WR Berkley 3Q16 Earnings Call Notes

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W.R. Berkley’s (WRB) CEO Rob Berkley on Q3 2016 Results

The marketplace is more of the same

“as far as the market goes, generally speaking a continuation of what we’ve seen over the past few quarters. The marketplace overall is becoming incrementally more competitive. Reinsurance remains somewhat consistent as it seems to bounce along the bottom in search of a catalyst for change. One of the interesting things about the reinsurance market is putting aside property tax and peel back a few layers of the situation there, the loss ratios by and large are not particularly problematic, what’s is really driving is the seeding submissions that are creating a challenge for their economic model, from our perspective.”

Cyber insurance is a growing category

“And as we see in the development of cyber insurance coming around and wait to see – here in that is the beginning to scratch the surface, the fact is that intellectual assets are going to become a growing class and we as an industry need to find ways to grapple with that and help society figure out how they will manage that exposure. And again, I think there is a great deal of room in that area for growth and a lot of opportunity.”

We did have some exposure to SpaceX

“We experienced what I would just define as some meaningful as I suggested short-tail losses that are not normal. An example of that would be a couple of good-sized by our scale property losses not overwhelming but good size, but perhaps even more noteworthy, we had some exposure to SpaceX which was the [indiscernible] that didn’t get very airborne.”

Commercial auto product is in a very deep hole

“I think the fact is that commercial auto found itself, as a product line, in a very deep hole. And the idea that a certain just one-off percent rate increase is going to fix that, I think is a pipe dream. And we can all read in places like the Wall Street Journal about trucking whinging over rate increases, but the fact is, most folks that are writing their insurance haven’t been making any money, in fact they haven’t been getting paid appropriately for the risk, whatsoever. So, do I think that the situation is improving? Yes. Do I think that it is still challenged? Without a doubt. But it is heading hopefully – well, it is heading in a better direction. And again that’s why we’re getting meaningful rate increases, but you see the line still shrinking as far as premium, because our account or exposure is going down dramatically, in spite of the rate increases we’re getting.”

Bill Berkley

I’m concerned about inflation because it’s the only solution to the repayment of deficits

“I think that clearly, we have a country divided by extremes and views that are in conflict. And I think there’s loss of stresses and pressures. But there’s also beginning to be a recognition that there’s no free lunch. That someone is going to pay for everything that comes about. I think the last time we had runaway juries, there was a general sense that this was free money and it all came from heaven. I think there’s now a reality, reinforced by the issues of increased premiums from the Affordable Care Act, that someone pays somehow or another for everything. So I’m not particularly worried about runaway juries.

I am concerned about inflation, because ultimately, the only solution to repayment of deficits for governments is inflation. And inflation in the short-run will put pressure on insurance pricing. Although with property casualty insurance companies have done better in times of inflation than in non-inflationary times. So overall I’m okay with where we’re going. And I – in the short run, there may be some pressures as we change over to probably a more inflationary time. But in the intermediate term, I think that’s probably good for the business.”