W.R. Berkley Corporation Q2 2026 Earnings Call

Ladies and gentlemen, thank you for joining us, and welcome to the W. R. Berkley Corporation Second Quarter 2026 Earnings Call. This conference call is being recorded. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed in today's call, please press star one to raise your hand and star one to withdraw your question. The speakers' 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 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 31st, 2025, and other filings made with SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. W. R. 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 like to turn the call over to Mr. Rob Berkley. Please go ahead, sir. Kristin, thank you very much, and let me echo your welcome to all participants.

Thank you for finding time in your schedule to join us today. I'm joined on this end of the phone by Rich Baio, and we're going to follow our typical agenda, where momentarily Rich is going to walk us through some highlights from the quarter. I will then follow with a few of my own observations, and then the two of us will be available to answer any questions that participants may have. Before I do hand it over to Rich, I'd like to take a moment on behalf of my colleagues, my family, and myself to express our gratitude for the very kind outreach and support we have received on the heels of the loss of our founder, Bill Berkley. His extraordinary contributions to society, our industry, and our company cannot be overstated.

His spirit, values, and priorities remain foundational to who we are and how we operate as a team. One of his great achievements while leading this company was the institutionalization of the business and making clear that this business is a team sport, not an individual one. While his vision and character remain central to our foundation, the performance and success of this company continues to be a reflection of the hard work and commitment of thousands of people that make up this team. Thank you again to all of those who have been so supportive during this difficult moment. Rich, if you would please.

Of course. Thank you, Rob. Good evening, everyone. Operating earnings per diluted share grew 21% to $1.27 or $497 million, resulting in an annualized return on beginning of year equity of 20.5%. The company's second-best quarterly pretax underwriting income of $318 million and record quarterly pretax net investment income of $419 million contributed to the excellent second quarter results. We continue to generate meaningful excess capital, as evidenced by total capital return to shareholders of $334 million through regular and special dividends as well as share repurchases. While there's no predetermined amount of capital to be returned each quarter, this amount is consistent with what we did in the first quarter. Underwriting performance yielded a current accident year combined ratio excluding catastrophe losses of 88.1% and a calendar year combined ratio of 90%.

CAT losses in the current accident year decreased $37 million to $62 million in the second quarter of 2026 or two loss ratio points compared with 3.2 loss ratio points in the prior year's quarter. The current accident year loss ratio excluding CATs of 59.6% compared with 59.9% in the prior year. The overall expense ratio is flat quarter-over-quarter at 28.5% and remains below our previously shared expectations, that being comfortably below 30% but increasing modestly over 2025, barring material changes in the marketplace. Drilling down by segment, insurance reported growth in gross premiums written of 5.4% to a record $3.8 billion and net premiums written increased 3.7%, also to a record $3.1 billion. The current accident year loss ratio excluding CATs is 61%, comparable with the first quarter this year.

The expense ratio of 28.3% was flat over the prior year, bringing our current accident year combined ratio excluding CATs to 89.3%. The Reinsurance & Monoline Excess segment continued to experience heightened competition in both property and casualty lines, which resulted in a decrease in net premiums written to $306 million. Having said that, the underlying performance of the business benefited in the quarter from lower CAT and non-CAT property losses, giving rise to a current accident year combined ratio excluding CATs of 78.7%. Turning to investments, net invested assets have grown to $34.2 billion. Strong operating cash flows have contributed to the growth despite the significant capital return to investors. Over the prior 12 months, we've returned capital of more than $1.3 billion, or approximately 14% of stockholders' equity, and nearly 70% of the first half of 2026 earnings.

Strong second quarter operating cash flow was $800 million and will continue to contribute to the growth in net investment income. Income from the core portfolio grew 13% over the prior year to $371 million, and investment funds performed well, growing 5.6% to $28.8 million. The credit quality of our portfolio remains very strong at double A minus, with the duration on our fixed maturity portfolio, including cash and cash equivalents, increasing in the second quarter to 3.2 years, which remains below the average life of our insurance reserves. The effective tax rate of 21.4% was below our normalized run rate of 23% ± due to the mix of earnings from foreign operations taxed at higher marginal tax rates, as well as the non-recurring utilization of certain tax credits.

