W. R. Berkley Corporation (WRB) Q3 2026 Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for joining us. And welcome to the W. R. Berkley Corporation Third Quarter 26 Earnings Call. This conference call is being recorded. After today's prepared remarks, we will host a question and answer session. Please raise your hand. If you have dialed in to today's call, please press 1 to raise your hand. And 1 to withdraw your question. 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, believes, expects, or estimates. We caution 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 10-K for the year ended December 31, 2025 and with our filings made with the SEC for a of the business environment in which we operate 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. I would now like to turn the call over to Mr. Robert Berkley. Please go ahead, sir.

William Robert Berkley: Chrislyn, thank you very much. And good afternoon to all. Welcome to our Q3 call. Thank you very much for your time. Thank you for your interest in the company. Along with me on this end of the phone, you all Richard Mark Baio, our Chief Financial Officer; and we are going to follow our typical agenda where I am going to offer a couple of very brief macro observations, then I am going to hand it over to Richard to do the heavy lift. And he will walk through highlights from the quarter. And I will trail behind him with a few more observations on our quarter and then we will be pleased to open it up for Q&A. So before Richard runs with it, I think it goes without saying it was another strong quarter for us, but that is not really where I wanted to focus my comments at the moment. We can get to that in a few minutes. I really wanted to spend a bit of time just taking a moment to acknowledge the pace of change. And we see a great deal of change certainly in the-- but we are just seeing a great deal of change in society overall. The trajectory of that change is steep. The velocity is increasing. And before we get into the details of how the technologies that are driving this are being adopted by us, Maybe more macro, it is something that we are looking at as to how society is evolving and the risks that we are potentially taking on, how they are changing. Fundamentally, our value proposition to society is helping it manage risk. And our value proposition to capital is, yes, accepting that risk from society but doing it in a controlled manner. From our perspective, we are seeing a variety of the parts of the economy that face a great deal of risk evolving considerably. There has been a lot of discussion around autonomous vehicles, what does that mean for private passenger auto? What does that mean equally for commercial auto? And what will the consequences of that be? How will those risks remain within the auto space How will they potentially be shifting over to products liability and other parts of liability? In addition to that, we can all see it coming AI, and in particular, its relationship with robotics. What will that mean for the workers' comp lines, and how will that unfold? These are the types of questions that we and presumably others are actively grappling with and trying to make sure that we are not just thinking about them for how we position ourselves going forward, but ensuring that we have the knowledge and the expertise to underwrite and accept these risks in a thoughtful and controlled manner. In addition to that, technology obviously is in this driving the broader economy, but it is even having an impact on the sleepy insurance industry and how we operate Fortunately for us as an organization, my colleagues many, many years ago recognized the importance of data and how that role was gonna become ever more greater. We have been on a data journey for many, many years at this stage. And fortunately for us, we are reasonably well positioned as we see many of the technology tools that are being brought to bear AI related in particular, data is the fuel that drives those engines. When we think about some of these tools and how we are utilizing them, we are finding ways to apply them to a variety of activities within our organization as we have discussed in the past. At this stage, the advantages are primarily coming or rearing their head in a manner that some might equate to speed. We are able to intake and respond in a more, speedy manner than we could in the past. This certainly applies to the underwriting activities. As well as the claims front. That having been said, while we are making our way well up that mountain, the next mountain that is before us is not just the benefits of speed, but the insights that we will be enjoying or further insights that we will be enjoying as it relates to decision making. From our perspective, this, without a doubt already is a competitive advantage and will continue to become an increasing competitive advantage for us. So maybe to put a little bit more data around that some of the activity that we are doing on the intake side is allowing us to become more efficient to the tune of 20% plus. And we are also seeing opportunities on the claims front as we have flagged with some of you in the past. While we are a specialty writer and much of our claims activity is highly complicated. At the same time, more than 50% of our claims are settling for $5 thousand or less. Which would invite the idea that we should be able to have a lower and lower human touch when it comes to this. So long story short, I understand that we are here to discuss the quarter. Richard is going to lead us through that part of the discussion momentarily. But given the world that is changing at an ever increasing pace, I thought it was worth noting our efforts to make sure that we are appropriately keeping up with that in both how we engage with the market, how we think about risk, and how we operate day to day. So with that, Richard, if you would, please.

