as far as Berkley One goes, it's less high on a regulator's radar screen perhaps because, for the most part, regulators don't give a s*** about rich people.

And your next question comes from the line of Yaron Kinar with Mizuho.

Can you hear me?

Yes, we can.

Great. Thanks, here. In insurance, I'm trying to connect the dots. It sounds like the slowdown opinions in October, November was more driven by increased competition. And I think you're so cautioning not to read too much into that. Is that because you see competition flattening out here? Or are you seeing greater appetite emerging for the company itself to go after more premiums?

I think the point that we are trying to make is a couple of fold. One is that October and November are just 2 months, and we would -- while they sort of shine brightly through in a quarter, we would caution people to [indiscernible] on to that too much, particularly given the data point to December and what we are seeing in January. In addition to that, we offered the comment earlier that from our perspective, there are certain pockets of our portfolio, certain parts of the market where given the early returns on the reserves, we are thinking that perhaps it is a more comfortable place than we appreciated.

Okay. And then I had another question on the tech investments here, specifically on the AI side, machine learning, I've always thought of that as being very data-driven. And I'm just trying to think how this plays out in a company that has always prided itself in having 50 different operating units plus/minus, how do you consolidate that run that efficiently and have the data to apply across the 50 units?

Just because we have more than 50 different businesses doesn't mean that we're not able to aggregate and use the data amongst the businesses and make it available to the businesses within the group. So I think the notion perhaps that you had that each one is a self-contained island, and there is no way for them to work together on things such as data or for us to aggregate or for us to build tools and try and leverage them across the broader organization. I would encourage you to maybe think about that a little differently.

Maybe we can take this offline. I'm trying to understand how more than the concept of whether you can.

Yes. We would be very happy to try and give you a little more color. Please just call at your convenience.

And your next question comes from Andrew Kligerman with TD Cowen.

Great. Can you hear me?

Yes, sir, we can.

Rob, I'd like to -- on the premium question. In the past, you've -- let's say, going back 2 years ago, your outlook was for double-digit more recently, you had talked about 8% to 10% for the year. Maybe big picture, how are you thinking about 2026 in terms of growth potential because of those kind of disparities between October, November versus December and January? What are you thinking this year?

I'm thinking that I don't get rewarded for providing estimates and these kind of forward-looking statements. That having been said, from my perspective, as mentioned earlier, I think the insurance business, both excess and primary should have an opportunity to grow more than what you saw us do in the quarter. And as I suggested, I think the reinsurance business, while we remain optimistic, we are even more so disciplined, and we can't control the market. So we'll have to see how that unfolds, but that seems to be becoming more challenging more quickly mean for [indiscernible].

Fair enough, Rob. And then maybe just drilling into detail as I look at the net written premium. It looked like short tail lines grew a little more than the others. Could you share with us which areas of short tail that worked out well and...

The big drivers there are A&H as well as our private client business, Berkley One.

I see. And then...

If you look at the Commercial Lines piece, particularly some of -- the commercial lines piece is it's not worth coming from at all.

Got it. That makes a lot of sense. And then just the workers' comp piece, you touched on. i guess it sounded like you were writing fewer accounts because you didn't get the rate you wanted. This was an area about a year ago. There was some excitement just higher risk stuff. So maybe just a little color on what you're seeing...

Yes, we try to bifurcate the fact, Andrew, that there's sort of a more complex, higher hazard as you alluded to versus the Main Street stuff. I think the other piece with this, there was not a huge amount, but there was a bit of a timing issue with this as well. Rich, you want to talk about that for a minute.

Sure. So we had a couple of our operations, if you will, that renewals had transpired at different time periods relative to the fourth quarter of this year so that was the other reason for the change from the decline, if you will, in the workers' comp space.

I see. So that might reverse a little bit in the next quarter.

Over time, yes, that's the expectation. .

Your next question comes from Josh Shanker of Bank of America.

So when you think about pricing business, sometimes you imagine that you need a certain amount of rate because loss costs rise at a certain trajectory. Sometimes you need rate because the loss cost trend has changed, and therefore, the way you're pricing it previously needed some correction. As you talk about the softening, we're not really seeing you or any competitors out there really talk about a different loss picking, we're not even seeing it in the paid loss trends, although we haven't seen the fourth quarter triangles yet. Are loss conditions changing beneath the industry's feat right now? Or is the industry unable to get the necessary price increases with the general trajectory that one would expect from where losses are supposed to go?

Was there a particular part of the market that you were focusing on or it's in general?

You say something like casualty, that's a very broad class, right? There's a lot of different kinds of casualty out there. So I guess, I mean, we can start broad, but maybe there's something specific going on that you want to highlight?

Okay. So here are a couple of sound bites. And if I'm missing the mark, please tell me. But I would tell you that in the excess and umbrella space, it seems like there is a reasonable amount of discipline and trend continues, and we and others are getting that. I think auto liability, as we discussed earlier, continues to be a problem and the marketplace is taking rate, though, I'm not convinced at this stage that it's enough. As far as property goes, people have super short memories and the notion of making sure you have an appropriate cat load I think, is a fading concept. Do you want me to keep going? Or is that enough?

I'm just -- what I'm hearing from you is rate doesn't feel enough. You're not seeing paid trends change in such a way that demand a different view. It's just like, look, things are going at a base we understand, and we're not getting the rate forward, I guess.

I think what I'm suggesting is, Josh, that different product lines are in different places, and you need to use a pretty fine brush in my opinion. I think that there are certain product lines where I would tell you there is a green light and it would be advisable to try and lean into it more. There are certain that are amber and there are some that are red. And ultimately, it's -- one makes a judgment as to what do you believe the loss pick is given what you're able to charge, how do you feel about that? And what is your confidence in that. And every day, we go through that process. Obviously, there are certain characteristics such as length of incurred tail that can make it that much more complicated. So I would tell you that from my perspective, there are certain product lines where, again, for the comment I made earlier about rate, what we're feeling as though what we're in a pretty good place, maybe we don't need to be pushing quite so hard on rate. There are other places where we are dead serious about the rate that we need. And if the choice is you write it, if you don't get -- or get the rate or not, if you don't get the rate, don't write it. That's why you see certain parts of our business exposure-wise shrinking. So it's very difficult to have a one size fits all. But philosophically, that's how we think about the business. I don't know, for like 50 years, and we're still thinking about it that way.

And are there parts of the market that are earning, let's say, 91% to 94% combined ratio that you could write and you could grow, but that's not good enough? Or are there not these pockets that are worse than your 89% or 87% depending on how you want to call it, but it's just done out there to be found?

Maybe to answer the question a little differently is, please understand we are a return-driven business, not a combined ratio driven business. We figure out what type of combined we need in order to achieve the return.

Okay. And so there's not a pocket that just are track -- are marginally attractive. I mean look, 2% growth, it's not terrific given what we're used to. But there might be nothing out there for you, I guess.

I think that the answer is that there are different parts of the market that are in different places in the cycle. And my colleagues to their credit, understand very clearly what the goal of the exercise is to make money, make good returns, not to issue insurance policies. And there are certain product lines that are in a moment of transition. In fact, all product lines are in some sense of transition but some more than others. And we are navigating and responding to market conditions and also responding to the data that we have as to how we see the margins that currently we are in place.

And your next question comes from Meyer Shields of KBW.

You can hear me?

Yes, sir.

Fantastic. Rob, you mentioned -- I just want to go back to the comments where you talked about how reevaluating recent accident years suggests less of a need to push for rate. I know in the past, we've talked about some fame made claim frequency coming in below expectations, and that's actually translated into some reserve releases, lines of business where the claims didn't happen. Is that what you're talking about is this is the same subject?

So it's really across the board, where even where there is some tail to it, and we have tail factors and how we would expect it to develop that there are certain early indications that in some of the more recent years, that even the lines that have some tail to it, it would seem as though the underwriting actions and the rate actions are having the impact plus that we had hoped for.

Okay. No, that's very helpful. Is there any way breaking down...

Just to give you a little bit more, it is not limited to the claims made form. So again, we're not going to get ahead of ourselves, but we're watching it.

Okay. No, that's helpful. I was wondering if there's a way of breaking down whether that's positive emergence on the frequency side or on the severity side?

I would invite you to give Rich a call and he can torture you with all kinds of data.

Okay. I look forward to it. And last question, does any of that initial more changing viewpoint impact the full year '25 acting your loss picks for the relevant lines?

Sorry, could you once more, I beg your pardon there?

Yes. So let me rephrase it. If there's more optimism about how these recent years are going, did that show up in the [indiscernible] '25 loss picks for the exposed lines? Or did you maintain the loss picks and then just feel less need for pricing?

No, we did not touch them.

And your next question comes from Katie Sakys of Autonomous Research. .