Stockholders' equity increased to a record of more than $9.8 billion. Capital return to shareholders comprised regular and special dividends of $223 million, as well as share repurchases of approximately $111 million. Rob, with that, I'll turn it back to you.

Okay. Rich, thank you very much. A couple of quick additional comments from me. Then again, we'll be pleased to open it up for questions. Maybe starting on the more macro side with regards to market conditions. Clearly, it is ever more a fragmented market as far as market conditions by product line. That puts that much more emphasis and value around the combination of expertise and discipline, key ingredients for cycle management, regardless where any product may be in the cycle. Let me start by flagging a few areas where we're seeing some headwinds. Then we will pivot to where we're enjoying tailwinds and get into that a bit more, I guess, taking the approach of vegetables before dessert.

Long story short, I guess a little reminiscent of past comments from us, we continue to have great concern around much of the MGU model and how it's participating in the marketplace. We have always had questions around delegated authority and the lack of alignment of interests. That having been said, it just seems like this is just mushrooming and ultimately is going to end in tears for some market participants that are not having the appropriate control over the capital and how it is being managed. From our perspective, the greatest stupidity can be found most easily in the property arena. Shared and layered, as we've been talking about for some number of quarters, is particularly concerning. We're seeing that water falling through to other parts of the property markets.

With that having been said, the casualty market by and large is offering greater discipline, though there are a few isolated pockets within casualty that give us reason for pause. Two that I'll call out in particular would be habitational, as well as liquor. Quite frankly, examples of where we're seeing business where rates are being cut by 20%, 30%. We kind of look at it from a distance and say, "You could have had it if you cut it 10%." As my father used to suggest, this is the type of behavior that turns long tail lines into short tail lines. We will see how that unfolds. Continuing on some of the challenging areas as Rich referenced, reinsurance is particularly concerning from our perspective. Yes, property is eroding rapidly. Casualty never enjoyed the bounce that property got.

You can see in our numbers, as Rich alluded to, actually, we are shrinking more quickly on the casualty side than we are on the property side. Turning to some of the more encouraging areas, I would tell you the broader casualty market overall, with a few exceptions that I referenced, remains attractive. We continue to find ways to put capital to work that we believe will generate very attractive returns. In addition to the broader casualty market, I would tell you there are a few pockets within the short tail lines that we also find attractive as we've flagged in the past couple of quarters. 2 of those that I'll call out are, 1 would be within the A&H space, and the other 1 would be private client personal lines, which again, on both those fronts, we continue to get great traction.

Rich walked us through, again, a bit on the results. I'll just echo a few quick comments on that front specifically. The top line growth clearly is being driven by what we're able to achieve on the insurance front with the growth coming in at mid-single digits. Just to be clear, much of that is being driven obviously by the margins that we find attractive and also while we're still, there is a contribution, I should say, coming from rate increases. The rate increase for the quarter was ex comp was 3.8%.

Now before anyone overreacts, I would remind you this is exactly what we said we were going to be doing when we talked last quarter, and I believe the quarter before that, where we see that there is attractive margin in the business and our priority is to increase count or exposure and where we will keep our foot on the rate pedal, but we may not be pressing down on it as hard. This is in line very much with our expectations and quite frankly, is keeping with our historic approach to cycle management and trying to maximize the opportunity and again, grow where the margin is. That's the approach, that's the game plan, and that's what we're executing on.

On the loss ratio front, I guess the only thing I would add is in a moment like we just went through, we certainly benefit from somewhat of a relatively benign CAT quarter given the time of year. That having been said, for us as an organization, you really see us stand out when it comes to CAT when there's serious or significant activity. That is when our approach to managing volatility comes into sharper focus. Moving over to the expense ratio, Rich obviously covered this in some detail. I would just offer a couple of additional comments. 1 being, and I was surprised that Rich didn't throw this caveat in because being the good CPA, he's usually trying to manage expectations of nobody more than me. We do believe that we'll be able to keep the expense ratio at 30% or better.