Richard Mark Baio: Of course. Thanks, Robert. Appreciate it and good evening, everyone. Our strong results in the third quarter were driven from both underwriting and investment performance. Contributing to an annualized operating return on equity of 18.8% for the quarter and over 20% year to date. Record third quarter underwriting profit of $296 million combined with double digit growth in the core investment portfolio resulted in operating earnings of $456 million or $1.07 per share. Drilling down first into underwriting income, the current accident year loss ratio excluding catastrophe losses improved 40 basis points to 59.5% along with a relatively flat expense ratio of 28.6% brought our accident year combined ratio ex cats to 88.1%. Pretax current accident year cat losses $86 million or 2.7 loss ratio points. Despite almost twice the number of storm events named by PCS, quarter over quarter, our cat losses only increased $7 million or 20 basis points. That brings our calendar year combined ratio to 90.8% in the current quarter. Both of our segments reported terrific underwriting results in the third quarter. The Insurance segment's current accident year combined ratio ex cats of 88.3% improved 1 point over the prior year representing growth in the pretax underwriting income of 10.6% to $238 million The improvement was primarily attributable to changes in the mix between our 60 businesses and improved non cat property losses. As it relates to premium production the Insurance segment's gross and net premiums written grew 4.9% to a third quarter record of $3.6 billion and 3.2% to a third quarter record of $2.9 billion respectively. Our Reinsurance and Monoline Excess segment reported a very strong current accident year combined ratio ex cats of 86.9% resulting in pretax underwriting income of $58 million As the reinsurance market remains competitive, we have been steadfast in maintaining our underwriting discipline. Accordingly, you will take note that the segment's net premiums written declined 11.6% to $369 million driven by casualty and to a lesser extent property. Turning to investments. Pretax net investment income increased to $384 million in the current quarter driven by growth in the core portfolio of 12%. Income from fixed maturity securities increased 10.3% over prior year's quarter, attributable to both higher domestic yields and a larger base of invested assets. Income from investment funds was $2 million and as shared during prior calls can be inconsistent quarter to quarter. On average, we expect each quarter to generate between $10 million to $20 million And as seen year to date, we are above the high end of that range. The duration of invested assets has increased to 3.3 years at the end of the third quarter with a very strong credit quality of AA- remaining below the average life of our insurance reserves. And finally, as of 9/30/2026, stockholders' equity was more than $9.6 billion relatively flat to year end 2025. Reflecting significant capital return to shareholders of $729 million year to date and an increase in unrealized losses on investments of $800 million due to rising interest rates. We generally hold our fixed maturity securities until they mature, and as such expect the unrealized loss on investments to reverse favorably into stockholders' equity. Robert, with that, I will turn it back to you.

