WR Berkley (WRB) Q2 2016 Earnings Call

posted in: Earnings Call, Notes | 0

WR Berkley (WRB) CEO Robert Berkley said low interest makes sometimes make him feel like crying

“Continued dislocation in the marketplace amongst some very large carriers as some of them were managing through a merger or acquisition and others were just going through a meaningful restructuring. And then finally, we have continued low interest rate environment around the world and it’s really gotten to the point that it could almost make your eyes tear.”

And the sector is becoming more competitive 

“The insurance market seems to march to a similar beat to what it did in the first quarter. The reinsurance market continues to flirt with the bottom. On the other hand, the insurance market is becoming incrementally more competitive though it can vary greatly by product line or clients.  A couple of general comments around some of the product lines in the insurance space. Properties, particularly cat exposed properties, remains surprisingly competitive to a certain extent. My speculation would be this is a result of the reinsurance market empowering the insurance market to be less than responsible in many situations.”

Looking more and more to the alternative investment space for returns in their investment portfolio as a result of low interest rates

“As you have heard our Chairman talk about for some number of years now, given the interest rate environment, we had to look for alternatives, hence the building out of our alternative investment portfolio and gains have become a more meaningful part of our strategy.”

WR Berkley (WRB) Chairman Bill Berkley on whether Brexit will affect their business

“First of all, we in fact had set up a company in Liechtenstein well in advance being cautious and wanting to take no chances. So we are equipped to do business in the EU in domicile other than the UK. So from a legal point of view, it won’t have an impact on us if we did that some time ago. Clearly, that impact that’s based in the London market continues to be there. We don’t see it disappearing, so we think London will continue to be the center of the insurance business in that part of the world. And from a regulatory point of view, we think we can protect ourselves, so we don’t really see a major change or a significant impact.”

All returns are not created equally

“We focus on risk-adjusted returns. All returns are not created equally and we try and evaluate the risk that we are taking on and what is an appropriate return is associated with that. Ultimately, we are focused on obviously we are going hand-in-hand with risk-adjusted return, ROE.”

WR Berkley (WRB) Chairman Bill Berkley on whether we will get tax reform

“Tax reform, I don’t know who is going to be elected President. Probably, either of the above will be a good outcome. I have no idea whether we are going to get tax reform or not. I think that the reality is that the tax system is not working, not just for the insurance industry, but for lots of parts of corporate America and how people behave or what people do. Will we get tax reform? We sure should. We need it. I spent last time in Washington as I become less enthusiastic about something happening. Last week, I spent time with our lobbyists and talked about it. It was more optimistic, because as they don’t have much choice. So, I am slightly more positive than I was 2 years ago, but you surely can’t bet on it.”