That having been said, we are making significant investments in the organization as we have in the past. We continue to lean into it harder and harder, certainly on the tech front, the data front. Maybe to give a few specific examples, very much on the AI front. AI is an interesting topic. There has been a moment of remarkable activity in the broader economy and certainly we're seeing it in the industry. There have been moments in time where we've seen people talking about AI. It's almost as if they felt like I need to do something because I need to do something because I can't not do anything. We are big believers in doing something. We're not going to just participate within AI for the purpose of the headline. We are clearly looking to make investments.

We are looking to create value. We expect to generate returns on those investments. In addition to that, we have a recognition as to what our strengths are and what our limits are. We are certainly not in a position that we are going to go out and try and create our own large language model. For our purposes, the notion that we are going to try and recreate what the likes of an Anthropic or OpenAI or anyone else and spend tens of billions of dollars, that is not our strength. What is our strength is to take the tools that are out there and then layer on our own approach on top of that. What is our strength is to use our 60 different laboratories, each one of our businesses, to be experimenting with tools and then to coalesce around the best solutions and leverage those.

Two examples amongst many, two that I thought we would call out in this conversation. One would be on the underwriting side. The other one would be related to claims. On the underwriting side, we've focused very much on underwriting workbenches and the idea of how we digitalize activity right from intake straight through to quote. Early returns on that front where we've begun to utilize it are that we're getting 20-plus% uplift in efficiency. We're reasonably confident that there's significant additional juice to squeeze out of that. Plenty of upside from there. The second area would be claims, which is our efforts to try and use AI and other tools to move in the direction of straight-through processing where it is appropriate, where it makes sense.

Ultimately, if you have a look at our claims profile, if you will, approximately 50% of our claims settle for $5,000 or less. There are lots of examples where we are showing up to a situation with a sledgehammer when a fly swatter is really what is required. Using some of this technology where appropriate, we are able to deliver a better solution for claimants in a more timely way. More to come on both of those fronts. We are making good progress and we are, quite frankly, as an organization, very excited about our ability to reallocate people's time in other directions and utilize the technology to drive these improvements. A couple of quick soundbites really just echoing some of what Rich said on the investment stuff.

Long story short, we're in a pretty good place and we have pretty clear sight to an even better spot. Rich mentioned the strength of the cash flow at $800 million in the quarter, just as a point of reference, which you would have seen in the release. That's up from $700 million in the corresponding period. That kind of growth is really driving how you're seeing the investment portfolio to continue to increase in scale. That combined with the reality of a new money rate that is well above our domestic book yield of 4.8%. If you say the domestic book yield is 4.8. You think about a new money rate that certainly comfortably starts with a five, that gives you a lot of upside from here. We look forward to being able to continue to deliver on that.

Obviously the duration piece, Rich flagged that it's 3.2. Just as a reminder, the average life of our reserves or how long we hold onto the money is 3.9. We have a fair amount of room to take that duration out if and when we believe it is appropriate. There is no doubt that in certain product lines, as I mentioned earlier, there are clouds building. Those that are weighted towards certain lines such as property, it is going to get tougher before it gets easier. I think we're going through a period of time where mother nature is lulling the property market into a false sense of comfort. This will go on perhaps for some period of time, and then once again the industry will learn the hard way.

Fortunately for us as an organization, if you look at the parts of the market that we participate in, those parts of the market are not getting cloudy. In fact, there's still plenty of sunshine, and we continue to lean into those opportunities, whether it be much of the casualty market or some of the shorter tail lines that I called out earlier. With that, Kristin, we'll open it up for questions. Rich and I will do our best to address any topics people would like to discuss.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand now. If you have dialed in today's call, please press star one to raise your hand and star one to withdraw your question. Please stand by while we compile the Q&A roster.

That's one question with how many parts, Kristin?

You have one question and one follow-up.

Okay. Here, your first question comes from the line of Elyse Greenspan from Wells Fargo.

Your line is now open. Please go ahead. Hi, Elyse.

Good afternoon, Elyse. Thanks for calling in.

Hi. Good afternoon, Rob. Before I get into my questions, I just wanted to express my sympathies to you and just to everyone at Berkley on the passing of Bill. I'm sure he'll be missed by everyone on the buy and sell side. I want to extend my sympathies there.

