WRB Q1 2026 Earnings Call Transcript

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DATE

Tuesday, April 21, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• President and Chief Executive Officer — Rob Berkley
• Executive Chairman — William R. Berkley
• Executive Vice President and Chief Financial Officer — Richard Mark Baio

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TAKEAWAYS

• Net Income -- $515 million, or $1.31 per share, reflecting meaningful growth relative to the prior year.
• Operating Income -- $514 million, or $1.30 per share, both at record levels for the company.
• Return on Equity -- 21.2% return on beginning-of-year stockholders' equity, indicating significant capital generation.
• Combined Ratio -- 90.7% (calendar year basis), with current accident year combined ratio excluding catastrophe losses at 88.3%.
• Catastrophe Losses -- $76 million, equating to 0.4 loss ratio points, down from $111 million (3.7 points) in the prior year, primarily attributable to winter storms rather than wildfires.
• Insurance Segment Gross Premiums Written -- $3.4 billion, up 4.5% year over year; net premiums written rose 3.2% to $2.8 billion.
• Reinsurance & Monoline Excess Net Premiums Written -- $395 million, reflecting a decline due to decreases in property and casualty lines.
• Net Investment Income -- Increased 12.2%, with the core portfolio up 11.8% to $354 million, and investment fund income up 46.3% to $40 million.
• Operating Cash Flow -- $668 million, cited as supportive of further net investment income growth.
• Expense Ratio -- 28.6%, with management expecting it to remain below 30% for the year absent material changes.
• Effective Tax Rate -- Reported at 16.3% due to a nonrecurring tax benefit, significantly below the normalized run rate of approximately 23%.
• Share Repurchases -- About 4.5 million shares bought back during the quarter, with continued focus on capital return.
• Stockholders' Equity -- Increased to approximately $9.5 billion, despite active share repurchases and regular dividends of $34 million.
• Group Renewal Retention Ratio -- Around 80%, consistently ranging between 78.5% and 81.5%, serving as an indicator of portfolio stability.
• Rate Increases -- 7.2% excluding workers' compensation, with management signaling a growing emphasis on balancing rate and growth.
• Fixed Maturity Portfolio Duration -- 3.1 years, remaining shorter than the average life of insurance reserves.
• Investment Portfolio Quality -- Upgraded to AA-, with book yield at approximately 4.7% and new money rate above 5%.
• Financial Leverage -- 22.6%, highlighted as a historical low for the company, affording significant capital flexibility.
• Property and Casualty Market Dynamics -- Increasing competition noted in both insurance and reinsurance, especially for property and cat-exposed lines.
• Segmental Premium Movement -- Net premiums written grew across all lines except workers' compensation within the insurance segment.
• Berkley Embedded Launch -- One product launched in the consumer space, with management noting minimal channel conflict due to differing target markets.

SUMMARY

Management confirmed a shift in competitive environment, with national standard carriers broadening underwriting appetite and elevating market rivalry in select property and liability pockets. The reinsurance segment experienced accelerated competition, particularly in property catastrophe, inducing reduced premium volumes as disciplined pricing standards were maintained. Executives communicated explicit intentions to recalibrate strategy, signaling moderation of rate increases and a heavier tilt toward premium growth in high-margin lines, with the rate-growth balance under ongoing review. The call featured clarity on capital management, with repurchase activity and low financial leverage enabling both return of capital and future opportunistic deployment without resistance. Full-year tax rate is expected to normalize, despite the present quarter’s nonrecurring benefit.

• Rob Berkley stated, "We are actively rethinking what the balance is between rate versus growth," and indicated future periods may see "our foot slightly off the rate pedal and look to push harder on the growth in particular lines where we see the margin is particularly attractive."
• Reinsurance premium declines reflected management's view that "this is probably a moment, generally speaking, where it is better to be a buyer of reinsurance than a seller of reinsurance," leading to an increase in reinsurance purchasing at attractive terms.
• Executives highlighted the nonrecurring nature of the tax rate reduction, asserting that, "We expect the remainder of 2026 will return to our normalized run rate."
• The leadership team described capital deployment as highly flexible, emphasizing that leverage remains "a very comfortable place" and that rapid capital generation will support continued shareholder returns and opportunistic actions.
• New businesses, such as Berkley Edge and Berkley Embedded, were referenced as contributing to diversification, though their scale will not materially alter the group’s results in the near term according to management commentary.

INDUSTRY GLOSSARY

• Combined Ratio: A measure of underwriting profitability; the sum of loss and expense ratios, with a value under 100% indicating an underwriting profit.
• Catastrophe Losses (Cat Losses): Significant insurance losses caused by large-scale natural disasters or unusual events severely impacting claims cost.
• Reinsurance: The transfer of insurance risk from one insurance company to another to manage net exposures and volatility.
• MGA / MGU: Managing General Agent/Managing General Underwriter; entities authorized to underwrite, price, and manage insurance policies on behalf of carriers, often with specialized expertise.
• Retention Ratio: The percentage of existing insurance policies renewed at expiration, reflecting customer loyalty and portfolio stability.
• Expense Ratio: The percentage of premiums used to pay underwriting and administrative expenses.
• Accident Year / Calendar Year: Accident year tracks losses based on occurrence date, while calendar year accounts for all losses recorded during a reporting period regardless of when the incident occurred.
• Book Yield: The income yield on an investment portfolio based on book (historical) values, not market value.
• E&S: Excess & Surplus lines; non-admitted insurance market for risks that standard carriers will not write, generally offering more flexible terms and pricing.
• Loss Ratio Points: A unit indicating a 1% change in the loss ratio, used to compare changes in claims cost as a percentage of premiums.