Just a quick one for me. I just kind of like to break down your philosophy on capital return going into the new year here. I think the size of the buyback this quarter was perhaps a bit higher than expected in the context of some of your commentary last quarter. Was this quarter...

Well, I say last quarter.

I think you had kind of phrased it as not necessarily seeing like a huge opportunity for buyback, and I recognize that can change over time. So would you say that the 4Q repurchase was opportunistic? Or do you anticipate continuing to repurchase at these higher levels as long as you continue to access more capital than you feel you can put to work?

Okay. Well, I have good news for you. The gentleman who is the Head of our repurchase desk and also the Head of our Capital Management Committee. And I don't know, you probably have some other fancy titles. Do you want to take that one?

Sure. I think that we're constantly looking what to do our excess capital, how much you generate and how much we can use for various things in our business. So it's really constantly changing opportunities. when the opportunity arose is advantage of it. I can't tell you how and what we'll do on the next day. We think that our business returning 20-plus percent of capital, which candidly, I'm optimistic that we'll continue to be able to do that. At the moment, it's a pretty good investment from my point of view. So I would expect that we'll continue to look if opportunities present themselves to buy back stock. The alternative is to give stock -- give money back to our shareholders and special dividends. I don't think we have a rule. The judgment as move through the year. And as we look at opportunities and what we're going to do. We still had a huge amount of excess capital that we generate. And one of the things people don't understand is we become a very much more financially conservative company. We've gone from 35% debt to equity to 22% debt to equity. We've got lots of capacity to do lots of things and that gives us a lot of flexibility. So it's not just the cash we generate, it's the balance sheet we have, the risk we have in here and running the business. Then we look at the opportunities with those things together. And we're a very much more conservative company. So I can't give you an answer, but I can tell you we -- we have lots of opportunities. And our job is to run the business is now we own the whole thing and how would we use our count most effectively for the owners of the business. And we'll make that decision on a constantly evolving and changing basis.

And your next question comes from Ryan Tunis of Cantor.

First question just on the investment fund returns, bit a bit mix. Just curious, maybe you could go into a little bit more detail there. Is that individual fund specific, just I don't know, peel back the onion a little bit on what's going on in the investment funds.

Long story short, the noise that you saw in the financial category was primarily driven by one fund, and it was a disappointing result. And quite frankly, it's been a disappointing relationship. We do not expect that to be the norm going forward.

Sure. Got it. And then I guess just a follow-up. Yes, here in the aftermarket, a few of these big managed care companies like you and are getting woodshed and these stocks on Medicare Advantage of CMS proposal on 2027 rate increases of supposed legs being flat. Apparently, they need more than that. If memory serves, workers' comp pricing has some relationship to these Medicare price indications. I don't exactly remember how that works. Maybe you could refresh your memory.

So workers' comp rates in several states, prices off of multiple -- I think it's Medicare, not Medicaid schedules. Not all, but in many. And I think we all know that Medicare quite frankly, plays not just below market, but below cost. So comp has benefited from a multiple of that. Now what you're starting to see happen and you saw maybe a year or 18 months ago or something like that in Florida. And I think you're starting to see it in some other states is where they are going back and reviewing what the multiple is because the underlying Medicare rates are just so below market that is basically enriching the comp writers and they're looking to adjust that. I think you're going to see that more and more. I think, quite frankly, medical trend is going to prove to be a bigger and bigger challenge. Certainly, pharma is a piece of that in spite of the efforts from the administration, and I think it's going to be not just pharma. So that's how we think about it. And hopefully, that's helpful as far as the relationship between and Medicare.

Your next question comes from the line of Mike Zaremski of BMO Capital Markets.

Just kind of going back to the competitive environment in the insurance cycle. And you and Bill, Rob have a lot of experience in terms of seeing a lot of past cycles. Does -- I know you wouldn't say that based on your commentary, that's rational for casualty pricing to start decelerating given social inflation levels remain an issue. But I guess -- but from just -- as a competitor, though, have you seen this kind of cycle before that until there's real pain and ROEs start eroding off high levels that the trajectory of casualty could be biased south a bit for the foreseeable future?

We're not seeing any -- as far as GL or excess and umbrella, we are not seeing that. I think we probably tortured the topic of auto liability enough. But as far as GL and the access an umbrella, we're not seeing signs of what you're referring to. Will it come eventually? Yes, absolutely. It's still a cyclical business. But is it here today? Certainly not something that we're observing at the moment.

Okay. Got it. And my follow-up is, Rob, in your prepared remarks, when you're talking about kind of meeting the customer where they -- where it's most convenient for them. I guess I was initially thinking you were talking about direct to consumer or direct to business insurance online. But in your follow-up to a question later, you talked about just doing different types of business with existing traditional insurance bookers. So I don't know if you're willing to just be more -- add a little more color.

Yes, maybe yes, a little more color, sure, Mike. I think the point that we were trying to make is that the sacredness of the relationship between carrier and distribution is not universally sacred anymore. There's been a lot of change that has occurred, whether it be the nature of the ownership of the distribution, whether it be consolidation, whether it be distribution getting into the underwriting business. It's evolved. Simultaneously, you have a meaningful shift in customer behavior. And while perhaps it's not particularly pronounced amongst large accounts, in the small part of town is much more akin to personal lines. So we, as an organization, are of the view in the end that we exist to serve the customer, and we are respectful of our partners, but we are going to meet the customer wherever she or he wishes to be met in the way they choose to be met. So we certainly have businesses that are solely dedicated to wholesale. We certainly have businesses that are solely dedicated to retail. We also have businesses in the group that are going direct to customer. We have a new venture that is going to start to get its sea legs during '26 called Berkley Embedded, where it's point of sale. So there's a whole host of different things that we're doing not looking to undermine partners but making sure that we are there to meet the customer how she or he wishes to be met. And what is becoming more and more apparent, I think I may have said this, if I didn't -- my mistake, is that the customer, of course, they care about price, almost every consumer does, but customers are more preoccupied with convenience, and they are more open to a self-serve model, and we need to be conscious of that and responsive to that.

And your final question comes from the line of Maxwell Fister with Truist Securities.

I'm on for Mark Hughes. In the other liability line, you mentioned a pivot in your portfolio last quarter. Where do you stand with that now? And then separately, how did pricing in that line trend through the quarter maybe on a monthly basis if you have that level of granularity?

Honestly, maybe it's just the hour and a bit of a long day, but I do not have a clear recollection of what you suggested. We said around a pivot and other liability last quarter, I'm sorry. Is there any additional context you could offer, please?

You had just mentioned that you're pivoting the portfolio maybe you different states or exposures. So I just wanted to see if you had an update for us there?

Maybe, again, I apologize, it's not ringing a bell. Maybe we could pick this up off-line, if you don't mind. And we can sort of try and unpack it a little bit more as to what the context was. But it's not striking a cord.

Absolutely. That works. How about the pricing in other liability through the quarter, monthly, did it accelerate? Or how did you see that?

Yes. We don't, generally speaking, break out that type of detail by product line. But as we suggested earlier, on the liability side, we are feeling comfortable about where things are and how we see the market opportunity at least at this moment.

Understood. And then separately on property. Any stabilization there in pricing? Or are you still seeing incremental pressure there?

Well, I think -- as we have suggested earlier, I think with the larger account stuff, we're seeing more than incremental pressure. Unfortunately, for us, that's not a big part of what we do. On the smaller property accounts, quite frankly, we're still seeing opportunity there.

And again, if you wish to follow up on that, please just give us a shot whenever you like. Kevin, was there anything else? Or are we through?

There are no further questions at this time. I'll now turn the call back to you, Mr. Rob Berkley for closing remarks.

Kevin, thank you very much for your hospitality this evening. Thank you to all participants for your time and your interest in the company. Again, I think a solid quarter to say the least, yet another great year and the momentum continues for the most part, to be in our favor. So we look forward to catching up with you sometime in early April. And we wish you a good evening. Thank you again. Good night.

This concludes today's call. Thank you for attending. You may now disconnect.

All right. I think we're right about out of time. So how about we get started. My pleasure to be joined on stage by Rob Berkley, CEO of W.R. Berkley. So thanks for being here with us, Rob.

Thanks for the invitation. Nice to be here.

And maybe we'll just kick it off with the news that came out on Friday, MSI acquiring a 12.5% stake in Berkley. I know this was a previously announced transaction, but anything of additional context, update you want to provide on that?

Maybe just a little bit of background, recognizing different folks may have a different knowledge base of the situation. But to make a long story short, some time ago, there was an announcement that was made that MSI, a large Japanese insurance company was going to be buying a 15% stake in the company. And I think what's important to -- there are a couple of things that are important to recognize.

One is that it's been a relationship that the company I work for has had with MSI for more than a decade. My interpretation of the catalyst for their decision was they are one of the largest insurance companies in the world, certainly one of the largest Japanese insurance companies. And they are notably underweighted in the largest insurance market in the world, that being the United States.