William Robert Berkley: Richard, thanks. Anthony, how are we on time? I do not like to use up all the time by babbling. 05:15. Okay. Good. So just following on Richard's comments a couple of observations. First off, the comment that people would have perhaps picked up in the release under the highlights as well. Comp, the rate popped back up a little bit to 4%. Also, would offer the observation that the renewal retention ratio it just does not move. it is sitting at 80%. So, hopefully, that gives people insight that the book is not, churning, so to speak. A couple of other observations in this people had a chance to flip through the release, would have seen on page 7 going through a couple of the different product lines there. The other liability, yeah, it is up to shy of 4%. People might say, oh, well, they are just churning it with, the rate That would be not the right view. Actually, there is a bit of a shift that is going on there. To smaller accounts that is by design no surprise. There tends to be a bit more competition with larger accounts. We like the margin in the smaller accounts. And we have the platform to be able to handle it efficiently Shorter tail, we lump a lot in there, and that could be confusing as well. Included in that is commercial property, which is down considerably. On the other hand, we are pleased with the continued growth that we are seeing in our private client business. On the personal lines front as well as our A and H business. On the auto front, again, you may be scratching your head looking at 5% Please understand the exposure is coming off at this moment at a very reasonable healthy rate. So speaking of rate, the rate increases that we are taking are a multiple of that with our determination and commitment to keep up with trend. Comp, I would just. The only thing I would call out there is we are pleased to see the bottoming out and incremental firming in California. The rest of the nation is still trying to, keep up, but they are lagging. Professional liability, as we have talked a little bit about in past. D and O is in the process of bottoming out. That having been said, there are several pockets within the professional space that we find very attractive. And, no, I am not going to go into the detail of where we find things attractive Richard touched on the reinsurance front. I guess there is no point in crying any further over the spilt milk, but when the day's all done, as you have heard us talk about for some number of quarters now, a dissatisfaction with market conditions within casualty reinsurance. And property Quite frankly, we are waiting with bated breath, not in a happy way to see what happens at 1/1 and what will follow And that, in all likelihood, will prove to be a challenging time. A little bit on the forward looking front, so taking advantage of the safe harbor, from as best as we can tell, we think the insurance business is going to be able to continue to grow all in following the unforeseen event. At mid-single digits or better. And we think the reinsurance business is likely going to continue to shrink for the foreseeable future at a 10% rate between 10% to 20%, and that is fine with us. that is just the realities of the business, and we accept that. Richard touched on the expense ratio. I would tell you that I think we sit in a pretty attractive place The utilization of technology along with other disciplines that we are employing, I think, are helping us manage that. I would tell you that given the amount of business that we produce through the wholesale channel, and the acquisition costs associated with that, I think it speaks well to the work that my colleagues in particular have done to manage the expenses. So on the underwriting front, from my perspective, it was basically right down the middle and exactly what we would have anticipated. I would tell you that if you look out at least through our lens, some of the shorter tail lines property in particular over the coming quarters and perhaps next couple of years. Will prove to be particularly challenging. And as we have discussed in the past, the liability lines tend to have more staying power, at least based on our historical experience. Quickly shifting over to the investment portfolio. We did have a little bit of noise in the funds as perhaps people had taken note Richard touched on that as well. Our expectation as he flagged is sort of $10 million to $20 million a quarter million to $15 million a quarter. It was a little shy of that. We can get into more detail if people want. Later on, but, we expect it to return towards a more typical historic norm. I think the only other piece that is worth flagging, and we have talked about in the past as it relates to the investment portfolio, but I do wanna pull it back to the center of the radar screens here is the domestic fixed income portfolio which is where the growth has been and it continues to be as it relates to our overall portfolio. The domestic portfolio sits at just inside of $24 billion Richie. Is that correct? And today, it has a book yield of about 4.7% or so. Our new money rate today is probably between 80 and 100 basis points above that. In addition to that, you would have taken note that, yeah, the duration nudged out incrementally from 3.2 to 3.3. But life of our loss reserves is just a hair inside of 4 years. So we have lots of room and we will be thoughtfully taking advantage of that room to push out the duration and capture the yield environment. In addition to that, just as a data point as far as how the portfolio rolls over, The portfolio every year shortens if it is just if you do not do anything, this left to its own devices, NAST every year shortens by just shy of a year. So the point is that the combination of how we have managed duration in addition to how the portfolio rolls over we are particularly well positioned to capitalize on the rate environment that we see before us today. And we have every intention of continuing to do that. So that is sort of the state of play. I think we pause there. Richard, did you have anything else you wanted to flag? And we can open it up for Q&A, please.

Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. You would like to ask a question, please raise your hand now. If you have dialed in to today's call, please press 1 to raise your hand. And 1 to withdraw your question. Your first question comes from the line of Rob Cox with Goldman Sachs. Your line is open. Please go ahead.

Rob Cox: Hey, Robert. Good afternoon. Good afternoon. Hey. So I wanted to go back to some of the comments you made last quarter. Around potentially revisiting recently favorable claim trends. Just based off of the comments, from Richard there, it seems like underlying loss ratio improved a good amount this quarter. I am just curious if you could share with us any further detail on the core loss ratio, and maybe if you have any early insights into how you are thinking about the design loss ratios for next year.

