Q3 2023 Earnings Summary
- WRB's CEO expects the earnings power of the business to grow for the foreseeable future, benefiting from both underwriting and investing activities, with momentum expected to continue. ,
- Momentum in premium growth is building, particularly in the insurance segment, with no indications of slowing down as per overall outlook.
- Successfully obtaining rate increases in key lines such as general liability and property, which is improving margins and capitalizing on market opportunities. ,
- Increased exposure to property lines may heighten catastrophe risk. The company is experiencing significant growth in property lines, with the "lion's share" of short-tail lines being property.
- Rising reinsurance costs could pressure profitability. The company acknowledges that reinsurance costs are up and is attempting to pass these costs onto clients, but it may not fully offset the increased expense.
- Professional liability and D&O markets remain highly competitive and challenging. The company notes that the professional liability sector is "pretty challenging" and that D&O continues to be "very, very competitive," potentially limiting profitability in these lines.
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Premium Growth Outlook
Q: What is the expected trend for premium growth?
A: Rob Berkley indicated that momentum is building in premium growth within the insurance book, and there's nothing seen today that's going to "take the wind out of that sail". He suggests that growth will continue in the fourth quarter and into 2024. -
Social Inflation and Loss Cost Trends
Q: Has Berkley's view on loss cost trends changed recently?
A: Rob Berkley stated that social inflation continues to be a challenge, but with rate increases excluding workers' comp of 8.5%, they are in a comfortable position to absorb whatever the inflation trend sends their way. He also mentioned generating a 20% return, so there's no need to "push the envelope". -
Approach to Rate Increases
Q: Why continue pushing for rate increases despite strong returns?
A: Berkley emphasized the need to keep up with loss cost trends due to ongoing social and medical inflation, stating that "we're just going to keep pushing". He noted that while economic inflation may be slowing, "there is no evidence that social inflation is abating at all". -
General Liability Trends
Q: Are you seeing a rehardening in general liability?
A: Berkley attributed the acceleration in general liability to a combination of rate increases and benefits in their E&S and specialty businesses. He highlighted increased discipline in the market and a growing preference among clients and distribution partners for carriers they can "have confidence in". -
Paid Loss Ratios and Reserve Adequacy
Q: How do paid loss ratios reflect on older accident years?
A: Berkley explained that growth benefits are largely driven by charging more per unit of exposure. With an average duration of loss reserves around 3.5 years, he believes investors should have comfort in how challenging years are developing.