Full Conference Call Transcript

Rob Berkley: Alexandra, thank you very much, and good afternoon to all. Thank you for finding time in your calendars to join us. My colleagues and I appreciate your interest in the company. So speaking of colleagues, joining me on this end of the phone, we also have Executive Chairman, Bill Berkeley as well as Group Chief Financial Officer, Rich Baio. We are going to follow a similar path to what we have used in the past where I am going to offer a few more quick comments. Then Rich is going to provide us a summary on the quarter. I will follow behind with a few additional thoughts.

And then we will be very pleased to take your questions and the conversation in any direction you wish to take it. Before I do hand it over to Rich, just a couple of observations from me, perhaps a bit stating the obvious. One is let there be no confusion. This continues to be very much a cyclical industry. As we have discussed in the past, the cycle is driven by two human emotions, greed and fear. And without a doubt, these days, it would seem as though the fear is fading and the greed is fully percolating in many of the corners of the marketplace today.

One of the things that we have talked about in the past couple of quarters is where is some of the competition coming from or much of this competition coming from. We have talked about MGAs and MGUs, delegated authority, a lot of that capacity coming from a variety of different sources, in particular, the reinsurance market, as well as we talked about Lloyd's as a marketplace providing a lot of capacity to delegated authority.

One of the things that we have taken note of over the past 90 days or so is a notable shift in the appetite of the standard market, in particular national carriers, who seem to be broadening their appetite and having reached a new level of, I would suggest, competitive nature that we have not seen in some number of years though it tends to be focused in certain pockets. A couple other comments on the marketplace. Focusing on the reinsurance market for a moment. I think no surprise property and property cat within the reinsurance space has been more and more competitive.

We are not surprised with it directionally, but we have been taken aback a bit by the pace of change and how that level of competition has really taken hold at an accelerating pace. In addition to that, the casualty market or the liability within the reinsurance space never seemed to have gotten much of the bounce that we saw in the property market. Nevertheless, it remains very competitive. And we remain concerned for the health and well-being of that marketplace over time, as there is more competition in the property market that will undoubtedly, at least history would suggest, create more irrational behavior that will be plentiful in both the property cat market as well as the liability market.

Couple of thoughts on the insurance market, speaking of property and how it can turn into a marketplace that quickly erodes. We are definitely seeing that, particularly with cat-exposed property on the insurance side. GL and umbrella, I would suggest, are areas where rate is still available with good reason. Professional, as we have talked about in the past, continues to be a mixed bag. D&O remains one that we are very focused on and seems to be continuing to flirt with the bottom. On the other hand, EPLI in certain jurisdictions is an area from our perspective to be very cautious. I would call out California, particularly Southern California, as one that we are paying close attention to.

Speaking of California, as it relates to workers' compensation, we have talked about it in the past, and we remain convinced that California this time around is out in front of much of the broader workers' comp market. And without a doubt, all eyes remain on the WCIRB and what is to come in the not too distant future. And at the possibility of, I guess, finishing on a bit of a low note, I guess, auto would continue to be an area of great concern from our perspective. It is unclear to us that the marketplace has really wrapped their head around loss cost trend and what action needs to be taken.

I hope you have the punch line before I hand it over to Rich. It is that at the intersection of a cyclical industry and a focus on risk-adjusted return, undoubtedly is a concept that we subscribe to and hopefully others do known as cycle management. The good news for us as we exercise cycle management, the decoupling of product lines as to where they are in the cycle combined with the breadth of our offering, allows us to be more resilient than many of our peers that have a narrower offering. So why do I not pause there? And speaking of resilience, Rich, over to you, please.

Richard Mark Baio: Great. Thanks, Rob. Good afternoon, everyone. First quarter marked an excellent start to 2026 with record net investment income and strong underwriting profits contributing to a return on beginning-of-year stockholders' equity of 21.2%. Net income for the quarter was $515 million, or $1.31 per share, while record operating income was $514 million, or $1.30 per share. Other drivers benefiting the quarter compared to the prior year included lower catastrophe losses and an improved effective tax rate. Starting with underwriting performance, current accident year combined ratio excluding cat loss was 88.3%, and the calendar year combined ratio was 90.7%.

The difference was current accident year cat losses of 0.4 loss ratio points, or $76 million, compared with the prior year of $111 million, or 3.7 loss points. Unlike last year, which was heavily influenced by California wildfires in the first quarter, this year the industry experienced significant winter storm activity occurring in January and February. The current accident year loss ratio ex cats for 2026 is 59.7%, compared with 59.4% for the prior year, which reflects a shift in business mix as we look to maximize profitability. The Insurance segment's current accident year loss ratio ex cats increased 10 basis points to 60.9%, while the Reinsurance and Monoline Excess segment increased to 51.1%.

The expense ratio of 28.6% is comparable to the recent sequential quarters and reflects small impact from the decline in net premiums earned from the Reinsurance and Monoline Excess segment. We continue to believe that the 2026 expense ratio will be comfortably below 30%, barring any material changes in the marketplace. On top line production, despite heightened competition in certain pockets of the market, the Insurance segment grew gross premiums written by 4.5% to $3.4 billion and net premiums written by 3.2% to $2.8 billion. As you can see from the supplemental information on Page 7 of the earnings release, net premiums written grew in all lines of business apart from workers' compensation.

