On Tuesday, WR Berkley (NYSE:WRB) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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View the webcast at https://events.q4inc.com/attendee/647597137
Summary
WR Berkley reported record net investment income and strong underwriting profits, contributing to a return on beginning equity of 21.2% for Q1 2026.
Net income was $515 million, or $1.31 per share, with a calendar year combined ratio of 90.7%.
The company is seeing increasing competition, particularly in the reinsurance and property markets, but remains focused on cycle management to navigate these challenges.
Growth in gross premiums written was 4.5% in the insurance segment, while net investment income increased by 12.2% to a record $404 million.
Management expressed a cautious yet optimistic outlook, indicating potential for growth in certain niche areas while maintaining disciplined underwriting practices.
The company repurchased 4.5 million shares for $302 million and paid $34 million in dividends, highlighting strong capital management.
WR Berkley is managing its investment portfolio with a focus on high credit quality and a potential for improved yields, given current market conditions.
The company is selectively expanding in areas with attractive margins, particularly in certain casualty lines, while being cautious in more competitive markets.
Full Transcript
OPERATOR
Star one to raise your hand to withdraw your question, please press Star one again. The Speaker’s remarks may contain forward looking statements. Some of the forward looking statements can be identified by the use of forward looking words including without limitation, believes, expects or estimates. We caution you that such forward looking statements should not be regarded as a representation by us and that the future plans, estimates or expectations contemplated by us will in fact be achieved. Please refer to our annual report on Form 10-K for the year ended December 31, 2025 and our other filings made with the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. WR 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 Berkeley. Please go ahead sir.
Rob Berkeley
Alexandra thank you very much and good afternoon to all. Thank you for finding time in your calendars to join us. My colleagues and I, we appreciate your interest in the company. So speaking of colleagues joining me on this end of the phone, we also have Executive Chairman Bill Berkley as well as Group Chief Financial Officer Rich 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 from me, perhaps a bit stating the obvious one is, let there be no confusion, this continues to be very much a cyclical industry. As we’ve discussed in the past, the cycle is driven by two human emotions, greed and fear. And without a doubt these days it would seem as though the fear is fading and the greed is fully percolating in many of the corners of the marketplace today. One of the things that we’ve talked about in the past couple of quarters is where is some of this competition coming from or much of this competition coming from? We’ve talked about MGAs and MGUs delegated authority, a lot of that capacity coming from a variety of different sources, in particular the reinsurance market as well as we talked about Lloyd’s as a marketplace providing a lot of capacity to delegated authority. One of the things that we’ve taken note of over the past 90 days or so is a notable shift in the appetite of the standard market. In particular national carriers who seem to be broadening their appetite and having reached a new level of, I would suggest, competitive nature that we haven’t seen in some number of years, though it tends to be focused in certain pockets A couple other comments on the marketplace couple 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 taken aback a bit by the pace of change and how that level of competition has really taken hold at an accelerating pace. In addition to that, the casualty market or the liability market within the reinsurance space never seemed to have gotten much of the bounce that we saw in the property market. Nevertheless, it remains very competitive and we remain concerned for the health and well being of that marketplace over time as there is more competition in the property market that will undoubtedly, at least history would suggest, create more irrational behavior that will be plentiful in both the property cap market as well as the liability market. Couple of thoughts on the insurance marketplace Speaking of property and how it can turn into a marketplace that quickly erodes, we are definitely seeing that particularly with CAT exposed property. On the insurance side, General Liability and Umbrella I would suggest are areas where rate is still available with good reason. Professional, as we’ve talked about in the past, continues to be a mixed bag. Directors and Officers (D&O) remains one that we are very focused on and seems to be continuing to flirt with the bottom. On the other hand, Employment Practices Liability Insurance (EPLI) in certain jurisdictions is an area from our perspective to be very cautious. I would call out California, particularly Southern California, as one that we are paying close attention to. Speaking of California as it relates to workers compensation we’ve talked about in the past and we remain convinced that California this time around is out in front of much of the broader workers comp market and without a doubt all eyes remain on the Workers’ Compensation Insurance Rating Bureau (WCIRB) and what is to come in the not too distant future and at the possibility of I guess finishing on a bit of a low note. I guess automobile would continue to be an area of great concern from our perspective. It’s unclear to us that the marketplace has really wrapped their head around loss cost trend and what action needs to be taken. The punchline before I hand it over to Rich is that at the intersection of a cyclical industry and 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 resilience, rich, over to you please.