From my perspective, they viewed it as a way to increase their exposure to this market, but to partner with an organization that they've had an extended period of time to get to know. They've been a reinsurance partner of ours for some number of years. And I think that was a key component of that comfort level. I think it's worth noting, and perhaps this is apparent to those that had read the original announcement some time ago. And that is there were no new shares that were sold by the company. My boss and myself, we did not sell any shares as well and have no intention to. And there are certainly some very important points in the agreement that was entered into.

So long story short, some of the reaction that came about recently on the announcement and even leading up to the announcement was a little bit surprising to me. It seemed as though people were caught off guard. But quite frankly, it's been very clear that they were going to be getting to, call it, 15% or so by the end of the first quarter. And I think this was just a natural step in that occurring.

Yes, right in line with what was originally announced. So I guess moving more broadly on to the overall business, could you just provide us some background on sort of where the business stands today from a holistic perspective? And kind of what's the strategy going forward into 2026?

Rob, perhaps it's more exciting for some if one were to get up here and announce some radical change. But I guess when you think about it, we're pretty boring as an organization. We've been doing essentially the same thing for the past 55 years. And that is we are focused on the specialty insurance industry. And that is ultimately how we approach creating value for shareholders. Our view of the business is we do not want to be all things to all people. We are a collection of 60 different businesses focused on particular niches and ultimately, our value proposition to customer and in the end, shareholders is the expertise that we have in each one of those niches.

Yes. And so I guess one thing that is changing is the insurance cycle and every cycle is unique. Berkley has 60-plus independently managed underwriting units to manage it. What would you say about this cycle relative to past cycles? And how does that inform your view on how conditions should play out over the coming year?

Yes. Every cycle is the same, but no one is a mere image of ones that we've seen in the past. The fundamentals continue to be the same that there's really 2 human emotions, if you like, that drive the cycle, fear and greed. And it's really the profitability at any moment in time or lack of profitability that drive that mindset. Just taking half a step back when the profitability is strong, human nature being what it is, people want more. And how do they do that? They compromise on underwriting discipline. And ultimately, they will follow that path down to a place where they do not want to be. And that's when all of a sudden, the greed is overshadowed by fear and discipline returns to the market.

One of the changes that we have seen more recently is a decoupling of product lines. Approaching 30 years ago, when I got into this business, product lines marched somewhat in lockstep throughout the cycle. Today, there is much more of a decoupling. So by example, we are seeing a property market, certainly a commercial property market that is in the early stages of softening, workers' compensation has been soft for some extended period of time, similar for professional liability. On the other hand, you see commercial auto or some of the other liability lines such as GL, excess and umbrella, where there's meaningful firming that is going on. So I guess the punchline, Rob, is that it is different in the sense that product lines have decoupled. It is similar in the sense that what drives the behavior at a macro level continues to be what it has been for generations.

Yes. Yes. And if we zone in on casualty, for example, how are those claim cost trends trending here? And do you expect any sort of let up in the level of loss trend that you're seeing in those lines?

I think the industry over the past several years was, quite frankly, caught flat-footed. There were really 2 phenomenons that were driving loss trend above and beyond what was anticipated. One of them was economic inflation coming out of COVID and the other one was social inflation, which essentially is just a shift in the legal environment and the awards that are coming out of the legal environment, particularly jury awards. We have seen a very steep trajectory on the social inflation front and how that is contributing to a loss cost trend for some number of years now.

The industry has been having to play catch up, and there's been a fair amount of pain that's come out of the policy years '15 through '19, and in some examples, spilling over into '20, maybe even to '22. I think the industry is making progress in catching up. And as a result of that, I think while rates will have to continue to go up in some of the liability lines, I don't know if it will remain as steep a trajectory. But the reality is it's just the industry pushing rates in response to an environment that is driving loss cost trend up, and that has not abated as of yet.

Okay. That makes sense. And Berkley is a large participant in the E&S market. In the past, you've said that E&S is likely to continue to take share of the commercial market over the long term. Do you think that's still the case? And like is there any differences between what you're seeing in the near and medium term versus long term?

I think E&S is a pretty broad brush from my perspective. And without a doubt, E&S -- and quite frankly, being a bit of a proxy for specialty overall, has benefited greatly over the past several years because of a shift in loss costs and a challenge for the standard market to reposition itself. And that's just been a reality that has benefited against specialty and E&S. Will that continue? It really depends on what the appetite will be of the standard market. Said differently, the specialty market, in particular, the E&S market picks up the crumbs that fall off the table of the standard market. So to get to the point or to the question, Rob, I think given the appetite that we are seeing on the property front, starting with property cat and how it is waterfalling through into the shared and layered market and ultimately will make its way down into the primary insurance market, you're going to see more competition on the property front.

On the liability market, I think you're going to continue to see some runway there, some opportunity for that part of the specialty market and by extension, the E&S market to continue to take market share. To bring it home a little bit for us as an organization, when you look -- we are one of the larger E&S markets in general, but we are weighted towards the liability lines. So if you look at our E&S portfolio, we're sort of 85% to floating with 90% of our E&S business is liability related. So the comment I was making earlier about where the opportunity still lies on the liability side, I think, bodes well for us because we are -- as opposed to many of our peers, we were not really just focused on the property piece. We caught the property wave, but really the lion's share of what we do is casualty focused.

And for Berkley specifically, growth has been like high single digits this year, called out rate adequacy in certain lines of business that has held you back from some additional growth. As we think about that, like what's the right rate of growth for WRB going forward? And it sounds like maybe you're more opportunistic on certain products versus others?

We start from a place that we are managers of capital. We manage the capital in part through selecting and pricing risk and then all of the activities that come behind that. But we are not in the business of issuing insurance policies. We're in the business of making good risk-adjusted returns, full stop period. We also recognize it's a cyclical industry. So there are moments in time you can grow and there are moments of time you can't. So long story short, Rob, you tell me what the market conditions are going to be, and I can tell you much more thoughtfully what expectations should be of the top line. What I can tell you is regardless of market conditions, we will be focused on profitability. And if the window of opportunity is there, we will have no problem leaning into it and growing dramatically. But if we do not see that opportunity, again, we have no problem folding our arms and waiting for market conditions that are more attractive to present themselves.

Okay. And you touched on property briefly there. So you rode the wave. If we think about property cat specifically in 1/1, maybe even on the reinsurance side of the business, what are you seeing for 1/1 renewals? And how do you think about rate adequacy right now?

Well, I don't think anyone has perfect visibility as to where 1/1 is going to come out. Our finger on the pulse as imperfect as that is, would suggest that property cat is probably going to be off more than 10, not likely more than 20. So pick the midpoint 15-ish. I think that there's -- even after 1/1/25 and what we saw happen with rates, I think there was a lot of confidence that there was still margin in the business, and it was worth continuing to ride the merry-go-round. I think as you get to the rate levels that I was referencing or alluding to a few moments ago, it's going to start to invite the question whether people really want to continue and it generates a good risk-adjusted return. We'll see with time.

From our perspective, as a seller of reinsurance, which is a relatively modest part of what we do. Nevertheless, we are pleased to play in that marketplace in an opportunistic way. We are flirting right with that line in the sand at the rate decreases we were talking about. So we'll see. Is it possible that our property reinsurance writings could be off meaningfully at 1/1. If we don't like the pricing, that's exactly what you should expect. If we feel as though there's still margin in the business to generate good risk-adjusted returns, we will continue to play.

Got it. And so if we shift to the margin of the business, maybe in insurance first, I think you've said rate is in excess of trend, excluding workers' comp, but you also have some mix shifts going on. Could you unpack for us what's going on with the underlying loss ratio and how you're thinking about that?

Yes. So the comment about mix is really just a reflection of the portfolio is ebbing and flowing depending on market conditions and how we see opportunity. And in addition to that, as referenced earlier, we've got 60 different businesses. And at any moment in time, their growth or something less than their growth is affecting the mix overall. So when we talk about the rate opportunity, when we talk about the growth opportunity, it's very rare that from one quarter to another, we're getting to a similar answer in the same way.

So if you look at our rate that we've been achieving over the past extended period of time, that's sort of fluctuated between 5% and 10%, I would tell you, we get to that answer in a very different way today than we did get to that answer 2 years ago. The property opportunity 2 years ago was quite noteworthy. Today, it requires more caution. On the other hand, the opportunity for rate in the auto liability space, as an example, or some of the other casualty lines is quite meaningful, and we are trying to take full advantage of that.

That makes sense. How about on the expense side of the equation? I think Berkley has made significant improvement over a longer-term period. Is there more opportunity to get more efficient in the near term? Or is that becoming more challenging by some of the tougher growth environment?

