W.R. Berkley 2Q13 Earnings Call Notes

posted in: Notes | 0

This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“The second quarter, by and large, was a continuation of the trends that we saw in Q1. Primary comp rates continue to move up at a healthy pace.”

“The property market has always been one that’s made us scratch our head from time to time. When the earth shakes or the wind blows, it seems as though people choose to back that out of the results. And when Mother Nature is kind to us, it seems as though people call it brilliance.”

“Our new business relativity metric came in at 3.6%. This is a metric that we talked about with some of you in the past. It’s our effort to try and compare the rates that we’re getting on new business with our renewal book. We think that this is an important metric because, obviously, you want to make sure the new business that you’re adding to the portfolio, in no way, is undermining or diluting the margin in your book. And, in addition to that, obviously, new business as opposed to renewal business you know less about, so consequently, some type of surcharge would be logical and appropriate.”

“When you put all the pieces together, we ended up with a combined of a 96.6% compared to 98.2% for the second quarter last year”

“f you look at the profitability of insurance companies, insurance companies have always made their money from investment income, and investment returns are down substantially…the fact is you’re facing serious changes in what’s going off your portfolio and what you’re able to invest in. The alternative is to bet on no inflation for an extended period of time, which is not something we’re prepared to do, nor are most of our competitors.”

“if you look at the economic model of an insurance company, much of the rate increases people have been seeking stem from their concerns having to do from loss activity. And the impact, which is even more leveraged of investment income declining, is likely to force people to raise rates even beyond what they had done to date.”

“First of all, the skills and distribution required to write the kind of business we do is really quite different than what they do. Second of all, Berkshire is going to write at a profit. My friend, Mr. James [ph], is absolutely determined to get his share of the market, but not, I emphasize not, at any cost. He’s going to write the business where he thinks he can make money. And nobody should be afraid of that competition. He’s going to give good service, give good capacity. And he’s going to want to share the market, and he’s going to do it through those basis. But he’s not going to be a price cutter. Some people have entered the business to buy their share. I think Berkshire, by and large, is going to try and do it in other ways using their capacity, their credit and their ability to put large lines down. But I don’t think most of the people we compete with have the market position or the underwriters to move down to write smaller risks…But I don’t think Berkshire is going to be a market leader in pricing. I think they’re going to be — try to be a market leader in capacity and quick answers because that’s something they have.”