Thank you. I guess getting into my first question, going to the premium growth and pricing conversation that you hit on in your prepared remarks.

You have spoken about top-line growth improving as rate slows. As you think about just think out from here, not only in the back half of this year but for 2027 as well, do you expect an incremental slowdown in rate? How are you expecting insurance growth when you think about what happens to pricing from here?

It's in some ways easier to predict farther out than it is, because I think directionally we know where a lot of things are going, but it's not necessarily clear how quickly that will unfold. Based on what we're seeing and early returns in July, we're reasonably encouraged as far as the top line. The month isn't done and nobody knows exactly what tomorrow will bring. From our perspective, we have many pockets where we're very pleased with the margin that we believe is available. As a result of that, if the situation warrants it, we feel as though we have considerable room in the rate to adjust. We are not going to do that prematurely. Ultimately, our goal is to try and optimize between rate and growth. Long story short, do I think that things are going to fall off considerably from here? No. Do I think things can improve from here?

I think it is certainly possible.

Thanks. My follow-up is, I guess, triangulating some of that pricing commentary to just the underlying loss ratio, right? If you guys are taking the insurance pricing down, would you expect to start to see more compression on the underlying loss ratio? Or are there other things, mix or whatever it might be that would kind of offset compression from the level of earned rate going down?

Well, obviously there's several components to that, Elyse. One of them would be business mix and how that unfolds and how that gets weighted over time. In addition to that, as we get more comfortable with the margin that we believe is in the business, that could have implications for how we think about what the loss ratios are that we need to book the business to. Said differently, the rate we charge and the loss ratio, as you point out, they're not exclusive of one another, and we may feel as though there was more room in the pick than we recognized.

Got it. Thank you. Thank you.

Your next question comes from the line of Rob Cox from Goldman Sachs. Your line is open. Please go ahead.

Hi, Rob. Good afternoon. Hey, good afternoon.

Yeah, I just wanted to ask you maybe on other liability and commercial auto, a couple areas where I think, just looking at what you disclosed on pricing, maybe you're not growing exposure quite as much. Obviously, we don't know your pricing by product, but can you just talk about if there's more growth in those two lines? Or if you are shrinking exposure, why you don't think it's a good time to grow there?

As far as the other liability goes, we continue to find opportunity to grow. As you point out, there is a rate component there. As far as the auto goes, we are taking much more rate than this at first blush would suggest. In fact, the exposure is coming down considerably. That having been said, the auto line, we're lumping together Berkley One, along with the commercial auto piece, and that we continue to see opportunity. That's offsetting it a little bit. Long story short, the commercial auto line, the rate is up a lot and the exposure's coming down pretty quickly.

Okay, that's helpful. I just wanted to ask you on competition that you're seeing from admitted markets on E&S products. Has there been any sort of change there throughout this year?

We're seeing it incrementally more, as I suggested earlier, the big thorn in the side of the marketplace tends to be these people running around with a pen for someone else, and they get paid based on the policy they write as opposed to the underwriting result they achieve. That's really the challenge. As far as the standard market coming in, yeah, incrementally. Could that become more of an issue over time? Certainly possible. Okay. Thanks, Rob.

Thank you. Your next question comes from the line of Michael Zaremski from BMO Capital Markets.

Hey, Mike, good afternoon. Hey, good afternoon.

Just wanted to start off by echoing Elyse's comments about my sympathies regarding Bill's passing. He'll obviously be missed but also remembered.

Thank you, Mike. Of course.

My first question regarding the deceleration in pricing power. I wouldn't say it's surprising given data points we've seen in the industry's profitability level. Would you say it's also coming with maybe a better view of loss cost trend as well? I know that Travelers alluded to slightly different views. Every company's different on loss cost trend. That could maybe rationalize some of the decel the industry is experiencing.

Yeah. Obviously, I'm not in a position to comment on Travelers. That's a better question for Alan than me. As far as what we are seeing is we have a pretty clear view as to how much margin is in the business, and there are some places where the returns are exceptional. To the extent the choice is backing off on the rate incrementally and having more of that exceptional business, that's a trade that my colleagues are willing to make and has our support. In addition to that will certainly in some situations perhaps invite an examination of the loss picks that we've been carrying for the past couple of years, and a further examination as to whether there's more room in those than perhaps had been recognized at the time that they were originally booked.