I think clearly, the top line challenges that could lie ahead at some point certainly would not help us leveraging fixed costs. That having been said, I think we are reasonably comfortable barring the unforeseen event and our ability to keep it under 30% or so. With all that as a backdrop, we are actively making what I would define as meaningful investments in data and analytics and on a technology front, which does require upfront investment, but we are confident that the return on that investment will more than justify the investment itself.

Yes. You mentioned data and analytics. Maybe that's a good segue to ask you about artificial intelligence. How do you think AI can impact a business like Berkley? And what capabilities are you investing in? And has there been any success? Or is that further down the road?

So I think as far as the opportunities with AI, anyone who suggests that they have it figured out and fully scoped out, I think they're fooling themselves or maybe trying to fool someone else. Are we using the tools today? Absolutely. Do we have initiatives at the group level that we're working on for the various businesses that make up the group? Without a doubt. But in addition to that, we're able to provide toolkits to all of the operating units. So we essentially have 60 different laboratories all experimenting with different types of tools.

Some of the low-hanging fruit certainly is on the underwriting side, particularly on the intake and our ability to, quite frankly, just pile through more submissions in a more efficient with greater precision in a more timely way. Also on the claims front, there is, without a doubt, opportunity for us to be handling certain types of claims in a much lower touch manner. So I think we're just beginning to scratch the surface, more to come. And we are, and I expect we will continue to be in learning mode for an extended period of time, but early returns remain encouraging.

Got it. And I want to pivot and maybe ask you about MGAs. I know you've highlighted some conflicts of interest there in the past.

I do have my views on delegated authority, yes.

Where are you seeing the greatest prevalence of MGA risk today?

I think wherever you see the market most competitive is where you will find the greatest presence of MGAs. And I think it really just stems from this observation that I've shared, I think other people have made the same observation on their own is the misalignment of interest. MGAs, while not all, the reality is that the model, there is a disconnect. When you're an MGA, you get paid based on the number of policies you sell. You get rewarded on a commission structure. When you are an underwriting shop like the one that I work for, you get paid based on how much money is left after you cover your expenses and your claims. And those economic models, while they can work together, there are some fundamentals that are in conflict with one another. I made the comment to some folks recently if you were a portfolio manager, imagine if you got paid based on the number of stocks that you bought, it doesn't make a whole lot of sense. So that is just my take on MGAs, which is perhaps not popular, but is honest.

It's a fair one. And so hopping around a little bit here, but I wanted to give you the opportunity to talk about Berkley One. Berkley has seen strong growth in that business, the high net worth personal lines. Can you give us a sense of where this endeavor stands in the success to date?

So it has been a long road, but it has been built the right way. Foundationally, I think it is as solid a player as there is in the marketplace. It's really built on some of the same principles that I was trying to point to earlier about the specialty commercial lines business. It's all about a value proposition that is built upon knowledge and expertise to customer and ultimately to capital.

Berkley One is well on its way to becoming a $1 billion business, and I expect that it will blow right through that over time. We've been very thoughtful and deliberate or my colleagues have been very thoughtful and deliberate about the approach they've taken to the business, both the product offering, including the geographical exposures to certain -- well, we've been very -- for example, we've stayed out of California, and that wasn't by good fortune. That was by design. So I think it's a great addition to the organization. It continues to contribute in a meaningful way, and I expect it will continue to grow from here.

My comments about property in general, I should have been a little bit more specific. They were really pointed more towards the reinsurance market and the commercial lines property market. The personal lines, particularly in the private client space property market continues to enjoy a tailwind.

That makes sense. And if we pair those comments on Berkley One with the additional cat exposure there, and you've shifted some mix into property in recent years. Where -- how do we get a sense of where you are in terms of cat exposure relative to where you might want to be over the longer term? Is this like a new level?

We pay close attention to how we manage our cat and just on a relative basis, given how the business overall has grown, our exposure to cat is actually less today than it was in the past. But partly, that's because the business overall has grown and our ability to manage volatility is different than it was when we were a fraction of the size that we are today. But we have no desire to become a meaningful property cat writer on the reinsurance front. And even on the primary space, again, we pay very close attention to volatility. From our perspective, just going back to this notion of risk and return, we think one of the mistakes that's made oftentimes in this industry is when people think about risk, they don't appropriately factor in volatility as a component of risk.

I want to go back to something you said on pricing. Casualty maybe not seeing some of the same increases in certain lines. Were there certain products that you were thinking about when you were mentioning that? And do you have any idea of like why that might be? Is that just because pricing has gone up for a long period of time?

So I think within the liability space, there are certain product lines, particularly in professional liability that we've seen rates eroding. And again, it just goes back to this idea that people in this industry respond to pain. Pain meaning losses and the loss activity just hasn't been there to create the discipline around pricing. And again, I think you see more of that in some of the professional liability areas under the broader banner of liability.

Got it. And how about workers' comp specifically? I think you've been pretty vocal on this product. Are you seeing any new trends there? And how is the medical severity?

We continue to be concerned about medical trend. From our perspective, it is, without a doubt, on the rise. And we think that the comp industry has been somewhat subsidized, if you will, by how much of comp benefits, particularly around medical are a multiple or are priced off of Medicare. And as a result of that, the government has been keeping those rates down without a doubt. I mean we all know that the government plays below cost when it comes to Medicare to providers. And workers' comp as a multiple of that has been able to benefit from that as well. I don't think it's sustainable long term. California historically has lagged the rest of the country as far as comp pricing. It would seem as though it is out front at this moment in time. And a lot of what's driving that is cumulative trauma and litigation around cumulative trauma. But I think medical trend is going to prove to be not a friend to the workers' comp market. It's just taking time.

And how should we be thinking about Berkley's international ambitions, if there are any?

We have the same expectations of our businesses outside of the United States as we do inside of the United States. It's all about risk-adjusted return. And our focus is on building businesses based around or built on people and their knowledge and their expertise in that particular niche. So recently, we just opened up in India, and we'll be playing in the liability space with very much of a specialty focus. So I think we issued policy #1 last week, very exciting.

Great. It seems like we're getting to this period of potentially lower organic growth. How are you thinking about capital return? What is the playbook for Berkley? I know in issuing special dividends. What's the appetite for M&A?

We are generating capital, quite frankly, more quickly, we can organically put it to work. It is not lost on us that the capital belongs to the shareholders. And if we don't have a use for it, and it's above and beyond whatever cushion we need to carry, we will look for ways to return it. At this stage, there's 2 -- while there are 3 levers, we're not going to really touch our debt structure because there was some good work done during COVID that positioned the balance sheet very nicely, and we couldn't replace it for anything approaching what we're paying today. But -- so that leaves us with share repurchase, special dividends, and I think it would be appropriate to expect us to continue to use both of those tools.

As far as M&A goes, we are aware of transactions in the industry, typically before they are announced. But we also have a healthy respect, maybe even a healthy fear of the complexities that come with insurance M&A. It is hard enough to understand your own reserves, let alone somebody else's reserves, and it is very hard to change a culture. So from our perspective, while we would never say never and we do check tires from time to time, the reality is we're cautious and cheap, and we would rather more often do a better risk-adjusted return or it's a more controlled outcome.

Great. And if we think about the net investment income trajectory, how should we be thinking about the portfolio moving forward and planning any changes to allocations or anything like that?

Well, we have continued to have exceptionally strong cash flow. And as a result of that, the portfolio is growing. Our new money rate, as we've communicated in the past, remains comfortably above our book yield. And as far as the point around allocations, right now, given the opportunities that exist in the fixed income market, we are really not spending a lot of time focused on alternatives. That having been said, we -- it's not off the table altogether, but it's just not where we are focusing at this stage of the game.

Makes sense. And so if we put all of that together, lots of comments on underwriting, on net investment income, capital deployment. You've been in this sort of high teens ROE for a number of years. Is that still the right realm moving forward? Or are we on a -- potentially with the cycle, maybe a path towards a little bit more normalization? Or is it sustainable?

Well, obviously, the further you go out, the less visibility there is. But certainly, from my perspective, given the health in the underwriting as well as our ability to continue to push and achieve rate where we think we need it and what the investment portfolio, we believe we'll continue to throw off, I think high teens returns are something we expect to achieve for the foreseeable.

Awesome. I think we're right about out of time. Thanks, Rob, for being with us today.

Thank you. Good to be with you.

Ladies and gentlemen, thank you for joining us, and welcome to the W.R. Berkley Corporation Third Quarter 2025 Earnings Call. This conference call is being recorded. [Operator Instructions]

The speakers' 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. Berkley 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.

Nicole, thank you very much. And let me echo your warm welcome to our Q3 call. So in addition to myself on this end of the phone, we also have Executive Chairman, William Berkley, as well as Chief 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 through some highlights of the quarter. I may follow with a couple of sound bites of my own, and then you will have the 3 of us to -- at your disposal to try and answer any questions or engage in any discussion that participants would like to engage in.