The Reinsurance and Monoline Excess segment reported net premiums written of $395 million, reflecting decreases in property and casualty lines of business. Net investment income increased 12.2% to a record $[inaudible] driven by growth in the core portfolio of 11.8% to $354 million and an increase in investment fund income of 46.3% to $40 million. As a reminder, we report the investment funds on a one-quarter lag, and an average quarterly range for investment fund income is $10 million to $20 million. We expect that strong operating cash flow of $668 million in the current quarter should continue to contribute to the growth in net investment income.

The duration of our fixed maturity portfolio, including cash and cash equivalents, increased during the quarter to 3.1 years, which remains below the average life of our insurance reserves. The credit quality of the investment portfolio continues to improve to a very strong AA-. The effective tax rate in the first quarter was lower than our normalized run rate of 23% plus or minus, which is usually attributable to higher taxes on foreign earnings and the ability to utilize such foreign tax credits. In the current quarter, we reflected a net nonrecurring tax benefit reducing our effective tax rate from 22.8% to 16.3% as reported. We expect the remainder of 2026 will return to our normalized run rate.

During the quarter, we repurchased approximately 4.5 million common shares amounting to $[inaudible] and paid regular dividends of $34 million. Stockholders' equity increased to approximately $9.5 billion despite the significant capital management. In summary, another positive quarter with meaningful growth in earnings, and 21% plus return on beginning equity. Rob, I will turn it back to you.

Rob Berkley: Thank you, Rich. A little disappointed that this is not our new run rate on the tax front, but I guess you got a whole quarter to figure that out. Yes. So let me just offer a couple of more quick sound bites, and then we will move on to Q&A. First off, you would have taken note on the rate. It came in reasonably at the 7.2 ex comp. Just as another perhaps relevant data point. The renewal retention ratio continues to sit at around 80%. That thing fluctuates between 78.5 and 81.5. It does not move very much.

And I look at it as one barometer to really understand whether we are turning the book or not in our efforts to get rates. So that is an encouraging sign from my perspective. Just another quick sound bite on the topic of rate. And we touched on this briefly when we had our fourth quarter call and I think you are going to see it come into more and more focus. We have taken a tremendous amount of rate over the not just the past couple of quarters, the past few years.

I think there are many pockets of the organization we are feeling very good with what the margin is, and the need for rate is perhaps not going to be as strong going forward. So what is the punch line? We are actively rethinking what the balance is between rate versus growth. And over the coming quarters, you may see us take our foot slightly off the rate pedal and look to push harder on the growth in particular lines where we see the margin is particularly attractive and exposure growth is of more interest to us than rate. Rich talked about the top line overall growth.

It was obviously some pretty separate and distinct pieces and it does map back, at least in my mind, to the topic of cycle management. You would have seen we took a pretty firm position, which quite frankly, given our comments in the Q4 call and earlier last year should not have surprised anyone. We all know what has been going on with the rate. We have been very transparent about our view on the casualty or liability line and the discipline that we will be exercising there, and kudos to our colleagues that are actually putting that discipline into practice.

The other side of the coin, as Rich pointed out, we are still finding opportunities to grow within the insurance space. Clearly, a bit of a mixed bag. I think the note between the gross versus net again highlights, hopefully in the eyes of those that are observing, that this is probably a moment, generally speaking, where it is better to be a buyer of reinsurance than a seller of reinsurance, hence the delta between the gross and the net. I do think just a final quick comment on the top line.

In the insurance space, there is a reasonable chance that we will see a bit more growth as the year unfolds and we are revisiting this notion or balance between growth and rate. Pivoting over quickly to the loss ratio, I think in a nutshell, it is winter storms. We had more exposure to that than some. That having been said, we think it is still a good trade. The comments on the expense ratio, I share very much Rich's view that we will be keeping it below 30%. The movement that you would have seen in the reinsurance and excess segment was primarily a result of a decline in premium on the reinsurance front.

Switching over to the investment portfolio for a moment, and, you know, Rich flagged for you all the strength of the quality with a very strong AA-, almost flirting with a AA. But a couple other points that I would flag is that the book yield on the portfolio is about 4.7%. New money rate is five plus, so we still got some room there for improvement. In addition to that, the duration, as Rich pointed out, sitting at 3.1 years. As a friendly reminder, the average life of our loss reserves, which is a big part of what we are investing, is a hair inside of four years. So what is the punch line?

The punch line is a couple of things. One, the quality is high. There is opportunity with the book yield moving up, and we have flexibility around pushing that duration out, which is a plus as well. So even if you discount the growth in the portfolio due to the strength of the cash flow that Rich was referencing, which is real, and you see it quarter after quarter. But even if you put that aside, there is meaningful upside on the, depending on whether you look at the overall including cash, $28 billion, or if you want to back out the cash, $25.5 billion.

There is meaningful upside from there both because of growth of investable assets as well as the new money rate which, again, with the duration, we have flexibility. On the topic of flexibility, and I promised last topic for me, at least for the moment, is capital. And I know it is not something that we spend a lot of time talking about on these calls, but I did want to draw folks' attention to it. And that is our financial leverage, which is sitting at about 22.6% these days, which is a, I do not know if it is an all-time low, but it is an all-time low in my some number of decades at the organization.