As far as trend goes, that would be one component of a variety of components that go into the analysis, as I know you appreciate.

Understood. Just regarding the still constructive view on top-line growth. Does some of the underpinning, I think you alluded to it, come from what you discussed in previous quarters about new means of distribution with certain new partners that could be accessing different types of risks that have the same business classification on what we see, but just come from different actual underlying risks?

The short answer is yes, and as we do reference and we have spoken about in the past, we are very committed to our traditional distribution. At the same time, in the end, our view is that the client or the insured is queen or king, and we need to meet them wherever they and however they wish to be met. We are fully committed to traditional distribution, at the same time, are not going to ignore the shift in behaviors of customers as well. Specifically to your question is, does that contribute to this? Yes, it does contribute to this today, and we expect in all likelihood it will contribute more tomorrow. Got it. Just as a follow-up then, still we heard the expense ratio guidance.

If those distribution methods came with a slightly different expense ratio, obviously maybe a different loss ratio, still not impactful enough to call out any expense ratio changes, right? Thanks. Not at the moment.

Thank you. Rich's head was going up and down, clearly that was the right answer as far as he's concerned.

Your next question comes from the line of Andrew Kligerman from TD Cowen. Your line is open. Please go ahead.

Hey, thank you. Hi, Andrew.

Good afternoon. Good afternoon to you.

Unfortunately I had some technical difficulties for the first 10 minutes, so hopefully I'm not covering old ground. The first question is prior year development by accident year. Could you share a little color on the liability lines and how that played out in the quarter? I do not have that here. I don't think Rich got into those details, but if you wouldn't mind just circling back up with Karen or Rich afterwards, and they'll give you whatever it is that has been sensitized by a herd of attorneys. 100%. It sounds like there wasn't much going on if you're not calling anything out.

No. You mentioned. In that.

Yeah. You mentioned a 3.8% rate ex comp. Did that include exposure as well, or was it just purely rate? With that, could you elaborate a little bit on how property played out and how casualty played out and what the loss cost- Yeah underneath that was?

Sure. Long story short, I know that there are different organizations throw around different metrics, We have a variety of different metrics, the one that I was referring to and that we are sort of laser locked in on is rate. From our perspective, what it's all about is how much are you charging? How much more are you charging relative to a unit of exposure? If we think about a trucking account as an example, if the trucking account has 10 trucks and the rate goes up 5%, that means you're getting 5% more per power unit. If the trucking account ends up adding another 10 trucks, the premium only goes up 5%, that's not a very good answer.

Long story short, what we focus on is how much more are you getting per unit of exposure, irrelevant as to how many more units you actually are covering. That is something we watch, that's not what we obsess about. Pure rate per unit of exposure is what I was referring to and what we are focused on, ultimately that's what drives or impacts margin. As far as how we think about trends per product line, that's something that we, generally speaking, are just not sharing with the world.

Okay, how about loss costs underlying the 3.8? How did that move? Again, loss cost trend is not something that we publish by product line or for that matter in general.

Okay. Thank you. Yep. Thanks for the question.

Your next question comes from the line of Josh Shanker from Bank of America. Your line is open. Please go ahead.

Hi, Josh. Good afternoon. Good afternoon.

Good afternoon to everybody. At the risk of repeating, there's no reason not to repeat. Bill Berkley was a giant, and he always made time for me, which I'm grateful for, and I appreciate everything that he accomplished and the organization he built. Congratulations to you on what he's done, and his memory will be always cherished. Thank you. Thank you, Josh.

One thing that I was curious about, I noticed that basically over each of the last few quarters, the duration, maybe it's a question for Rich, has moved up by about a tenth of a year, and it's been going on for a couple of years now. I realize the duration of the portfolio was exceptionally short, but a lot of market prognosticators are thinking that we're in a higher for longer cycle, and maybe that's not what W. R. Berkley thinks, or maybe there's so much gap between the assets and the liabilities that you feel you need to narrow it. Can you talk a little about your conscious approach?