But before I hand it over to Rich, let me just as oftentimes I do state the obvious. And that is -- I think the past 90 days is just a continuation of clear evidence that the insurance industry is still a cyclical industry. And for whatever the reason may be, some would say, fear and greed. The industry continues to seemingly make an art out of self-sabotage when it comes to its own success.

That having been said, we, as an organization, are not completely insulated from that, but we are able to mitigate that quite effectively because of how we what parts of the market, I should say, we focus on, particularly specialty and further more small accounts, which a lot of the challenge that continues to percolate and seems to be building momentum, again, we are somewhat protected from.

So let me leave it there. I'm going to hand it over to Rich, who'll run through some thoughts, and then we'll -- I will come back and offer a few more mines. Rich, please?

Great. Thanks, Rob. Appreciate it. Good evening, everyone.

Third quarter results were excellent with a return on beginning of year equity of 24.3%, reflecting an increase over the prior year's quarter of almost 40% and net income, $511 million or $1.28 per share. Operating income increased 12% over the same period to $440 million or $1.10 per share, with a return on beginning of year equity of 21%. Further growth in underwriting and investment income drove the strong performance, combined with net investment gains.

Pretax quarterly underwriting income increased 8.2% to $287 million. Calendar year combined ratio was 90.9%, and the current accident year combined ratio ex cat was 88.4%. Cat losses represented 2.5 loss ratio points or $79 million compared with the prior year of 3.3 loss ratio points or $98 million. Current accident year loss ratio ex cat for the current quarter was 59.9%, reflecting an increase over the prior year attributable to business mix, however, comparable to the second quarter of 2025.

Drilling down further, the Insurance segment's quarterly accident year loss ratio ex cat was relatively consistent with the first half of 2025 at 60.9% bringing the accident year combined ratio before cat to 89.3%. Reinsurance and monoline access segments, accident year loss ratio ex cat was 52.6% with a strong accident year combined ratio before cats of 82.4%.

Moving to our top line. Quarterly net premiums earned continue to benefit from written growth, reaching another record of more than $3.2 billion. Gross and net premiums written were $3.8 billion and $3.2 billion, respectively. Net premiums written grew in all lines of business in both segments. The comparable third quarter expense ratios were 28.5%, in addition to benefits from the growing net premiums earned on our expense ratio several of our recent start-up operating units are gaining scale and contributing favorably to the expense ratio.

Technology enhancements are also contributing to operational efficiencies. Our pretax quarterly net investment income grew to $351 million, driven by an increase in our core portfolio of 9.4%. As a reminder, 2024 did benefit from heightened Argentine inflation-linked income and excluding such income from both periods, would increase the core portfolio growth to 14.6% quarter-over-quarter.

Fixed maturity portfolio had a book yield of 4.8%. We do expect investment income from our fixed maturity portfolio to grow in the foreseeable future due to strong operating cash flow of almost $2.6 billion on a year-to-date basis and new money rates comfortably above the roll-off of existing securities.

The duration of our fixed maturity portfolio, including cash and cash equivalents increased to 2.9 years in the third quarter while strengthening our AA- credit quality of our portfolio. Stockholders' equity reached a record of $9.8 billion, increasing 16.7% from the beginning of the year, driven by strong earnings an improvement of $428 million in our after-tax unrealized investment losses and currency translation losses as well as capital return of $362 million through ordinary and special dividends and share repurchases.

As of September 30, our after-tax unrealized investment losses included in stockholder equity decreased to $177 million, and our financial leverage has improved to historic low levels of 22.5%. We've continued to generate significant capital. Company proactively refinanced its debt when interest rates were historically low, resulting in a low cost of capital and adding permanence to our capital structure with our nearest scheduled maturity in 2037.

Our liquidity remains strong with almost $2.4 billion of cash and cash equivalents to invest. Book value per share before dividends and share repurchases grew 20.7% year-to-date. And 5.8% on a quarter-to-date basis.

Rob, with that, I'll turn it back to you.

Okay. Rich, thank you very much. So maybe just a couple of quick soundbites for me that perhaps will invite a bit of conversation later on. Starting out with some observations regarding the market. The reinsurance marketplace, clearly, the property market, particularly property cat, that bloom is off the rose. From our perspective, there's still margin in the business. We'll see how long that lasts. It's without a doubt eroding. And to that end, you can feel the growing groundswell, but frankly, it's palpable around 1/1 and the appetite that's going to be coming from the reinsurance market. So we'll have to see what 1/1 holds.

As far as the liability side, again, from our perspective, and we've expressed this in the past, we've been a bit frustrated in the reinsurance marketplace, drawing a line in the sand and demonstrating some discipline, it would seem as though that reinsurers are dissatisfied with the underlying rate increases that their [ cedents ] are achieving from our perspective we think that there should be opportunity to push a little harder. That having been said, obviously, it endures to our benefit as a buyer of reinsurance.

Flipping over to the Insurance side, for the comment earlier, from our perspective, and again, using a very broad brush year, larger equals more competition, smaller equals less competition, which certainly bodes well for us. On the property front, highlighting that, clearly, the world of shared and layered, as we talked about, give or take, 90 days ago is where the competition is heating up the greatest. It is also pronounced just in E&S in general. That having been said, from our perspective, clearly, the small admitted space as well as select parts of the homeowners market continue to offer attractive opportunity.

Not different from what we've expressed in the past as well. The world of professional liability is very much a mixed bag. On one hand, you have D&O that continues to erode, although at a slower rate from where it had been and the E&O market, generally speaking, is choppy. One of the brighter places, and by the way, it needs every drop of it and then some would be the world of HPL as an example, or hospital professional.

As far as workers' compensation goes, Main Street comp from our perspective, consistent with what we shared with you in the past, tends to be particularly competitive. We have talked and talked and talked about California and certainly some of the challenges that market faces and happy to see the rate action coming through. A lot of that indigestion is being -- is coming about as a result of cumulative trauma and litigation stemming from that.

GL, it would seem, at least from our perspective, for the moment, one is able to keep up with trend. Auto has been on again and off again. I think it was the first quarter where we expressed a view that there were some green shoots. In the second quarter, it was a little less encouraging and quite frankly, it remains pretty choppy.

A bit of a puzzle to me, and I believe, colleagues because there is no product line that has been more exposed to social inflation in our opinion than auto, but we'll have to see what happens with that. as far as our portfolio goes, and we can get into it later, we are reducing exposure. We're taking a lot of rate. And quite frankly, our top line is growing considerably less than our rate.

Over to umbrella, again, not without its challenges for the marketplace. Clearly, the smaller end of town has been the better place to be. And in addition to that, the indigestion that the umbrella line has experienced disproportionately has been impacted by auto.

Rich covered our quarter in some detail. So maybe just a couple of quick observations on that front from me. Top line up 5.5 rate ex comp coming in at 7.6 different folks can interpret that in whatever the way they wish to. But from my perspective, it highlights the concept or the idea that this is an organization that is focused on rate adequacy. And to that end, we are very attuned to the fact that we are in business to make good risk-adjusted returns, not solely to issue insurance policies.

You would have seen some on the insurance front, growth in the short-tail lines, just to call a couple of pieces out, what's really driving that because you may be scratching your head saying, well, how do I reconcile this? What he was just babbling about? As far as the property line and competition. There's really 2 pieces that are driving that. One is our personal lines effort in Berkley One, that being the private client personal lines. Where there is great opportunity, and we continue to lean into that. And in addition to that, our accident and health business continues to prosper as well.

You would have also perhaps taken note of the growth in the workers' comp line. That not dissimilar to what we've talked about in the past is really driven by specialty comp. Some of it tends to be higher hazard and so on and so forth. It is not Main Street comp. The growth under the reinsurance banner, really, as far as the property piece goes, that's just us getting our last bite at the apple before the apple starts to rot. We have a view as to rate adequacy and we have no problem drawing a line in the sand as we have demonstrated in the past. And as far as the excess line with the growth is coming from is primarily excess comp.

Risk covers the loss ratio, the expense ratio. As far as the cat goes, that was really just SCS that gave us a little bit of noise there. The expenses, again, continue to be benefiting from our focus around automation, as Rich highlighted, but please understand we continue to make investments. So on occasion with the expense ratio, you will see us having to take half a step back in order to take multiple steps forward.

Flipping over to the investment portfolio. And again, I'm not going to completely pile on what Rich has already covered, but I would just flag that the duration did nudge out to 2.9 years. And we feel as though that we have a fair amount of runway before us. A, as Rich highlighted, the strength of the cash flow continues to build the size of the portfolio. And in addition to that, we see the book yield continuing to go up from here. So just as a point of reference, the domestic book yield at the -- for the quarter was 4.6%, and our new money rate is, give or take, right about 5%. So growth in the portfolio, higher new money equals runway ahead.