I think it is important to take note of that for a couple of reasons. Number one, when you look at the returns that we are generating, we are generating it with a much higher level of capital or equity, for that matter, more specifically in the business. Number two, I would draw your attention to the fact that we, as an organization, do not have an expectation for 22.6 to keep going down from here. This is a very comfortable place. We think we got lots of room if an opportunity presented itself. So what does that mean?

That means if you look at this business that is earning, I do not know, between a billion $[inaudible] and $2 billion and something a year, give or take, and you think about where our leverage ratios are, what that means is we are generating capital significantly more quickly than we can consume it. And that we will have significant amounts of capital to return to shareholders for the foreseeable. And to that end, even with us doing that, we still have a tremendous amount of flexibility to take advantage of whatever unforeseen opportunities may be coming our way.

So I flagged that because what you saw in the quarter with the repurchase, what you have seen us do with special dividends and recognizing the earnings power of the business and how we see the growth opportunities before us, that we are going to, in all likelihood, have large amounts of capital to continue to return to shareholders in what we believe is the most effective and efficient way that is in the best interest of our shareholders. So I know we talk about repurchase every now and then. People talk about special dividends. But I just wanted to put those data points out there.

And again, we can talk more about it during the Q&A if people wish to, but it seemed like that was a relevant topic of the day. So why do we not take a pause there? Alexandra, if we could please open it up for questions.

Operator: 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 press star 1 to raise your hand. To withdraw your question, press star 1 again. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Elyse Beth Greenspan with Wells Fargo. Your line is now open. Please go ahead.

Rob Berkley: Hi, Elise. Good afternoon.

Elyse Beth Greenspan: Hi. Thanks. Good evening. My first question, I guess, just trying to, Rob, square away your comments. Right? You started off by saying, you know, just pointing to, you know, greed and fear in the market, and then you were talking about standard market carriers, national carriers, that broaden appetite and pointing to the market getting more competitive. But then you also ended your comments by saying that there is perhaps some better opportunities to push for a little less price and show better growth. So can you just help me square what felt like introductory comments?

And then as we try to translate that in terms of just thinking about premium growth, and I guess my comment is more focused on the insurance segment. It got slightly better this quarter. But I think from your comments on last quarter's call, I think you had insinuated growth in January might have been within range of 7%, so we could see that things, it seems like, slowed in February and March. So how are you thinking about just the level of pickup of growth that we could see in this? And then for your comments about growth getting better, is that a Q2 comment? Is that more maybe Q3, Q4? Just based on how you see that today?

Rob Berkley: Thank you for the question, Elise. And what I perhaps was not as clear on as I should have been with my opening comments is that I think there are still pockets where there is good opportunity. I think a lot of those pockets tend to be more casualty related. We, as an organization, have a bent towards casualty as opposed to shorter-tail lines, particularly property where the competition is most pronounced. So do I think, overall, the market is a bit more competitive today than it was yesterday? Yes, I do. Do I think there are still pockets of the marketplace that we are a meaningful participant in that offer opportunity? Yes, I do.

And to answer your question on the growth cadence, and maybe we confused the situation; if we did, apologies. But we actually saw the top line improve as we made our way through the quarter as opposed to the other way around. So January did not prove to be our best month. We are hopeful that we will be able to do better in Q2, but I cannot promise that right now. What I can tell you is that we, as an organization, oftentimes are quoting 90 days out, sometimes 60 days out, sometimes even longer than 90 days out.

So as we identify pockets where we are willing to make a trade as far as maybe a bit less rate in order for a bit more growth, it takes a little bit of time for that to come into focus. How that will play out I cannot promise that. I know what I have talked to my colleagues about, and I hear from them how they are thinking about things, and that is what I am trying to share with you. So I cannot promise that in Q2, we will grow x amount more. We will have to see how it unfolds.

But I am trying to give you a little bit of a flavor as to what the dialogue is within our clubhouse.

Operator: Your next question comes from the line of Rob Cox with Goldman Sachs. Rob, your line is now open. Please go ahead.

Rob Berkley: Hi, Rob. Hey. Good evening.

Robert Cox: Good evening. Yeah. Just first question on property. I hear your comments this quarter and in recent quarters that property dynamics are repeating themselves. I am curious where you think property is from a price adequacy perspective, whether it is ROE or whatever metric, and how you would bifurcate across insurance, reinsurance, and maybe by geography. And then I just had a follow-up on professional lines. You mentioned pricing trying to bottom there. Looked like your strongest growth at Berkley since 2022 in professional lines this quarter. I do not think a lot of that was pricing, so it seems like exposure grew.

Do you anticipate seeing further opportunities in professional lines, and is there any other color you could provide on the quarter?

Rob Berkley: I think that is a pretty big question from my perspective. I think that there is still margin in a lot of places, but it is falling off pretty quickly. I think it is falling off most quickly in the reinsurance marketplace. I think then it would waterfall down into cat-exposed or E&S property, and probably the place where there has been the least level of sea change would be the admitted or standard-risk property market overall. That having been said, that part of the market probably got the least bounce. But in my mind, the reinsurance market led the way up and the reinsurance market is leading the way down. On professional, it is a pretty broad category.