William Robert Berkley: So as you can appreciate, it is that we are looking at very regularly. And continuing to reflect and refine as we see appropriate. I would tell you that as far as trend goes with auto and auto related, being perhaps the exception, by and large, other product lines. We are seeing trend again, early days, starting to quiet down a little bit. So it would be premature to declare victory at this stage But aside from the auto line, we are seeing signs that the steepness of that trajectory is perhaps abating somewhat or certainly not becoming ever more steep. So that is something, Robert, that we are taking into account. To the extent that we are in a position to give you some math to put to that comment. Not really at this stage, That having been said, we will have to see how it unfolds. As far as the specifics in the quarter, it was a combination of non cat property on the risk front running well. Thanks to the thoughtfulness of our colleagues and their discipline. And also, we are gaining as I just alluded to, in some of the more recent years, a bit of incremental comfort on some of the liability lines.

Rob Cox: Got it. that is super helpful. And then I just had a follow-up on reinsurance. You guys are exercising cycle management there. Can you just talk about the ROEs you think are embedded in some of the business that you are passing on? And just any general way to think about rate adequacy, especially from a property perspective?

William Robert Berkley: Well, I think that at 1/1, it is going to be very telling around the property front. So there is not a huge amount of visibility at this stage. We are gonna have to see what comes of it. Certainly, we are hearing commentary that people are expecting rates using a very broad brush to be off between 10% to 20%. So, you know, that certainly takes a lot of the fun out of it for many That having been said, for us as an organization, we buy more reinsurance than we sell. So we have a pretty good hedge on that front. But we will have to see how it unfolds.

Rob Cox: Thanks, Robert.

William Robert Berkley: Thank you.

Operator: Your next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.

William Robert Berkley: Hi, Elyse.

Richard Mark Baio: Hi, Elyse.

Elyse Greenspan: Good afternoon. Hi. Thank thanks, Robert. Good evening. In the past, you were talking about. That you guys would probably in insurance, right, give up some on price for growth. Right? You know, in the quarter, right, you said price got marginally better And it sounds like you guys are guiding, right, for premium growth that is kind of more or less consistent with the second quarter, right, I am sorry, with the third quarter, you said mid-single-digit from here. So Yep. Has anything been impacted for you around giving up price and growth changed?

William Robert Berkley: I missed the second part of that. I. The-- can you repeat the last sentence?

Elyse Greenspan: What Elyse? I just wanted to know if anything related to your view about price Sorry. I wanted to know if anything related to your view about price and growth, I think, has changed since last quarter.

William Robert Berkley: No. The answer is that we looked at it with a very, very fine comb. And from our we are looking at the rate need by product line, by territory. And as far as the rate moving around, between Q2 and Q3, that certainly mix can have a play-- a role in that. So, again, from our perspective, there are certain pockets that we find particularly attractive Generally speaking, we think it is gonna prove to be a more challenging time for the reinsurance market, hence the comments that we offered earlier. We think that if you look at the commercial property market, that is gonna get uglier before it gets prettier. And we think that much of the liability related lines are going to prove to be the opportunity for the foreseeable. And when we put that all together, that is what led to how we were speculating around growth. Thanks.

Elyse Greenspan: And then I guess my follow-up is on, I guess, the development in the quarter. I think if I backed into it, there was probably, you know, double-digits, maybe within the range of $15 million adverse in insurance. Right? It seems like it was offset by the same amount in reinsurance. So within the. Within insurance, was there anything kind of within certain lines or years that you saw, you know, some that, I guess, drove the movement in reserves in insurance in the quarter?

William Robert Berkley: Yeah. It was primarily a commercial auto both in the primary as well as excess and how that can bubble up to access an umbrella. But that was not the only culprit. But if we are-- it was the majority of it. And as far as the years go, I do not have that, but you wanna follow-up with Karen or Richard, we can try and give you more insight.

Elyse Greenspan: Got it. Thank you.

William Robert Berkley: Sure.

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

Tracy Benguigui: Hi. So capital returns were notably light in the third quarter with modest buybacks and no special dividends. And maybe less growth opportunities like we saw in reinsurance and monoline excess. I would assume you would have undeployed capital. So I am curious are the negative marks on security book weighing down how you are thinking about deploying capital?