It's a conscious decision. We do not feel obliged to narrow it. It is based on how we think about where we are, how we think about interest rates and where they're going to be going. As you pointed out, we were at one point very short. We are still short, and we're comfortable incrementally nudging that out. We are not racing to push it out, but we are comfortable incrementally nudging that out and locking in the yield for a more extended period of time.

With that, one thing that if you look over, of course, say, 50-year period, the amount you can earn on float has been A indicator of profits for the industry for a long period of time, and it hasn't been for the recent past, as interest rates have gone up, underwriting margins have improved.

I know that you talk about MGU markets and whatnot, but is there a potential to be willing to compromise on underwriting margin? Not necessarily at W. R. Berkley, but the industry in general, because there's so much opportunity to earn attractive returns on float. Or is that relationship going- Yeah down for foreseeable future?

I think it is going to be impacted by how high rates go and how long they stay up there. Do I think today that we're drifting into a cash flow underwriting environment? I don't see that happening in the short term or today. If rates keep ticking up for long enough, certainly that could potentially invite that thinking. As far as MGUs go, while there are some that are responsible operators, generally speaking, as we've been reasonably outspoken about, I think it's inherently, in many cases, a flawed model. Do I think people are just throwing around the pen and putting it in people's hands and not caring what the underwriting results are because they're looking at the cash flow? No. I think that it's a more fundamental error than that it's just irresponsible management of capital.

All right. That's my follow-up. Thank you very much for taking them both.

Thanks, Josh. Have a good evening.

You too. Your next question comes from the line of David Motemaden from Evercore ISI.

Your line is open. Please go ahead.

Hey, David. Good evening. Thanks.

Good evening, Rob. I also want to extend my sympathies to you, your family, and also the entire Berkley team on Bill's passing. He obviously will be very missed. On to my question. On the rate front, the 3.8% that you disclosed, I'm just wondering if we're right to assume, I guess, the main areas where you guys are taking the foot off the gas and have talked about that previously. Is that really more on the short-tail lines, or is that dynamic happening at all on the casualty side as well?

I would tell you that it's more select than you're suggesting. It's not just property or casualty. It's much more of a scalpel than a cleaver as to how we think about rate, and it gets quite granular, not just by broad product line, but we will be looking at a subclass within a state and have a position as to how we feel about what we can or can't, should or shouldn't do at the rate. It's one of the benefits of our organization, where we are a collection of different businesses, each one with its own management team, again, very focused at a granular level around their P&L and what kind of margin that they have. And we are having conversations with great regularity around incremental changes that are appropriate and, in some cases, significant changes that are required. I don't have- Got it specifics for you by product line.

No, that makes sense. I think it's early, I guess, just given the decline in the pricing or the decel in the pricing this quarter versus last quarter, and I know it takes time for that to sort of work its way through the distribution system. I'm wondering, are there any early indicators that you can share, particularly around retention? Because I would think it would show up there a little sooner than on the new business front. I think you've, in the past- The renewal- you've talked about retention being in- In the aggregate, yeah, in the aggregate, our renewal retention ratio continues to hover or sit right around 80%.

That would suggest that the book is quite stable.

Got it. Thank you. Your next question comes from Mark Hughes from Truist Securities.

Your line is now open. Please go ahead. Yeah. Thank you.

Good afternoon. Hi, Mark. Good afternoon.

Mark, the 3.8%, you've described how you've leaned in and a meaningful part of that is your doing.

No. Your- Just to be clear.

Yeah to define you, I think it's our doing because they don't let me select or price risk, just to be clear.

Yeah. I didn't mean that in any negative way, but I think you've made the point that you're seeing opportunity and you're pursuing those opportunities. If you looked at the market, just absent that, how would you describe the pricing if you hadn't been pursuing those opportunities.

I think it varied dramatically by product line. No surprise, I'm sure, to you, perhaps most pronounced in much of the commercial property market. I flagged a couple of pockets, isolated pockets within liability that has really made us pause and scratch our head. Long story short, Mark, it's a fine brush, not a broad brush.