I tried to fashion my comments around two areas that gave us reason for pause: D&O, particularly public D&O, and certain components of the EPLI market. That having been said, a lot of the growth that you saw on the professional front, much of it came from outside of the United States. My earlier comments were really focused on the U.S. market. As far as the places specifically where we think there is the best opportunity, that is just not something we are going to unpack publicly.

Operator: Your next question comes from the line of Alex Scott with Barclays. Alex, your line is now open. Please go ahead.

Alex Scott: Thanks for taking the question. First one is on reinsurance. I know you mentioned better to be a buyer than a seller at the moment. So I just wanted to take your temperature on what to expect there for the full year. And when we look at the growth numbers for this quarter, is there anything funky in there around restatement premiums or anything like that we should factor? I just want to make sure I understand the right kind of run rate to that business. And then I wanted to come back to the casualty reserves a little bit.

I know this is sort of old news because you guys put out the triangles and so forth with the 4Q results, but would be interested if you have any comments you would share on the another liability and just what we see in there related to some of the early years releasing on shorter-tail casualties versus some build in the reserves on longer-tail. What would you say to help us get more comfortable with the trends we see?

Rob Berkley: Nothing “funky,” to use your words, in the reinsurance numbers. I think it is just a reflection of market conditions from our perspective. And you are seeing a combination certainly of a more competitive market. And simultaneously, you are seeing a couple of cedents struggling to get their top line where they want it, so they are increasing their net. And that may feel good in the short run. We will see how it works out in the long run. On the casualty reserve detail, that is probably a bigger conversation than makes sense to hold up everyone’s time on. We have put a fair amount of information out and supplements out.

In addition to that, I think some of our folks, in an effort to help piece it all together, have reached out to others. And if you would like to further the conversation, we are happy to help you piece together the public information. Obviously, there is a bit of a constraint as to how far we can go, but we would be very happy to pick that up with you, Alex, offline. That is not going to be a quick answer.

Operator: Your next question comes from the line of Andrew Scott Kligerman with TD Cowen. Andrew, your line is now open. Please go ahead.

Andrew Scott Kligerman: Hey. Thanks a lot. Good afternoon. The first question is around the capital management, Rob. I am trying to frame your appetite in terms of what is bigger. Is it the buyback, the one-time big dividend, special dividend, or is it growth in a challenged market? Because as I look at what you did in the first quarter, $302 million, that is a lot of buybacks, as much as you did in all of 2024 when the stock price was about 20% lower and the earnings were very similar to what we are seeing today. Or do you do a big dividend like you did in 2024 or 2025? And then where should that leverage ratio be?

You said 22.6% is too low. Where would you like it to level out? So sorry for the long wind on this one, but why the big buyback in the quarter, and what is the appetite buyback versus dividend, and where will the leverage be? So a lot to unpack. And with regard to the gross versus net written premium, the net being 3.2% against the gross at 4.5%. Any read-through there with the lower net? Any color that you can share on why that net was materially lower? And just to sneak one last one. Prior year development, anything unusual in the casualty lines, plus or minus?

Rob Berkley: Thank you for the question, Andrew. A couple of things there. First off, as far as the 22.6%. I did not suggest—and if I misspoke, shame on me—that we wanted to go lower or higher. I think what I tried to suggest to you is that we did not see it going much lower than that. I am not suggesting that we want it to go considerably higher. It really depends on the circumstances at any moment in time and how we are positioning the business for what we see today and what we envision for tomorrow.

Number two, the point that I was trying to articulate earlier is that the opportunity for growth for the organization today and what we see in all likelihood tomorrow is we think we will be able to grow, but it is not going to be the growth rate that we enjoyed some number of years in the past or for some number of years. That is just a reality of market conditions. So, again, will there be growth? Yes. Is there going to be the kind of growth we saw in the past? Probably not.

So with that all having been said, the reality is with the company generating, call it 20% plus returns, or said differently, call it, you know, flirting with $2 billion of net income, that is a lot of capital that we need to figure out—if we do not need it—how we are going to return it to our shareholders. That is just the reality. As far as what levers we utilize to return capital to shareholders, that is something that we grapple with every day, and we think about what is in the best interest of all shareholders, whether it is special dividends, whether it is repurchase, whatever it may be.

As far as what we did in the past and why we are back—you know, we can take it offline and try and unpack what we did this quarter versus that quarter. A lot of it has to do with valuation at the moment in time. A lot of it has to do with how we see growth opportunity. So there are a lot of things that we consider. If you are looking for more guidance as to what we are specifically going to do to be returning this significant surplus of capital that we are generating today and expect to be generating tomorrow, I do not have a particular road map to share with you.

But it is certainly something that we will continue to be transparent about on a quarterly basis. On gross versus net, it is a combination of mix of business, and in addition to that, as we tried to flag earlier, there were opportunities to buy some reinsurance at what we believe to be attractive terms. On prior year development, nothing particularly exciting. If you want to do a deeper dive, at least to the extent we are able, we will share with you whatever we are allowed to share with you on that, and, obviously, there will be more detail available in the Q.

Operator: Your next question comes from the line of Michael David Zaremski with BMO Capital Markets. Michael, your line is now open. Please go ahead.