William Robert Berkley: No. Okay.

Tracy Benguigui: So was there something else in your calculus that was helping me The answer-- the answer is sure.

William Robert Berkley: I mean, the answer is that you know, we are not of the view that we just come up with a number, and it does not matter where the stop price is, and we just go out and buy stock. We are of. We operate like owners. And we have a view that every now and then you get somebody's algorithm that does something that does not make sense to us? And when that happens, we step in as we see opportunity. Or we will see someone offer a perspective on the company that, for whatever the reason, spreads like wildfire, and that creates an opportunity and then we will look to buy. So do I we still have what I suggested in the past a 9-figure or, excuse me, a 10-figure number of excess capital? Yes. We do. Do I expect that we will continue to be thoughtful in how we return it to the people that it belongs to? Without a doubt. I would suggest that it would be a mistake in my opinion for you to read too deeply into what went on in the quarter.

Tracy Benguigui: We understand that. If I look at your insurance underlying loss ratio, and you mentioned improved 100 basis points year over year, So that now it looks like it is a touch below 60% We have not seen that level in a couple of years. I am not sure if you are willing to answer this, but it might be worth asking. What would it look like under your former framework just to get a sense of how of that improvement was from your new methodology as you are looking at loss picks?

William Robert Berkley: Sorry. Our new-- I missed the part. I am not sure I am fully understanding the question.

Tracy Benguigui: Yeah. What-- Yeah. You mentioned NAF last quarter. Sure. I will just rephrase. You mentioned last quarter that you were rethinking your approach towards loss picks. And I am just curious if you could contextualize how much of that year over-year improvement might have been under a new methodology. If you are willing to answer that.

William Robert Berkley: The answer is similar to what I suggested earlier. The-- a majority of what you were referring to came through as a result of our property risk book or non cat exposed loss activity. So the short answer is no. It would. It would not have a consequential impact. Thank you. It would be incremental. But you go ahead. You wanna add?

Richard Mark Baio: The other point I would just highlight, Tracy, is that when you look at the composition of our portfolio, we have got 60 operating units. Some of those operating units are growing, and others are shrinking at the same time. So the composition overall could shift from quarter to quarter. So it is not inconceivable to see that the accident year loss ratio could move, you know, some number of tens of basis points from, you know, quarter to quarter as well. So that is a business mix, if you will. But those operating units, are very focused on particular things, whether it is an industry, geography, etcetera.

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

Andrew Kligerman: Hey. Thanks, and good evening. Robert, in your prepared remarks, when you were talking about AI, you touched on workers' comp and robotics. And then you did not elaborate. So I am kind of curious, you know, How do you see AI affecting workers' comp over time?

William Robert Berkley: I think that well, the reason why I stopped was because Rick started to yawn. But to make a long story short, I think that the advance advancements in robotics, which much of it is being driven off of AI, not all of it, but much of it. I think undoubtedly is gonna have an impact on the workforce. And I think that there are a lot of people that are viewing AI as just having an impact on aspects of the white collar labor force. And I would suggest to you that I think there is material impact potentially over time beyond that.

Andrew Kligerman: I see. I see. And mean-- meaning that the workforce might decline a little bit.

William Robert Berkley: I think that, ultimately, the labor in this country and around the world is gonna be a challenge as to how quickly we can retool people's skill sets. And there are certain jobs that are going to go away not just because of AI in an office environment, but robotics can play an ever increasing role we have seen it to a certain extent in manufacturing. And I think that there is likely the potential for it to go beyond how we typically think of that. And there could be implications for the workers' comp line as an example. in some parts of the economy?