By and large, it was a pretty solid quarter. And it wasn't just because the wind didn't blow and the earth didn't shake in a consequential way. It's because this is the trajectory that we're on, and it would take a lot to take us off that path. So when the day is all done, the underwriting opportunity continues to unfold. The discipline remains in place to ensure that, that margin is there. And our other economic engine being the investment portfolio, again, has much opportunity ahead of itself.

So let me pause there. Nicole, we are going to turn back to you, please, if we could open it up for questions. Thank you very much.

[Operator Instructions]. Your first question comes from the line of Alex Scott with Barclays.

Think I got this unmuted correctly. So let me know if you can hear me, but.

Yes, we can hear you. We get stuff on mute at all the time. You're coming through a couple of times a day.

All right. I'll jump into it then. So I first wanted to ask you about how you're thinking about capital position of the company and just hearing a little bit more restraint in terms of what you're willing to grow into? But you're still getting some decent growth. What would your plans be for the additional capital flexibility that, that would give you? And what would the pecking order look like?

So a couple of comments. If you were to take the rating agents -- some of the rating agency models, I don't know if it's all of them, but certainly, several of them. And you ran us through their sausage maker, it would tell you that we have significant headroom to the tune of 10 digits as far as excess capital. So loads of flexibility there.

In addition to that, as you pointed out in your own words, we are generating capital more quickly than we are able to consume it. Obviously, as we've discussed in the past, we want to make sure we've got plenty of wiggle room that having been said, we're also equally conscious of the fact that the capital does not belong to us. It belongs to the shareholders. And to the extent that we are not able to utilize it effectively, we should be thinking about returning it to the shareholders. We have multiple tools to do that. And so we have not been shy about utilizing them.

Rich flagged the balance sheet, in particular, the capital structure. So not in a rush to do anything as far as the debt or related securities and that would really leave us with 2 options that being dividends and repurchase. And again, we are open and regularly thinking about that question.

So let me pause there. That was probably a lot of babble without specific answer that you're looking for, but I'm probably not going to be able to give you a specific answer. But this so happens that my boss is here, and he spends a lot of time thinking about capital and excess capital, particularly as our by a wide margin, largest shareholder.

So we spent a lot of in thinking about it. There'll be opportune times buy back stock. We've been a very effective utilizer of that tool, and we've bought back a lot of stock over the years. But it's because we're not impatient, we wait the opportunity comes. We continue to do that.

In the meantime, we feel that special dividend is a way to let the shareholders know, we work for them. That opportunity to buy back shares can come at any time. We'll keep plenty of powder available so we can seize those opportunities. We don't think it's there right at the moment.

Got it. Thanks for the question, Alex. Nicole, was there another question out there?

Your next question comes from the line of Tracy Benguigui with Wolfe Research.

Tracy, are you there?

Hello. Can you hear me now?

We can hear you now, Tracy. Sorry for the confusion with the new platform. Okay. I'm sure it was a brilliant question. I ask all my best ones when I'm stuck on mute, too.

That's okay. I want to go back to your comments about your excess capital position. It's my observation that this is an industry-wide phenomenon. Are you worried that the industry is sitting on too much capital and your competitors are so used to growth coming off a hard market, it's going to be hard for them to take their foot off the pedal. I'm just curious to your thoughts like what catalyst can you envision that could turn pricing around given the supply-demand equation?

Well, maybe a couple of comments there. So we took ex comp, and we back out comp because presumably, that's sort of keeping up through weight inflation. But we took 7.6 points of rate in the quarter. So as far as our ability to keep getting rate and keeping up with trend, we feel pretty good about that.

That having been said, as far as excess capital, some of our peers have a lot of excess capital, some of them don't. We're really just focused on what we're doing, and we're focused on our value proposition to the marketplace every day. And if at some point, it means that we have irrational competitors that drive parts of the market to unattractive places as we've demonstrated in the past, so be it will shrink the business.

As I, in a clumsy way, was trying to allude to in my comments earlier, given the breadth of our offering or how many different parts of the market we participate in and how the marketplace has decoupled as far as where product lines are in the cycle, that positions us as an organization to be more resilient when it comes to growth. But look, when the day is all done, people may become more aggressive. Seeing some version of the movie in the past, and you and others have seen how we respond. As I suggested earlier, we're focused on making good risk-adjusted returns. If we can't do it, so be it, we'll let the business shrink.

Got it. And I want to go back to your auto comments. Since your growth was flattish, can you just unpack how much exposure you're reducing balanced by the pricing you're seeing there?

I don't think we break out that detail. I will double check with Karen. And if we do provide that to the world, then I can assure you she will follow up with you tomorrow. But what I can say is I wouldn't have made the comment I made earlier, if it was just rounding. It's meaningful. And we're just seemingly, there are some market participants, particularly those with delegated authority that don't seem to get where loss costs are. But that end in tears eventually, and we will have an opportunity.

Your next question comes from the line of Elyse Greenspan with Wells Fargo.

Okay. Perfect. My first question, I guess, is just on Mitsui Sumitomo. I know we have not seen a regulatory filing hit indicating that they've hit a 5%...

Yes. I noticed that too...

In the company. Do they have to file when they hit 5%? Is there any update? I know you guys are...

My understanding is yes. I am not an SEC attorney, so full disclosure. That having been said, my understanding is they get to 5%, they need to file and every X amount of shares that they buy beyond that, they will have to do follow-on filings. I do not believe there is any reason for them not to have to comply with what everyone else does.

But as we also mentioned in the past, in an effort to ensure that we are not handicapped in our ability to participate in the market, we have no information beyond what you have as far as where they stand in their process.

And then my second question, you guys saw kind of stable rate price in the quarter. Growth slowed, right, mostly due to commercial auto, a little bit of their liability. It feels like that's a trade-off, right, Rob, you guys are willing to make.

I know last quarter, you said we're kind of in this 8% to 10% growth world. This was a little bit lighter. So does it feel like we're in a little bit lighter growth world as you guys look to keep as much price in the portfolio as you can?

So from my perspective, the answers, Elyse, that we have major parts of the marketplace that are in some period of transition. Some are eroding and will likely erode further. Some are healthy and others are somewhere between the bookends, perhaps going through some stage of fits and starts in our opinion is you will likely see it needing to firm from here commercial auto being an example of that. It's these periods of time of transition, which makes it really, really hard to predict what the opportunity will be over the next 90 days.

So once upon a time, we tried to give guidance because we were trying to be helpful. I'm not sure if that proved to be the case or not, but that was the intent around what the growth opportunity is. I do believe that there's still opportunity for us to grow and grow at a healthy rate from here. But as you pointed out, thank you for flagging. We are not going to compromise our underwriting and particularly rate integrity in order to juice the top line. And that sort of highlights what we've talked about on occasion in the past. That's because we have a sense of ownership, obligation and responsibility to the capital we manage.

We get rewarded our colleagues throughout the organization get rewarded not this monetarily, but emotionally based on delivering good risk-adjusted returns coming out of the underwriting in part. As opposed to an MGU where you know what, it's just about how many widgets you can roll off the assembly line today.

Your next question comes from the line of Rob Cox with Goldman Sachs.

For my first question, I just wanted to ask about the catastrophe losses in the insurance segment. It just looks like it was more in line with the average ratio -- cat loss ratio we've seen for the last couple of years, whereas some peers are reporting lower cats. I know you called out SCS. But is there any particular geography or large loss to call out there? Or is this just a result of growth in short tail lines recently?

I would tell you that it's 2 things. One is a bit of frequency with very modest severity. And number two, as you pointed out -- look, we -- the property market, in particular, it's been a pretty good run. So we leaned into it because we like the risk-adjusted returns that were available. As a result of that, we got a little bit more exposure. But I would caution you not to read too deeply into it.

Okay. Great. That makes sense. And just a follow-up on homeowners. It sounds like there's still some opportunity there. Can you talk about how Berkley One has performed compared to your expectations and where you're growing? Is it in states with more cat exposure, less cat exposure? Any context would help.

I think, Brian -- well, first off, I think Berkley One has proven to be a great success. It basically started -- not basically, it was started from catch with a small team of people that made it happen. And today, it is comfortably more than a $0.5 billion business and growing at a healthy pace.

No, we are not leaning into California or anything akin to that. I would tell you, we have a certain group of states that we're in, and we are just going deeper this is not just an idea to try and go into every last nook and cranny. We're going where our colleagues believe the opportunity is and where we feel as though we have a value proposition that we can deliver consistently day in and day out. But no, the growth there isn't because California became the flavor of the day for us. We do not participate in the California market.

Your next question comes from the line of Ryan Tunis with Cantor.

I guess just a question on the casualty side, just low single-digit growth in other liability. Less than I expect. I'm just curious, are you starting to see more competition in some of those lines? Or is there something else that's kind of causing that decel?