Michael David Zaremski: Hey, thanks. First question, kind of pivoting back to social inflationary lines. Rob, loud and clear, we heard your comment. I think most would agree with you that the industry is still getting their hands around loss cost trend. The industry is doing very well, though, overall. Would you be willing to paint a broad brush on how Berkley views loss trend in GL, umbrella, commercial auto? Because, back to Alex Scott's questions, we do see Berkley, like peers, adding—truing up—your loss picks a bit higher as well. So curious if you could add any color there.

And just pivoting back to the debt-to-cap discussion, your very long-term average debt-to-cap oscillates low 20s to mid 30s, but it has averaged 30% plus. Can you remind us, are there circumstances when you are increasing the leverage? Is it when you feel you are very bullish about the marketplace? Any additional context worth mentioning?

Rob Berkley: If you are asking me to share with you what our trend assumptions are by product line, that is not something that we put out, generally speaking, for public consumption. As it relates to our loss picks, we are constantly looking at our data and what it is telling us. We are constantly looking at industry data, and we are looking at other datasets as well, both traditional and nontraditional, and trying to respond to that. Put it all into our sausage maker, and then a lot of folks sit around and try and apply our judgment to the best of our ability.

So I am not sure what more I can add at this stage, other than we are very focused on making sure that our picks are appropriate, and based on what we conclude on that front, we are looking to actively respond from a rate perspective, terms and conditions. And I think one of the points I should have made earlier that we tend to not always focus on as much as we could or should is the role that jurisdiction or territory plays as a component of selection. On leverage, the answer is that when we see opportunity in the market, we are very happy to, in the short run, flex that leverage up.

But quite frankly, we are very comfortable where we are today, but we certainly have the ability to flex it up if the opportunity presented itself.

Operator: Your next question comes from the line of Analyst with Morgan Stanley. Your line is now open. Please go ahead.

Analyst: Hi. Good evening. So my first question is also on the capital side in a different way. You talked about willingness to grow your business. You clearly have capital. Is there some way to think about the balance between growing inorganically versus buyback and dividends? Are there lines of business that you feel M&A makes sense for you guys? Are there lines where you think M&A makes sense?

Rob Berkley: When you say inorganically as opposed to organic, are you talking about M&A?

Analyst: Yes, sir.

Rob Berkley: It is certainly something that when investment bankers are out trying to sell, we get a phone call on. Most of the time when you hear about a transaction, we are already somewhat aware of it because we got the phone call. But, as we have shared with some, we tend to err on the side of being cautious and cheap. And we recognize that most M&A transactions in this industry—not all, but most—if folks could do it all over again, at least the buyers, they probably would not. So I would never say never. We certainly look at things from time to time. But we are very comfortable with the organic growth model.

We are pretty disciplined in how we operate the business. And we are willing to be patient because of this philosophy around risk and return. Again, you never know what tomorrow will bring, but there is a reason why we have not been historically active on that front.

Analyst: My second question is on the growth side of things. In the beginning of the call, you talked about the market being in a greedy environment. As you think about pivoting to growth, are there areas where you feel the market maybe is too greedy and you have to avoid? Are there areas where you think the market is too cautious and it represents a big opportunity or semi-big opportunity? Maybe give us a bit more of a breakdown.

Rob Berkley: There is no doubt that if we want to use a broad brush, the market is overall more competitive today than it was a year ago, let alone two or three years ago. That having been said, there are still pockets, particularly within certain aspects of the liability space, that offer what we believe are attractive opportunities as far as available margins. It is not as broadly available as it once was. But it is still there. The shorter-tail lines—not all, but much of them—have become notably more competitive, and certain aspects of the liability lines have become more competitive.

But because of the breadth of our offering, we are still able to find opportunities where we still think that there are attractive margins available, and attractive enough to the point that we are willing to take our foot off of the rate pedal a little bit. Which is why I am suggesting as our colleagues are contemplating that and pivoting their behavior, there is a likelihood that you will see some level of growth that is coming from these niche opportunities. We saw our colleagues pivoting more and more throughout the quarter, which is why I was suggesting earlier that January growth was less relative to March.

And that was primarily a result of our colleagues pivoting, reminding you and others that we are oftentimes quoting 90 days in advance. So it takes time for that pivot to convert into binders or written premium. What does that mean for Q2? Honestly, I cannot promise anything. I can only share with you the narrative that is going on within our organization, how we are seeing the marketplace, and how we are adjusting our approach.

Operator: Your next question comes from the line of Tracy Benguigui with Wolfe Research. Tracy, your line is now open. Please go ahead.

Rob Berkley: Hey, Tracy. Good evening.

Tracy Benguigui: Hey. Good evening. Since casualty reinsurance never got the same bounce as you saw on property reinsurance, I am curious, is this business rate adequate now, or is it approaching rate inadequacy? Also, you mentioned potential upside from net investment income and you also noted certain insurance pockets like casualty where you might prioritize growth over rate. So are you taking more of a total return approach when setting combined targets for your underwriters, maybe putting more weight on net investment income, which will allow you to grow?

Rob Berkley: I think you would have heard for a number of quarters or beyond us bitching and moaning about the casualty reinsurance marketplace and how we did not think ceding commissions made sense, and that is a pretty broad brush that I am using there. So if we are writing the business, we believe that it is an acceptable margin. But as you would have seen, our casualty portfolio within reinsurance was down considerably in the quarter. And that is not because we are charging less for the same exposure. It is because that book of business is shrinking. I cannot speak to the broader market. I can only talk to what our colleagues are doing as I understand it.

