W.R. Berkley 4Q16 Earnings Call Notes

Robert Berkeley

There are some markets that are exceedingly attractive, reinsurance remains irrational

“Having said that, there are some parts of the professional market that are exceedingly attractive and there are other parts where people need to be quite cautious. Commercial auto, while it does continue down a path of improvement from our perspective, much of that marketplace still has a way to go. Casualty remains the bright bulb, at least for the moment. And finally, the reinsurance market remains as irrational as ever from our perspective. And quite frankly, it’s a bit disappointing because every now and then, you see some green shoots popping through and in relatively short order, it would seem as though somebody comes along and stops those out.”

Continue to be surprised at industry resistance to change

“we continue to be quite surprised by what one might refer to as the resistance that the insurance industry, particularly the commercial lines, P&C space continues to have towards change. Specifically, the struggles around embracing analytics and technology as well as what would seem to be a lack of recognition for the change in consumer behavior.”

Tax reform could impact offshore insurance companies

“I think the other component which is perhaps in some ways a little less clear is what is the impact going to be as a result of tax reform on companies in the marketplace that are not domiciled in the United States. Many companies that participate in the US P&C market have benefited from being outside of the United States and the question will be whether that benefit will continue going forward or whether that is something that perhaps may change or be impacted by decisions and actions coming out of Washington.”

Commercial auto has touched bottom but it’s not a hard market

“As far as the market goes and apologies if I gave the wrong impression, our view is that it has finally touched bottom and it is moving in the right direction. We certainly do not believe that by and large, the commercial auto space is a hard market or anything approaching that. Having said that, it is one of the few lines where it seems like rate increases are outpacing trend as opposed to some other lines of business, where rate increases are treading water with trend or maybe in some cases, the product line is losing altitude.”

There are a lot of organizations that have gotten over-extended

” Clearly if you look at the accident year loss ratio, there are a lot of challenges that exist in the market. We have and continue to believe there are a lot of pain but this hasn’t come into focus potentially. And if you actually backed out or normalize for Cat activity and people stop living off of prior year development which eventually it would seem as though they’re going to need to, there are a lot of issues. So do I think this is going to turn into a situation like the late 90s in to 2000, no. But do I think that there are some organizations that got a little ahead of themselves, yes. And I think that there’s some pain and some of those companies that have some pain, I don’t think that there’s a lot of patience for volatility amongst their shareholders”

Bill Berkeley

Current tax law benefits offshore insurance

I think the answer is we have a President and a legislature who is very conscious of the fact that we shouldn’t have a tax law that gives preference to non-US entities and that is what insurance tax laws do at the present time. So two companies who write US business one offshore and one domestic, the company offshore pays substantially less to no tax. So we think that will benefit us because we think this President and his legislature will recognize that sometime over the next 12 months and level the playing field. So that will not lower – likely not – that part will not lower our tax but will raise tax – raise the tax of our competition. So, overall US tax rate we think will go down, which we’ll benefit. So we would expect there will be probably a continuing same amount of competition at a lower tax rate.