Andrew Kligerman: Got it. And my follow-up is around casualty. It was interesting. In other liability, it inched up a little bit in insurance. And were it not for commercial auto per your comments, it may have been up materially more. And then in reinsurance at $144 million, it was off pretty sharply year over year. So what is it about the reinsurance area that you do not like, and what are you liking a lot in other liability and insurance

William Robert Berkley: Well, I think what we are not liking as we have chatted about for or commented on for probably not this quarter, maybe years of this stage as it relates to casualty reinsurance or the ceding commissions. We just do not think it makes economic sense. We think that other people are willing to rent their capital for a lower price than what we are prepared to rent our capital for. And we think that there is more opportunity at this moment in time on the insurance front as it relates to other liability. Quite frankly, there is an opportunity for you to be less of a commodity in the insurance space than there is in particularly the treaty reinsurance space.

Andrew Kligerman: I see. And it is pretty broad in other liability? The opportunity.

William Robert Berkley: Look. We are we are for what we have in front of us, and we think that there is an opportunity to continue to grow that business for the foreseeable.

Andrew Kligerman: Thank you.

William Robert Berkley: Yep.

Operator: Your next question comes from the line of Michael Zaremski with BMO. Your line is open. Please go ahead.

Michael Zaremski: Hey, thanks. Good afternoon. First question on the excellent loss ratio in the insurance segment. Richard called out in his prepared remarks, checking it, that it improved non-cat property losses. So fair to assume you are calling it out to hit us, maybe not to run rate the current underlying loss ratio because there was some good guys, and now there are obviously a lot moving parts.

William Robert Berkley: Yes. that is Richard being the measured CFO trying to measure. Manage your expectations.

Michael Zaremski: Okay. Got it. Maybe just switching gears higher level. Good to hear. You know, I guess I will you double down on or, you know, say again, this quarter that you are seeing loss trend maybe come down a bit. Just curious, maybe to prepare us for the overall pricing power environment. Is it fair to think that at current kind of very healthy interest rate levels, the downward slope in pricing power or rate is still probably moving south over the coming years in most lines of business that are longer tail. Look. I am okay. At this stage, excuse me? Excluding property. Just kind of focusing on the casualty lines.

William Robert Berkley: At this stage, we are pleased with the rate that we are able to achieve by and large and how that will maintain or enhance margins. So we feel like we are in a pretty good place. What will that mean for tomorrow? I do not know. Will the reinsurance market continue to be very aggressive and create more competition in the marketplace. Possibly. But I think it is probably pretty thin, in my opinion, to begin with. So, look, the other reality is that different folks taking different approaches to their investment portfolio and to what extent they are able to capitalize on a higher interest rate environment that varies by operation. When we look out at what people's duration are and give or take given their mix of business, how that compares to where they can take duration. I think many of our peers are somewhat stuck. They are not likely gonna be taking it out much farther, and it will be hard for them to reposition. So, ultimately, I think that you should assume, in my opinion, yeah, will property maybe become a bit more choppy Yes. I believe it will. Do I think much of the liability market is gonna be pretty stable for us, and there are some pockets where things could improve a bit here and there. Yes, I do. Do I think the big headline for us is learning with $24 billion that can get reinvested in 80 basis points to 100 basis points, above where we currently are, yeah, I think that is a lot of leverage in our economic model to be had And, also, the comment that I made about how the portfolio turns over and how quickly we are able to take advantage of the higher rates. Just with the existing portfolio, let alone the new cash flow. So do I think everything is perfect? No, sir. I do not. Do I think we have more of a tailwind than a headwind? Yes. I believe we do. And I think given our mix, and how the business is positioned, that will likely be the case for a longer period of time than some of our peers that have a different mix and have positioned themselves investment portfolio wise in a different manner than we have.

Michael Zaremski: That makes sense. And maybe just sneaking 1 quick last 1 in. This past winter, I believe it is on the 4Q call, you kind of talked about Berkley's expanding distribution to kind of more alternative means, for the first time. I think you were referencing some MGAs or MGUs. Maybe now that some time has gone by, you could further unpack or comment on how that is going and whether you expect that to continue to be a bigger source of distribution going forward? Thanks.