On the total return question, the answer is no. We have a view on loss ratio. And to take your comment to an extreme, we as an organization have never subscribed to the notion of cash flow underwriting or anything akin to that. Are we conscious of what the contribution is from the investment portfolio? Of course, we are. We are acutely aware of that. But we are not willing to throw the underwriting discipline out the window because of where interest rates are today. We look to each component of our economic model to stand on its own two feet and justify the capital that it utilizes.

Operator: Your next question comes from the line of Mark Douglas Hughes with Truist Securities. Mark, your line is now open. Please go ahead.

Mark Douglas Hughes: Yeah. Thank you. Good afternoon. Rob, you mentioned that the large standard carriers are ramping up their appetite. You saw the step up in competition. Is that largely on the casualty side you are referring to? Is that influencing the balance in the E&S and standard market? A little more on that would be interesting. And to the extent that you are successful in pivoting to growth here in the second quarter, does that have a meaning for your loss picks? Could we potentially see loss picks a little higher if you are not pushing as much on rate?

Rob Berkley: They are active on the property side and, to the extent it is on the casualty side, ironically it has been in pockets of the casualty market that are okay, but not great. So it is really bizarre. They are not going after the good stuff. They are going after the marginal stuff. And in some cases, they are taking it for 30% off, which is bizarre because they could have had it for 10% off. So, as we say around here and certainly my boss over here has reminded us, even long-tail business—you write it cheap enough—becomes short-tail business.

So they can keep going with 30% off, and we will look forward to seeing it back in a couple of years. On loss picks relative to growth, I do not think that would be something that I would link to in my view. I think what we are really saying is that there are pockets of the business where we have been very, very focused on rate. And we think we have room, and maybe it will prove to be that the picks had more room in them than we had originally anticipated. But we will have to see with time.

Operator: Your next call comes from the line of David Kenneth Motemaden with Evercore ISI. Your line is now open. Please go ahead.

David Kenneth Motemaden: Hey. Thanks. Good evening. Just back on the topic of maybe letting up a little bit on the rate increases in some lines. I may have missed this, so I apologize in advance, but is there any broad class of business that you had referred to? Is that short-tail? Is it casualty? Is it professional lines? I am not looking for specific sublines within those, but I was hoping you could elaborate a little bit on which broad area you think you might have opportunities to let up on price and maybe we can see growth accelerate. And then the growth in the insurance business in the short-tail lines continues to tick along at 5%.

I was a little surprised at that just given the pricing pressure on the commercial property side. So I was hoping maybe you could unpack that a little bit more for us and how we should think about the durability of the growth there. And maybe just a high-level question. You talked about the average life of your reserves at about four years. I was a little surprised that has not really changed that much. It does feel like claims durations are extending. Philosophically, what are you seeing? Do you think we are seeing more stability here in claims payment patterns as we look through the reserves?

Rob Berkley: We just have not put that detail out there. We will think about if there is something we can tuck into the Q that could be helpful along those lines. But at this stage, we just have not put anything out there yet. On the short-tail growth, I think you are focusing on it through the lens of commercial, and I would encourage you to broaden your lens to incorporate our A&H business that we have spoken of in the past as well as our private client business. On reserve duration, I think that we all know that the industry got caught a bit flat footed with inflation, particularly social inflation.

And it has been a bit of a process of catch up. I think that picture, as we have all discussed ad nauseam, was clouded by COVID for us to a great extent. And I think at this stage, the industry and ourselves included have adopted and adapted to the new reality of the claims environment and what we see coming out of the legal environment.

Operator: Your next question comes from the line of Joshua David Shanker with Bank of America. Your line is now open. Please go ahead.

Rob Berkley: Hi, Josh. Good evening.

Joshua David Shanker: Thank you for taking my question. How are you all doing? I want to talk about your go-to-market strategy or maybe go-away-from-market strategy. As I see the declines in the reinsurance book, I am trying to understand the complexion of your book. Sometimes people purchase on syndicates. Sometimes you have some unique one-off deals. I know your program business—program management business—is in that reinsurance bucket, and that is probably seeing some comps from MGAs. Can you talk about, as the business is leaving, are you walking away? Is it being competed away? What is the process, and what exactly are you losing? And then switching to competition from MGAs: the insurance growth looks fairly healthy.

Are you seeing less competition than in the past, or is it as heavy as ever? And one last one: as you are thinking about deployment of capital, obviously capital is a big deal, you have liked yield from the market. Is there anything attractive in the alternative spaces compared to past quarters where you might be deploying money into more illiquid products?

Rob Berkley: The lion's share of what we are losing would be treaty reinsurance business. And it is due to how we think about appropriate pricing. They tend to be a subscription market, if you like, or a treaty that has multiple participants. And so it is just someone else is coming with the capital or the cedent is looking for better terms than we are prepared to offer, and then maybe they choose to keep it. Certainly, a trend that we are starting to see more of is cedents, in some cases, if they cannot get far better terms, are looking to keep it as a way to bolster their own top line.

On delegated authority, we are not seeing the delegated authority model—MGA, MGU, etc.—subside in any way at this time. On alternatives, we certainly have a participation in the alternative space. I would add that we do not have a participation in the private credit space, just to make sure there is no question about that. But right now, given what the public fixed income market is offering as far as yield, we do not feel much need to look beyond that.

Operator: Your next question comes from the line of Katie Sakys with Autonomous Research. Your line is now open. Please go ahead.

