W.R. Berkley Corporation 2026 Q3 Earnings Call

Please go ahead, sir. Chrislyn, 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, then 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. Before Rich runs with it, I think it goes 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. We see a great deal of change, certainly in the industry, but we are just seeing a great deal of change in society overall. The trajectory of that change is steep. The velocity is increasing. 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? What will the consequences of that be? How will those risks remain within the auto space? How will they potentially be shifting over to products 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 just 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 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 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. Maybe to put a little bit more data around that, some of the activity that we're doing on the intake side is allowing us to become more efficient to the tune of 20%+. 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. 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 risk, and how we operate day to day. With that, Richard, if you would please.

Of course. Thanks, Rob. Appreciate it. 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%. Pre-tax 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 cat 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 one point over the prior year, representing growth in the pre-tax 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 excess segment reported a very strong current accident year combined ratio ex cats of 86.9%, resulting in pre-tax 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, pre-tax 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-$20 million, and as seen year to date, we are 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 double A minus remaining below the average life of our insurance reserves. 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 of $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 will turn it back to you.