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W.R. Berkley Corporation Q1 2010 Earnings Call Transcript

W.R. Berkley Corporation Q1 2010 Earnings Call Transcript

W.R. Berkley Corporation (WRB)

Q1 2010 Earnings Call

April 27, 2010 08:30 am ET


William Berkley - Chairman and CEO

Gene Ballard - SVP and CFO

Rob Berkley - President and COO


Mike Grasher - Piper Jaffray

Doug McGregor - RBC Capital Markets

Michael Nannizzi - Oppenheimer

Meyer Shields - Stifel Nicolaus

Jay Cohen - Bank of America/Merrill Lynch

Vinay Misquith - Credit Suisse

Josh Shanker - Deutsche Bank

Larry Greenberg - Langen McAlenney

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Good day and welcome to your W.R. Berkley Corporation first quarter 2010 earnings call. (Operator Instructions).

I would now like to introduce Mr. William R. Berkley. Mr. Berkley you may begin.



Our general counsel will now read our Safe Harbor statement.

Unidentified Speaker

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Previous Statements by WRB
» W.R. Berkley Corporation Q1 2009 Earnings Call Transcript
» W.R. Berkley Corporation Q4 2008 Earnings Call Transcript
» W.R. Berkley Corporation Q3 2008 Earnings Call Transcript

The speaker's 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 the 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 ending December 31, 2009 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 obligation to update or alter its forward-looking statements whether as a result of new information, future events, or otherwise.



We are going to start by having Rob talk a little bit about our operations and Gene talk about the financials. Then I will pick up and talk a little bit about anything they left out and then talk a bit about the industry and where we see our business going. We were pleased with our quarter and generally happy with our results. So now I will turn it over to Rob. Go ahead Rob.

Rob Berkley

Thank you, good morning. In aggregate the quarter was in line with our expectations certainly by most measures the environment remains competitive and some might describe the market as two steps back, one step forward, but more recently we are encouraged to see a growing number of isolated situations where perhaps it can be described as two steps forward, and one step back.

Some of the areas that are also in the greatest level of competition continue to be as in past quarters commercial transportations, construction and product liability and a bit disappointing but a reality one could add some of the professional lines over the past quarter to that list, particularly large account D&L. The company had a good quarter, particularly given the environment, the gross premium was down to mere 2% coming at $1.126 billion.

Our price monitoring indicated that are pricing was flat and our renewal retention ratio was in the 80s. We ended up delivering a combined ratio of 94. This is made up of a loss ratio 59 and the expense ratio of 35. It’s worth noting the 59 includes $23 million of the storms as well as tax. And the expense ratio was predominantly driven by lower earned premiums as well as start up expenses with some of our younger organization.

When you go cut through all the moving pieces as far as reserves and storms and cash, our best estimate is that our current accident year is running give or take around a 100 combined. If you take a step back and you look at our history and our approach to reserving there is certainly evidence that could suggest that it is possible that, that number could improve as the year develops out.

A couple of sound bytes on the five different segments maybe cutting right through to the chase as far as the one particularly noteworthy outlier that would be our international segment. It came in with a combined ratio of a [111]. This was in part driven by an expense ratio of 44. and this was really due to some of the fact that we have a significant number of start ups in that segment including our new Lloyd’s syndicate, our operations in Australia, our effort to build our business in Brazil as well as a few branches that we have created in Western Europe as part of WR Berkley, Europe, our FSA company.

Having said that, we also had some cat losses related to the Chilean earthquake to the tune of $4 million which hit our Lloyd Syndicate. Our regional segment had a very strong quarter coming into the 92.7. They incurred $15 million of storms. It’s worth noting that this market place continues to be exceptionally competitive and there is a fierce tug-of-war that seems to be going on amongst a few national carriers and we are doing our best to stay out of the way of that battle.

Berkley North Pacific, our newest regional company in the North West is getting the traction that we would have hoped for. And our surety business is enjoying the early signs of improving US economy. Moving on to the regional segments, continues to be a challenging environment for our re-insurance companies. Perhaps the greatest challenge comes from our receiving partners or the company that see business to us. In an effort to support their top line, they seem to continue to buy less re-insurance. As a result of this and this reality over the past several quarters, our expense ratio has been picking up. This has also driven by our underwriting discipline. It’s worth noting that we clearly recognize that there are two types of partners. There are those that try and see business to us in an effort to try and arbitrage our capital and there are some that are true partners through out the cycle. We recognize these two different groups and approach them accordingly. It's also worth mentioning that the Reinsurance Group encountered $4 million of cat losses through a relationship that they have in Lloyd, these cat expense from also the earthquake in Chile.

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