Katie Sakys: Good evening, Rob. Really quickly, how would you describe your approach to managing commercial auto exposures today versus your comments last quarter on shrinking exposures? With your very frank description of the auto liability market today, I am curious as to what is giving you confidence in the growth that you are still showing in that book, but it is not resulting in adverse selection. And then any new news on Berkley Embedded? I realize it has only been a couple of months. Are there any product lines that have gone live with that? And if so, how are you thinking about channel conflict with your traditional distribution partners there?

Rob Berkley: Just to be clear, the growth that we are experiencing is premium, not unit growth or exposure growth. So the rate that we are taking far exceeds the growth rate. So the exposure is shrinking, and the rate is increasing. So the growth that you saw on the page of the release, it is all rate, and then some. As far as Berkley Embedded, they are off to a great start. They do have one product offering that is chugging along in a consumer space. And as it relates to channel conflict, right now, the type of business that we are entertaining through that avenue is really not something that we would be in any other way.

That having been said, there is a reality, as we have talked about in the past. Once upon a time, there was a defined swim lane for carriers, and there was a defined swim lane for distribution. And I think what we are seeing more and more of is those lines are getting somewhat blurred. And while we are very committed to our traditional distribution, ultimately, our focus also has to be on the insured. And we need to be willing to meet insureds where they wish to be met.

Operator: Your next question comes from the line of Andrew Anderson with Jefferies. Your line is now open. Please go ahead.

Andrew Anderson: Hey. Good evening. Just on workers' comp, growth has been a little bit lighter there the last couple of quarters. To what extent is there an opportunity for that to pick up again, or is maybe a binding constraint here your thinking with regards to price or medical trend uncertainty? And when you are talking about the standard or national carriers taking back some business, would you describe this as more of a normal ebb and flow, or are the standard national carriers maybe going deeper into E&S and more into lines of business that have been stickier in the E&S channel historically?

Rob Berkley: I cannot tell you exactly what the next quarter will be. But generally speaking, directionally, we have had somewhat of a defensive posture with much—not all, but much—of the comp market that we participate in. And we are looking forward to that market experiencing some type of firming at some point. And when it does, I think you will see us expand, and hopefully the opportunity will be there for us to expand dramatically. On standard carriers, I do not think that they are going to derail the E&S marketplace. Certainly not today and likely not tomorrow.

But we do see them more present in the market with an appetite that is seemingly a bit broader today than it was yesterday. And at times, it would appear as though they are misclassifying risks. I do not know how else you could get to some of the rates that they are entertaining. We will have to see how it unfolds. I think it is, again, more pronounced in some of the shorter-tail lines. It exists, but is less visible in some of the liability lines.

Operator: Your next question comes from the line of Meyer Shields with Keefe, Bruyette & Woods. Your line is now open. Please go ahead.

Meyer Shields: Great. Thanks so much. I appreciate your taking my call. First question, I guess, Rob, last quarter and this quarter, you talked a little bit about taking the collective foot off the gas in terms of pricing in some lines. Should we think of that as a top-down directive, or is that bubbling up from the various underwriters? And then very briefly, whether it is Lloyd's or the reinsurance businesses, does Berkley have any exposure to the Middle East conflict?

Rob Berkley: Just to be clear, we are not a top-down organization in that sense. We certainly pay attention. We ask lots of questions. We want to understand, but we are not top-down directing our colleagues throughout the operations as to what they should or should not charge. We look at the data and grapple with them. But, again, this is an organization where those types of decisions are driven by our colleagues that run the various businesses.

That having been said, we do use group data that gets aggregated and other data sources to bring it to bear and put it in the hands of our colleagues running the businesses so they have as good an information set as possible to make their decisions. On exposure to the Middle East conflict, nothing of consequence. It is just not a big play in the war space. We are a very modest player in certain aspects of the marine market, and we are very active users of war exclusions.

Operator: There is one final question. This comes from the line of Brian Robert Meredith with UBS. Your line is now open, Brian. Please go ahead.

Brian Robert Meredith: Thanks, Rob. I will keep it to just one question here. I am just curious in your growth thoughts for the year here. Is any of that related to perhaps your incubator-type businesses transitioning into segments? I am thinking something like the Berkley Edge. Maybe you can talk a little bit about Berkley Edge and how it is doing so far.

Rob Berkley: I think that some of the new ventures are off to a good start, but relative to the overall size of the group, while we look forward to their meaningful contributions, it is not likely in the short run that they are going to get enough traction to move the needle for the group on their own. I think the opportunity is certainly going to come from their contributions, but will come from many others throughout the organization. As far as Berkley Edge, they are up, they are running, and they are off to a good start. But just to level-set expectations, it was a standing start that they begun from.

We are very pleased with the progress that they are making. And we think it is an outstanding group of people that are going to be of value to distribution, customers, and certainly to capital.

Operator: There are no further questions at this time. I will now turn the call back to Mister Rob Berkley for closing remarks.

Rob Berkley: Hey, Alexandra. Thank you very much for your assistance this evening. Thank you to all who tuned in for, again, your interest in the company and the questions. As I hope people would have gathered, by any measure a very solid quarter and perhaps equally, if not more, exciting, how well positioned the business is to continue to grow, prosper, and generate value for stakeholders. We look forward to speaking with you over the summer. Thank you very much. Have a good evening.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

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