W. R. Berkley Corporation (NYSE:WRB) Q4 2022 Earnings Call Transcript

Josh Shanker: So okay the prediction game is hard to do. You made the point earlier that you run with a lot of leverage. And I just want to dovetail that on what you were seeing before. And you got to be careful, but , there’s some people who — if you’re loss ratio deteriorates by 200 basis points, I imagine there would be a lot of unhappy people on this call. But if in doing that, you were able to grow your portfolio 15%, 20% more than you otherwise would have done so, that seems to me a pretty good trade in the long run. Am I right about that or is growth just transient?

Robert Berkley: I think that the point that I was trying to make is, when we think about our loss picks, we need to be very thoughtful and measured because when you make a loss pick, the assumption, there’s a lot of sensitivity. So if you are overly optimistic, even if you’re modestly optimistic that is very leveraged and that could be a problem. And that’s why we, again, do not want to declare victory prematurely as we see things season out, we will start to recognize our accuracy or potentially some caution.

Josh Shanker: And given the good ROEs, is there any reason to relax a little bit on the discipline. That’s going to sound bad, but a little bit more business even if it makes the loss ratio to deteriorate a bit because it will make sense for the long-term growth of the company.

Robert Berkley: Josh, what you’re pointing to, I think, is one of the hardest things to do in this business and it’s striking the balance, if you will, between optimization of rate versus exposure growth. And it’s something that we look to do, not just at a macro level, at a very granular level and optimizing that. So I’m sure in hindsight, there will be parts of the business that we will look back on and say, I wish we had leaned into it a little bit more. But in the meantime, I think we’re just trying to make the best judgment we can every day.

Josh Shanker: Thank you for indulging me. I appreciate it.

Robert Berkley: Thank you for the questions, Josh. Have a good evening.

Josh Shanker: You too.

Operator: Thank you. We’ll go next now to Yaron Kinar at Jefferies.

Robert Berkley: All right. Good evening.

Yaron Kinar: Hi. Good evening to you as well. I don’t want to put words in your mouth, Rob, but I think what I heard you say was in the right market, you may look to lean more into property, both in insurance and reinsurance, if the rates are adequate. If that is the case, can you maybe help us or indulgence us with your thinking about this because on the one hand, I would think it should certainly improve the loss ratios and returns. On the other hand, one of the things I think differentiates Berkeley is a very, very stable loss ratio and underwriting margin. And I would think that underwriting margin probably would incur greater volatility in that scenario. How do you think about that trade-off and the opportunity set?