Appreciate that. The follow-up on casualty reinsurance, you described more pressure there. Does that have any impact on the primary markets? Are you seeing any knock-on impact, or what is going on in casualty reinsurance?

I think that there are people that are willing to write the business on the reinsurance side. It's ceding commissions that don't make sense to us. Our colleagues that are running our reinsurance businesses, to their credit, they have the knowledge, expertise, and discipline to do the right thing. Many of us refer to it as cycle management. They're doing it, and we are grateful for that. What will that mean over time? We'll have to see, I assume you would've taken note in the growth of our gross versus our net, we are not naive to market conditions within the reinsurance marketplace and what that means for us as a buyer.

Appreciate it. Thank you. Your next question comes from the line of Brian Meredith with UBS.

Your line is open. Please go ahead.

Hi, Brian. Good afternoon. Yeah, thank you.

First, I just want to express my condolences as well. Bill's going to be hugely missed.

Thanks, Brian. My first question for you is, when you talk about rate and kind of going down to 3.8%, tell me a little bit what's going on with terms and conditions.

Are you starting to see terms and conditions loosen up? Are you thinking about loosening terms and conditions as well? Because that's just as important as the rate.

Generally speaking, we're not seeing a loosening of terms and conditions. Quite frankly, it's just been more of a rate conversation in our shop. The terms and conditions, we're not seeing those come unraveled at this stage, at least in our activity. What other people are doing, I can't speak to that. I think there are some folks out there that are very aggressive and, as I suggested, we'll see how that story ends for them. As far as our ability to operate with our terms and conditions remaining intact, that's not an issue that we're dealing with today.

Great. That's terrific. My next question, we're hearing about retail agents out there doing their best to keep business in the admitted market and not go to the E&S market. Are you seeing that happen in the market? Is it affecting your E&S business at all? What are the kind of things you're seeing right now with E&S versus admitted?

I think if you look at how the E&S market has grown as a percentage of the overall, to the extent they're trying, it would seem as though they haven't succeeded particularly over the past couple of years. That having been said, more recently, if I was a retail agent, I'd do everything in my power not to have to bring it to a wholesaler, which is obviously the path that most of that business would take. Why would I want to have to split the commission with a wholesaler? Yeah, I think any retailer, unless they had direct access to a wholesale-like product through retail distribution, of course, they should try and place it in the standard market. It almost doubles the economics for them. I would, wouldn't you? Yeah.

Makes sense. Thank you. Sure.

Thank you. Your next question comes from the line of Tracy Benguigui from Wolfe Research.

Your line is open. Please go ahead.

Thank you. Good afternoon. Huge condolences.

Thank you, Tracy. I'm really sorry.

You mentioned that there may be more room in loss picks. Curious how many years of experience you rely on to justify lower picks.

Totally depends on the product line. Obviously, as we both appreciate, different product lines have different tails, both especially on the incurred front. The way we take a view and develop confidence on outcome varies by product line, and again, the incurred tail is really what drives that.

Wait, just a quick clarification on that. The 3.9-year duration of your reserves, I'm assuming that's on a discounted basis. What would that be on a nominal basis?

The answer is I don't have the math. If you follow up with Rich, he can do it for you, or Karen for that matter, but it's not radically different.

Okay. I have a question.

Really, the only consequential area of a discount in our reserves or any consequence is excess comp. The rest of it, maybe a little bit on the reinsurance, but the rest of it, which is the lion's share of our reserves, are undiscounted and we don't discount.

Okay, got it. Then a cycle question. I'm curious if you think this soft cycle is any different than prior cycles, whether it be the key drivers or the duration.

I think that this cycle is radically different from past in some ways. In other ways, I think it's remarkably similar. I think it's remarkably similar because it's still, as we've talked about in past calls, human emotion that drives it, fear and greed. I think it's different because product lines have decoupled as to where they are in the cycle. When I got into this business, or a million years ago when Rich got into this business. All product lines by and large march somewhat in lockstep, so it was either a hard market or a soft market. Today, if you really unpack it a bit, it's notable how different product lines are at different places in the cycle. Yes, I think that, yes, similar fundamentals, but also radically different in how they present.