I think there's a couple of things. One, we have a view on rate. Is there a bit of competition? Yes, there's a bit of competition, but it's also how we're pivoting the portfolio at this moment in time.

Got it. And then I guess I was a little bit surprised that Berkley One and A&H, could move the needle that much in short tail lines. Could you just give us some idea? But then again, I don't know how big those lines are. So could you give us some idea of how much of that short tail lines line item is noncommercial property, if that makes sense?

I don't have a specific number here. So if it's okay with you, Ryan, let me ask Rich or Karen to follow up with you. But I don't have it at my fingertips, and I don't want to -- but it's consequential, obviously, hence, the comment earlier. Thanks for the question.

Your next question comes from the line of Brian Meredith with UBS.

Awesome. So 2 questions. First one, big picture. So -- and maybe this is kind of for you as well as the Chairman. I recall Bill saying that one of his biggest regrets from the last hard market was starting to pull back too early. When there was still a healthy margin in the business. Is that a debate that's going on right now? Kind of how are you thinking about that?

So Brian, it's funny. I recall that comment from the Chairman usually about 7:45 every morning, at least 5 days a week. So I'm going to yield the floor to him.

So I think it's always -- if you look at your business and you say, our price is going to go down more there at the bottom, how much margin do you have? And where is the current accident you're going to come out because you've had a lot of years of substantial price increases. And as all of us know, -- this is a business where you don't know the ultimate margin for several years after you've written the business.

And in that case, it was 86%, give or take, we have much more margin than we were reporting. And we didn't realize it and we cut back too soon. So there are 2 pieces to this puzzle. Are you being pessimistic as to the margin you're presenting because you haven't appropriately reflected the price increases.

And then the second question is where prices change and what's happening with the loss ratio. And that is the issues you faced, and it was different in 1986 than it is today. There's more litigation. There are more lawyers who are incentivized, bringing about litigation, that's a tougher decision.

But I would say that you can still grow. There are still opportunities. You don't have to run away at this moment. But it will come at some point in time. We guess it's not here quite yet, but it is going to evolve to that point. It may be shorter duration because of all kinds of other things than last time because when those losses happen, it could happen all of a sudden.

Brian, thanks for the question and highlighting the genetic flaw that runs through the family. Did you have a second question?

Yes. My second question, Rob, I know you chat a little bit about the first quarter and you didn't see much on...

Brian, are you there?

Yes, I'm still here. Can you hear me?

Yes. Please go ahead.

Okay, good. Question on tariffs. Are you seeing anything yet in your loss picks?

We are preparing for it, but we're not seeing anything particularly consequential yet. But we are certainly preparing for it in all the product lines, as you'd expect, that are more exposed, highlighting, obviously, property and APD.

Your next question comes from the line of Andrew Kligerman with TD Cowen.

Okay. First question is around loss development. It looks like really net nothing. But wondering if you could talk about if you had some releases in 1 area, some adverse in another area? Any color on that you could share would be appreciated.

It was basically incremental between the two segments. To your point, it was almost at push. And as you can appreciate, there's a lot of moving pieces that's where it ultimately ended up coming out to. But as far as additional detail, I don't know if we publish it, it will be in our Q, I guess, Andrew. So we don't have it all in front of us right now.

Anything off top of mind in casualty that stuck out? Was there adverse there or...

I don't have the numbers in front of me. I think we're but as I suggested earlier, we're paying close attention to the auto liability line and we're mindful of what that could mean for the umbrella line.

Got it. And then just, Rob, just your commentary throughout this call. I'm just trying to put numbers around it a little bit. First quarter market seemed very different, and you rightly thought you could grow double digit this year. Last quarter, you were thinking maybe 8 to 12. Should I be thinking we've kind of migrated more into the kind of mid-single-digit zone just given what you said about rates, et cetera?

It could very well be the case, Andrew. I think really what I was trying to articulate earlier is you got a lot of pieces of the broader marketplace that are in some kind of flux, and we are going to respond to that. So is it possible that next quarter, we could grow 4%? Yes. Is it possible next quarter, we could grow 10%? Yes, absolutely.

So I can't speak with the level of confidence I'd like to and perhaps you would like me to just because of my comment earlier about big chunks of the marketplace. Being in notable flux -- improving some eroding.

That's very fair. If I could just sneak a quick one in. When you talk about Berkeley's business being at the small end of the spectrum type accounts. Any way to size that? I know you even brought a team in from -- I think they were at Hamilton or Kinsale in the small end. Like any way to size the small end of the spectrum at W.R. Berkley in the...

So obviously, some of the business we write -- one way to quantify it would be limits. As far as giving one, a sense of scale of accounts that you write, not the only one, but certainly one would be -- and if you look at the policies that we write, some of them like workers' comp, you have a statutory exposure, so you can't have a limit on it.

So if you take the stuff out of the pie, that has statutory limits like comp and you look at what does that leave you with as far as the limits profile. I was told by a colleague earlier today, that between 85% and 90% approximately of our policies have a limit of $2.5 million or less. So I don't know, hopefully, that gives you some sense or direction.

Definitely. Thanks a lot.

Thank you. Andrew, just one other comment. Even though it's smaller account size, it tends to be very specialized in nature. So I would encourage you not to confuse size with commodity.

Your next question comes from the line of Mark Hughes with Truist.

A quick follow-up on the other liability. You said the -- you were pivoting the portfolio. I wonder if you could expand on that point? Is there something you're seeing in the loss development trends perhaps that makes you want to pivot around other liability?

There are countless different variables, and it could include just appetite based on the general exposure. It can be based on state and it certainly can be based on attachment point. So those would be a couple of examples or variables that can lead to the pivot.

And I think you talked about how commercial auto was -- had been volatile lately. When you see this pivot, that's something that probably persists depending on which variables are driving it. Is it something that...

Yes. I would not read too deeply into 1 quarter, would be my comment. Thanks for the question.

Your next question comes from the line of David Motemaden with Evercore ISI. Please go ahead.

Okay. Great. Just had another follow-up just on the other liability line. You had mentioned there are some pockets of competition picking up there. I was wondering if you could elaborate. Is that more primary casualty? Is it more excess or umbrella E&S more large account admitted? Any order of color on that would be helpful.

There are certain exposures that we've examined and given how we see the legal environment, we've adjusted our appetite. And that comes through both in the exposure itself as well as, in some cases, how we think about attachment point and certainly how we think about jurisdiction of exposure.

Got it. Okay. So that sounds like across both primary GL and umbrella sounds like sort of a book wide comment. Is that correct?

Correct. And those changes are well underway. And I don't think that you should assume that this is necessarily a perfect indicator for what to expect going forward because a lot of that change has been affected.

Got it. Okay. That's helpful. And then maybe just on workers' comp, and you sort of mentioned it a little bit in your prepared remarks. But pretty good growth this quarter also this year to date as well.

Could you remind me how much of the book is that you guys would say specialty or high hazard versus how much of it is Main Street just so I can sort of think about the moving pieces underneath that 9% growth this quarter.

So what I'd like to do, if you don't mind, David, is, a, I got to make sure that, that's detail that we provide. And to the extent it is, if you don't mind, Karen, I will follow up with your first thing tomorrow. I just -- I don't want to inadvertently color outside the lines.

Your next question comes from the line of Michael Zaremski with BMO.

My first question is broad, focusing on the E&S market specifically. At least the data points we see is the deceleration of the increased competitiveness and the growth in the E&S market, you mentioned it to in your prepared remarks, is coming more so from the pricing side of the growth equation, whereas policies in force are continuing to grow at a double-digit pace.

I'm just curious from your perspective, is that if to the extent pricing continues to moderate, should we would it be normal for the policy growth to also kind of start moving back into the primary market? Or are you seeing any trends there? Because it feels like the policy growth is really what's supporting ultimately a lot of the still healthy growth in D&S?

So a couple of things there. One, I think when we talk about E&S, one needs to draw the distinction between the property line and other, other being professional and certainly casualty. Long story short, a lot of the growth that we have seen over the past couple of years within E&S has been disproportionately driven by property. We've shared the observation in the past that when the property market gets hard, oftentimes, it tends to spike and then it comes back down at somewhat of a precipitous rate.

As opposed to the liability market when it starts to harden, it tends to oftentimes be a bit more of a gradual sense and it has more staying power. We, as an organization within the commercial lines, particularly specialty and more specifically, E&S. We are much more of a liability player than we are a property player. So did we cash a bit on the property wave? Yes. But that having been said, the lion's share of our E&S participation on a net basis happens to be the liability lines.

So when I think about this market unfolding, and I think we've expressed this view in the past, I think property has barring the unforeseen event, and it would have to be very unforeseen. I think the bloom is off the roads. I think you're seeing the retro market starting to erode that will waterfall down into the property cat market. And certainly, you're going to see that had continued pressure on E&S property.