Rich Baio (Group Chief Financial Officer)
Great. Thanks, Rob Good afternoon everyone. First quarter marked an Excellent start to 2026 with record net investment income and strong underwriting profits contributing to a return on beginning of year stockholders equity of 21.2%. Net income for the quarter was $515 million or $1.31 per share, while record operating income was $514 million or $1.30 per share. Other drivers benefiting the quarter compared to the prior year included lower catastrophe losses and an improved effective tax rate, starting with underwriting performance. Current accident year combined ratio excluding cat losses was 88.3% and the calendar year combined ratio was 90.7%. The difference was current accident year cat losses of 2.4 loss ratio points or $76 million, compared with the prior year of $111 million or 3.7 loss ratio points. Unlike last year, which was heavily influenced by California wildfires, in the first quarter this year the industry experienced significant winter storm activity occurring in January and February. The current accident year loss ratio excluding catastrophe losses for 2026 is 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 excluding catastrophe losses increased 10 basis points to 60.9%, while the reinsurance and monoline excess segment increased to 51.1%. The expense ratio of 28.6% is comparable to the recent sequential quarters and reflects a small impact from the decline in net premiums earned from the reinsurance and monoline excess segment. We continue to believe that the 2026 expense ratio will be comfortably below 30%, barring any material changes in the marketplace on top line production. Despite heightened competition in certain pockets of the market, the insurance segment grew gross premiums written by 4.5% to $3.4 billion and net premiums written by 3.2% to $2.8 billion. As you can see from the supplemental information on page 7 of the earnings Release, net premiums written grew in all lines of business apart from workers compensation. The reinsurance and monoline excess segment reported net premiums written of $395 million, reflecting decreases in property and casualty lines of business Net Investment income increased 12.2% to a record $404 million, driven by growth in the core portfolio of 11.8% to $354 million and an increase in investment fund income of 46.3% to $40 million. As a reminder, we report the investment funds under 1/4 lag and an average quarterly range for investment fund income is 10 to 20 million dollars. We expect that strong operating cash flow of 668 million in the current quarter should continue to contribute to the growth in that investment income. The duration of our fixed maturity portfolio, including cash and cash equivalents, increased during the quarter to 3.1 years, which remains below the average life of our insurance reserves. The credit quality of the investment portfolio continues to improve to a very strong AA-. The effective tax rate in the first quarter was lower than our normalized run rate of 23% plus or minus, which is usually attributable to higher taxes on foreign earnings and the ability to utilize such foreign tax credits. In the current quarter we reflected a net non recurring tax benefit, reducing our effective tax rate from 22.8% to 16.3% as reported. We expect the remainder of 2026 will return to our normalized run rate. During the quarter we repurchased approximately 4.5 million shares common shares amounting to $302 million and paid regular dividends of $34 million. Stockholders equity increased to approximately 9¼ billion dollars 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.
Rob Berkeley
Thank you Rich, A little disappointed that this isn’t our new run rate on the tax front. You got a whole quarter to figure that out, so let me just offer a couple of more quick sound bites and then we’ll move on to Q and A. First off, you would have taken note on the rate came in reasonably healthy at the 7.2 times compared. Just as another perhaps relevant data point, the renewal retention ratio continues to sit at around 80%. Now that thing fluctuates between 78 and a half and 81 and a half. 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. The 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 where we’re feeling very good with what the margin is and the I suppose 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 or 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 you know, Rich flagged for you all the strength of the quality with a very strong double A minus almost Flirting with a double A. But a couple other points that I would flag is that the book yield on the portfolio is about 4.7 percent, new money rate is 5 percent 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 four years. So what’s the punchline? The punchline 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 and a half 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 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 a billion, 7, 50 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 flag that because what you saw in the quarter with the repurchase, what you’ve seen us do with special dividends and recognizing the earnings …
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