W. R. Berkley CEO Discusses Q3 2010 Results - Earnings Call Transcript

W. R. Berkley CEO Discusses Q3 2010 Results - Earnings Call Transcript
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W. R. Berkley Corporation (

WRB

)

Q3 2010 Earnings Conference Call

October 26, 2010 9 AM ET

Executives

William R Berkley – Chairman and CEO

Rob Berkley – President and COO

Gene Ballard – SVP and CFO

Analysts

Kevin Walsh – Citi

Josh Shanker – Deutsche Bank

Vinay Misquith – Credit Suisse

Ken Billingsley – BGB Securities

Doug McGregor – RBC Capital Markets

Greg Locraft – Morgan Stanley

Jay Cohen – Bank of America

Meyer Shields – Stifel Nicolaus Bob Farnum - Keefe, Bruyette & Woods

Larry Greenberg – Langen McAlenney

Connie Deboever – The Boston Company

Presentation

Operator

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Good day, and welcome to the W R Berkley Corporation Q3 2010 Earnings Conference call.

Today’s conference is being recorded.

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 “believe,” “suspect,” or “estimate.”

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 10K for the year ended December 31, 2009, and our other filings made with the SEC for a description of the business environment for 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 obligations to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise.

I would now like to turn the call over to Mr. William R Berkley.

Please go ahead, sir.

William R Berkley

Good morning.

We were satisfied with our quarterly results and we’re going to start the call with Rob Berkley going through our operating units, then we’ll follow with Gene and then I’ll be back to give you an overall overview and then questions.

So first, Rob Berkley.

Rob Berkley

Thank you, good morning, everyone.

While the commercial lines market remains competitive, there appears to be a growing recognition amongst industry participants that pricing action is required.

For example, we are witnessing initial efforts by many carriers attempting to test the market in search of additional rates.

The standard market is, generally speaking, no longer pushing deeper into the specialty lines, and we are seeing few yet growing numbers of standard carriers retreating back to their traditional appetites.

Additionally we are observing some examples of specialty carriers reexamining their strategy, and on occasion withdrawing some lines of business altogether.

Finally, a slowly improving US economy is manifesting itself through fewer insurers going out of business, improved audit premium activity, as well as increased freight loads over both road and rail in the quarter.

Net written premiums for the quarter were $987 million, up 2% from 2009.

The growth during the quarter came predominantly from our younger operations, or startups if you will.

This was particularly visible in the specialty and international segment where our startup operations are more concentrated.

The macro-philosophy behind these startups stems from our historic and ongoing efforts to strategically position ourselves for what we believe to be an inevitable turn in the market.

Much of this activity is focused on parts of both the domestic and international economies that offer strong fundamentals. As we have noted in the past, growth in this type of environment is something that we are acutely sensitive to.

The confidence we have in our management team, coupled with our technical data as well as our internal controls give us the needed checks and balances to have comfort in the quality of the business being written.

Our price monitoring indicated the group’s rates were down a mere 0.1% for the quarter and were flat for the month of September.

Our renewal retention remained at an acceptable level of 80% for the nine month period, and the combined ratio of a 95.4 for the quarter was generally in line with our expectations.

Our loss ratio of a 61.8 was somewhat impacted by storms, and the expense ratio at a 33.6 was a continuation of the improving trend we have seen quarter over quarter this year.

As discussed in the past, this expense ratio trend is simply a reflection of our startups beginning to mature, and consequently the earned premium is building momentum.

With regard to reserves, as in the past we continue to take what we believe is a measured approach.

The group takes our fiduciary responsibility very seriously, and consequently feels as though one can’t simply assume past trends will continue in the future.

The realities of available investment returns combined with the distinct possibility of inflation at some point in the future, as well as early signs of frequencies picking up for the industry in 2009 and 2010, lead us to the conclusion that an appropriate level of caution is warranted in selecting loss picks.

In light of us it is our belief that the current accident year continues to run at approximately a 99 combined, and with storms roughly a 101.

It is true that we have historically outperformed our initial loss picks, however we maintain the position of not counting our chickens before they’ve hatched.

While the current market conditions remain challenging, we are increasingly encouraged that change is approaching and our organization is particularly well positioned to maximize future opportunity.

Thank you.

William R Berkley

Thanks, Rob.

Gene, do you want to pick up about the financials now, please?

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