What would that mean in terms of the duration of the cycle? What we've seen is past hard market cycles, the soft cycles tended to be much longer.

I think a lot of it has to do with the pain and how long it takes for the pain to come into focus. That's really what it boils down to. Just a comment a little while ago about incurred tail. I think ultimately what gives people the discipline and the courage to raise rates is when all of a sudden they recognize the current situation is not sustainable, and they're effectively destroying capital or not appropriately utilizing it. We see that happen time and time again. You saw it happen in the property market a few years ago, and all of a sudden a rush of discipline entered. You've seen it happen at a different moment in time with professional liability, particularly D&O. I would offer an observation that we are on the eve of seeing that happen with California workers' compensation.

Thank you. Thank you. Your next question comes from the line of Andrew Andersen with Jefferies.

Your line is open. Please go ahead.

Hi, Andrew. Good afternoon. Hey, good afternoon.

I think this was asked a little bit ago, but I'll try again. Could you maybe just discuss how the hit rate or quote-to-bind improvement has been in lines where you've lowered price and maybe how that's compared with expectations, and if there's still meaningful room to improve that quote-to-bind?

I don't have quote-to-bind data. What I did share with someone else earlier was our renewal retention ratio. It continues to sit at approximately 80%. That number doesn't move a tremendous amount, but as a data point, hopefully, that gives you some visibility as to the book isn't shifting dramatically, and our colleagues are adjusting to the market where they see appropriate.

Okay. In the past, you've described workers' comp as a market where you're waiting for firmer conditions. I imagine that's still the case, but any update maybe in terms of where we left it last quarter in terms of price or how loss trends are behaving on comp?

Yeah. As far as comp goes, maybe as we've said for an extended period of time, California, in our estimation, is ahead of the rest of the country as far as where it is in the cycle. You would've seen perhaps some of the information coming out of the state recently where they shared that the 25-year, I believe it was running at an accident year of a 129%. I don't know how a marketplace can make that 129% work. Historically, for the industry overall, comp and other product lines, when it looks bad, it's usually worse. It would seem as though that there's a growing amount of catalyst for a shift in behavior, and we're seeing early signs of that in the rate market. We'll have to see how it unfolds from here.

As far as the rest of the country, as we have suggested for some time now, we think it's trailing California, but coming as well.

Thank you. Your next question comes from Meyer Shields with Keefe Bruyette Woods.

Your line is open. Please go ahead.

Hi, good afternoon. Great. Thanks.

Good afternoon, Rob. Your dad was a good and great man, and I hope you find comfort in his memory. Two quick questions if I can. One, W. R. Berkley was one of the first companies, I think in 2016, to talk about social inflation, and I'm wondering whether you're seeing any signs of it maybe tempering as part of the reason for smaller rate increase pushes.

Certainly, it is a topic that, as you point out, we've been very focused on for an extended period of time, and it has gotten the attention of many, including policymakers, and we've seen some examples of action being taken in certain states. What the consequence of that will be and how that will come into focus over what period of time, we'll have to see. Are we aware of it? Yes. Do we feel as though we can quantify what that impact will be at this moment in time? Not fully enough that we're taking credit for it.

Okay. That's helpful. I apologize for having to ask this question, but you talk about a 20% productivity improvement on policy ingestion. Is that 20% more accounts or submissions that you can look at, or what is that 20% actually measuring?

We are getting to 20% more business, and we are able to run it through, and it is converting. We're touching a lot more business, and we're able to get far more at bats, and that is converting to, quite frankly, more productivity. I would tell you that early returns are 20%, and as I tried to suggest earlier, we think it grows from here.

Excellent. Thank you so much.

Thank you. There are no further questions at this time.

I will now turn the call back to Mr. Rob Berkley for closing remarks.

Richie, anything you want to add before I Sure?

Awesome. Okay. Well, thank you all very much for tuning in.

We appreciate your time. We appreciate your interest in the company. I think that as we pass the 50-yard line here, the business continues to fire on all cylinders, and perhaps what's most encouraging is that when we look out on the horizon, there's nothing that we see that we expect can get in the way of us continuing to generate really outstanding returns. Thank you again for your time. Have a good evening. This concludes today's call.

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