W. R. Berkley Corporation (



Q2 2011 Earnings Call

July 26, 2011, 09:00 a.m. ET


William R. Berkley - Chairman and CEO

Rob Berkley - President and COO

Gene Ballard - SVP and CFO


Michael Nannizzi - Goldman Sachs

Keith Walsh - Citi

Michael Grasher - Piper Jaffray

Josh Shanker - Deutsche Bank

Bob Farnam - KBW

Meyer Shields - Stifel Nicolaus

Jay Cohen - Bank of America/Merrill Lynch

Brian Meredith - UBS

Scott Frost - Bank of America/Merrill Lynch

Gregory Locraft - Morgan Stanley

Amit Kumar - Macquarie

Kenneth Billingsley - BGB Securities



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» W. R. Berkley CEO Discusses Q3 2010 Results - Earnings Call Transcript
» W. R. Berkley Corporation Q2 2010 Earnings Call Transcript
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» W.R. Berkley Corporation Q1 2009 Earnings Call Transcript

Good day, and welcome to the W. R. Berkley Corporation Second Quarter 2011 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,” “expects,” 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, 2010, and our other filings made with the 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 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

Thank you. Good morning everyone. I was pleased with our quarter and I think that all of our expectations for the turn cycle and for all in operations are coming about. Certainly things are happening if it's slower than we anticipated and we are pretty excited about where things are going. I’m going to let Rob talk about our operations firsts and Gene will talk about our finances and I’ll be there talking about overall of the business and where we stand. So, with that Rob please.

Rob Berkley

Thank you. Good morning everyone. Capacity activity during the second quarter following on the heels of the events of the first quarter is certainly the clear reminder of the value that the insurance in which we brings to the society. Additionally, the cat activity over the past six months has provided a strong wake up call to the industry for the need to appropriately price for the infrequent event. The recent natural disasters have compounded the pressure that the industry has already been facing.

This existing pressures stems from a modest investment income, evidence of increasing frequency trend and an overall lack of underwriting discipline that has existed for the past several years. The greatest level of competition continued to be found in accounts over $100,000. Additionally, excess casualty lines in particular excess workers compensation remains under significant pressure. These longer tail lines of business are typically slower to turn given the duration of the liability and consequently it takes more time for underwriting missteps to be recognized.

While industry conditions remains challenging and certainly by no means are we in the froze the of a hard market. There is a growing amount of evidence that would suggest we are in the early stages of hardening market. Much of these changes coming about as many standard markets in particular National Carriers are actively adjusting their appetite as they feel the pain resulting from over reaching during the past several underwriting years. The greatest supporting evidence of this change is the return of pricing leverage without the sacrificing of a renewal retention.

Additionally, our specialty companies are beginning to see some account they have not seen in years. Furthermore, in certain regions of the country we are observing an increasing population in several assigned risk plans. Historically, this has been an early to get accurate sign of a hardening market. The modestly improving U.S. economy is also providing assistance due to fewer insurers going out of business as well as continued strengthening in audit premium.

Net written premium for the quarter was $1.06 billion, this represent an increase of 10% over the second quarter of 2010. While the main drivers of this growth continue to come from our younger operations, we are experiencing improving contributions from our more mature companies as the market begins to turn. The specialty and international segments again led the growth as we continue to benefit from those domestic industries that have not been impacted by the slowdown in the general U.S. economy. As well as our presence in the international markets with economies continue to prosper.

The group's price monitoring report for the quarter indicated an improvement over the corresponding period in 2010 of approximately 2%. Though 2% may not be overly exciting for some, this is in fact the second quarter in a row that we have achieved in aggregate [wage] increase. Additionally, this represents more than twice a level of rate increase we achieved in Q1 2011.

Our renewal retentions remains in the 80s consequently providing evidence of pricing leverage rather than adverse selection. The loss ratio for the quarter was at 66.3 which includes 6.2 points of storm. The unusually high level of storms contributed an additional $35 million of losses beyond what we would normally anticipate in the second quarter. The lion’s share of the loss activity was in our regional segment which stem from PCS 46 in Alabama and PCS 48 in Missouri.

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