We, as an organization, will be impacted by that, but it will be far less than our peers because of our weighting towards the liability line. I think social inflation continues to be an issue. And you are going to see the opportunity within the E&S space become more and more weighted towards the liability lines, particularly casualty, I think professional is a bit of a mixed bag.

Okay. That's helpful. And my follow-up, Rob, is back to the earlier comments on the rating agency capital models and the their sausage maker throwing out perhaps a 10-digit excess capital number. So in my words, maybe we'll make it $1 billion to buy that by our shareholders' equity. That's, whatever, 10%. Is that 10% a much higher level than historically? And do we care about the agency capital model to manage to different models.

The answer is we care about everything, but we don't run the business for the rating agencies. We are conscious of those data points. The math you did, I'm not going to comment on whether that's right or wrong. I just was trying to articulate the point that we have a lot of cushion, and we will figure out how to deal with the surplus and what we believe is the most sensible and economic way to return excess to the owners that it belongs to.

So I think if you look at our capital ratios over an extended period of time there is no moment in time that I recall that we, from a ratio perspective have had the amount of headroom that we have today.

Your next question comes from the line of Andrew Andersen with Jefferies.

Just looking at the investment portfolio. I think I heard you say 4.6% on the domestic yield book, so maybe some pressure on the Argentina side. Maybe if you could just comment on the...

Argentina has come off a little bit from the peak. If you throw Argentina and there it brings up to 4.8%. What we were really trying to articulate is the lion's share of the portfolio is no surprise domestic, highly rated bonds, call it strong AA-. And again, the duration sitting at the 2.9. And really, again, the highlight that we were trying to flag was if you compare 4.6% to 5%, there's opportunity for improvement from here.

Okay. Great. And then just looking at the expense ratio and then the corporate expense at the consolidated level, it seems like that numbers lower than what the year-to-date or the first half was. So I guess -- are we still pushing...

The expense ratio is what?

I just look at the expense ratio and then looking at the corporate expense, and it looks like that's a little bit lower relative to where first half. So I guess are you pushing some expenses into the segment? And where are we with that?

Rich is just not paying on the holding company anymore.

It's a couple of things. It's one, as you pointed out, we have had some of our start-up operating units move out of our corporate expenses, they've got scale and move into the underwriting expenses.

And the second item is with regards to in the first half of the year. You might remember, we had also paid a special dividend and for accounting purposes, the vested but mandatorily deferred RSUs, the dividends on that wind up getting characterized as compensation expense. That's the driver.

As far as the first piece goes, those businesses that Rich referred to that once they get to a certain maturity, we move them out they are moved out, but they are dilutive to the expense ratio. So hopefully, they will continue to scale, and that will get some relief there.

Your next question comes from the line of Josh Shanker with Bank of America.

So as I'm listening to the 2Q conference call, commentaries from some brokers, from your peers, there was a commentary that the E&S property markets were very, very weak, and that contributed to the weakness. But that stay tuned for 3Q, which is a low property quarter, everything is rosy in the other lines of business, and so we won't see that same headwind.

And then when you began your prepared remarks with the word self-sabotage, I got very, very concerned...

Okay. Why did it upset you?

I mean the self-sabotage sounds like an extreme thing. I mean we're all guilty of it from time to time, but hopefully in modest amounts.

What is the takeaway, I guess, on pricing right now compared to 3 months ago? Is it along the same track? Or did you see a real step down, I guess, compared to 3 months ago.

Are we talking -- what part of the market are we talking about? I just want to make sure I'm following.

Book relative to the marketplace. When you read your book...

Our overall book, I think, was essentially flat. Obviously, there are a lot of moving pieces. But as far as the rate increase goes, I think we were at [ 7.6% ] and we were, give or take, at a similar level last time. Did we get there exactly the same way? Absolutely not. But ultimately, I think that by and large, it's in a similar place. the parts of the market that at this moment in time are under the greatest pressure.

Again, in our mind, you're going to see it with property cat and that likely will not become particularly visible until 1/1. But in the meantime, you certainly are seeing it in E&S property. And that -- while we are not a big player in that space, we're certainly an observer and a modest participant. And that's how it looks to us.

But again, why is our rate where it is? Because we are a modest participant in the part of the market that's under the greatest pressure right now. It doesn't mean we're insulated completely, as suggested earlier, but we have, again, a pretty broad offering. And we only have a toe in that pool.

And there's different ways to compete for business. And in this environment, are you seeing carriers offer to increase commissions to distributors in order to get a larger share of their business.

I think that Chapter 2. We're still in Chapter 1. That's the long book. Thanks, Josh.

Your next question comes from the line of Meyer Shields with Keefe Bruyette.

Great. So a couple of quick questions. One, going back to the pivoting comment. You mentioned the legal environment. Has your overall view of casualty loss trends changed over the past 3 to 6 months?

No.

And then I know the numbers are small, but I'm looking at most interest rates sort of declining in the quarter and an extending duration. And I'm wondering what is it that you're seeing that makes now the right time for that duration extension?

Well, I think just to frame it, we went from 2.8 to 2.9 and there's a little bit of rounding in there. So I would encourage you not to read too deeply into it. Obviously, we try to be opportunistic at any moment in time as far as putting the money out that luxury of opportunism is not as comfortable as it was in the past. As short-term rates are coming down. So that will put more pressure on the organization to put might to work.

But again, going from 2.8 to 2.9, I would cost you not to read too deeply into it. Now I'd like to go back to the first question for a moment, if I may. So our general view around loss cost trend in the environment is consistent. But our view about particular niches within the marketplace, we are constantly examining and reexamining, and that can instruct our appetite at a more granular level. It's not all on or all off.

Comes from the line of Bob Jian Huang with Morgan Stanley.

This is just more of a follow-up. Previously, you talked about that because the varying lines of business are decoupling from a pricing perspective, you can essentially turn on and turn off growth.

Can you maybe help us to understand how quickly you can turn that growth, say, the 4% or the 10% you're referring to earlier. Just maybe help us understand the mechanics that you visit just simply just saying, okay, we're going to stop doing business here. I'm trying to understand how you're thinking about growth and managing the ability to go in and out of the market?

I think ultimately, it's really just about market conditions, and we are consistently in the marketplace at a rate level with terms and conditions that we find to be appropriate. The market may move away from us or when we were talking about how we were pivoting some of the other liability.

It's not necessarily that we just washed our hands of it, but we have a view on rate. We have a view on attachment and we have a view on terms and conditions and perhaps the market doesn't find it palatable and perhaps the market can find someone else is willing to do it.

So again, it's not that we abandon a market is that our appetite and how we're willing to approach it can adjust based on the data and the information that we see and how we process that. So that's -- and our ability to do that, we can do it very quickly. You rely on our colleagues with the expertise and various niches to decide how and when to pivot.

Okay. That's very helpful. Very last one. In terms of the market competition, you kind of talked about a decent amount of businesses in the smaller market side of it. Now if we do go into a more challenging macroeconomic environment, are you perhaps concerned about small and medium enterprise tend to be more exposed to macroeconomic conditions. So consequently, that could potentially play into your core market? Like just curious how you think about that?

So the answer is no, while we're conscious of it and certainly the health and well-being of our clients is a priority for us. If you use COVID as a data point, actually, we were able to navigate through that, and we're pleased with how our clients fared and our ability to continue to support them.

Your final question comes from the line of Wes Carmichael, with Autonomous Research.

Great. So just one question, but just coming back, Rob, to your comments around property and property cat reinsurance. You mentioned the routing of the apple or at least impending routing of the apple. I just wanted to get your view -- curious your view because it seems like there's a lot of rhetoric that property is still rate adequate, but do you think we're really there where things could start to turn at 1/1? Or is that going to take more time?

I think it depends on what the feeding frenzy is like at 1/1. Everyone needs to assess how much margin they think is in the business. Obviously, rates went up dramatically. Attachment points shifted significantly, so on and so forth. And while whatever 9 months ago, we saw a softening, and I think the expectation is given the performance, it's likely there will be further softening at 1/1 for this coming year. We'll have to see how aggressive the market is. I we have a view as to how much margin is in the business and where -- and at what point we shift our posture from an offensive one to a defensive one. But that's just the reality of a cyclical business.

Thank you for the question. Nicole, was there anyone else? Or have we covered it?

We've covered it. There are no further questions at this time. I will now turn the call back to Mr. Rob Berkley for closing remarks.

Okay. Nicole, thank you very much for your assistance and hosting. Thank you all to the participants for your interest in the organization. And hopefully, it's quite evident we had a very strong quarter. But equally, if not more importantly, the table is set for a good balance of the year, and in all likelihood a very strong 2026. So again, thank you for dialing in, and we look forward to speaking with you in about 90 days. Bye-bye.

This concludes today's call. Thank you for attending. You may now disconnect.