William Robert Berkley: So the MGA MGU thing, that is not a cornerstone of our distribution, though we do have some of that. Generally, I think what you are referring to is alternative distribution where we may not be going through traditional distribution. So we have some operations that are taking traditional wholesale products taking it direct to retail. We have some operations that are dealing directly with customer, I think we may have also flagged our efforts around the area or the effort of embedded or point of sale, if you like, where we sell insurance along with another product that is the primary transaction that is occurring. If my recollection is correct, it was perhaps a comment that from our perspective, we are very committed, and we are very dedicated to traditional distribution. We are grateful for those partnerships, and we will continue to support them. At the same time, we are conscious of the fact that in the end, the customer is queen or king. And that we, as an organization, have to be willing to meet them where and how they wish to be met. So we will continue to partner and work in a traditional manner. But as customers may look to be engaged in a different way, we feel it is our obligation to meet them where they want to be met and not turn our back on them.

Michael Zaremski: Thank you, Robert.

Operator: Thank you. Your next question comes from the line of David Motemaden with Evercore ISI. Your line is open. Please go ahead.

David Motemaden: Good afternoon. Hey. Good afternoon. Robert, you had talked a bit at the beginning of this call just some of the changes, the technology and AI you know, is having on some of the risks, out there. I was surprised you did not mention you know, some of the risks that are there from. Or out there now from your clients who are using AI in their own operations and know, potential liability there. I am I am assuming you guys are not are not insuring the labs, obviously, but and I think you guys had an exclusion out there. So I am wondering if you could just talk about how you are thinking about that AI liability risk from your clients using the models and harm as a result of that? And you know, maybe any sort of silent coverage that might be lurking or know, sort of floating around in some of your recent casualty vent. Vintages.

William Robert Berkley: So long story short, we have a view that AI is a real exposure. And our colleagues are running the various businesses particularly on the front end. Are actively grappling with that exposure and making sure that, a, they are understand it, b, they are comfortable with it, and c, that they are getting paid appropriately for it. We have done a lot of work thanks to many colleagues in making sure that we have the appropriate wordings and we are not just taking whatever is being served up by the industry. We need to make sure that it makes sense for what we are doing through our lens. So do I think that there is a severe latency exposure? I think that we are on it, and we are focused on making sure that is not the case. Can I promise you that there is nothing out there, Mike? Absolutely not. But we are working very diligently to make sure the exposure, as they suggested earlier, is identified, understood, and we are getting paid for it. And, yes, we were 1 of the companies that people were bitching about that we had exclusionary language that we were applying when we feel it is appropriate. And quite frankly, we think that is our responsibility. And some people may like it, some people may not, but ultimately, that is part of our responsibility in managing capital.

David Motemaden: Got it. No. That makes sense. And then maybe just switching gears just on the, you know, the insurance growth And you know, you know, the growth, I mean, if I look at it including pump, excluding pump, it decelerated a bit still. Not huge numbers, but it did decelerate despite you guys, you know, You have had the slightly lower rates in the market now for a couple of quarters. Are you guys contemplating to sort of get to that mid single digit or greater additional sort of easing on the pricing front? You know, maybe just comment a little bit on how you are thinking about that.

William Robert Berkley: Yeah. When our colleagues are, you know, forming views of how the next quarter or quarters will unfold. There certainly is a component of that around rate, and, you know, that can evolve over time. Obviously, as we have more data, we are able to refine our view. But, yes, we growth and rate are not 1 and the same, but they are not exclusive of 1 another. In our book.

David Motemaden: Got it. Thank you.

William Robert Berkley: Yep.

Operator: Thank you very much. Your next question comes from the line of Joshua Shanker with Bank of America. Your line is open. Please go ahead.

Joshua Shanker: Yeah. Thank you. If bonds are trading at discount to par because interest rates have gone up. You would not pay par value. You can buy it cheaper in the market. How does it make you feel about your own stock when you have a mark to market loss in the portfolio? Is the stock worth anything less when you are holding that loss?

William Robert Berkley: Is the is the stock work, if anything, less when we have a. An unrealized loss in the bond portfolio? Is that the question, sir?

Joshua Shanker: Are doing different. When thinking about how to repurchase your own stock, in different When the day's all done as Richard position?

William Robert Berkley: So if I am understanding your question correctly, as Richard flagged in his comments, we are holding this stuff to maturity. it is super high quality. The, average quality is a strong double a minus. And as you can see, the duration is quite short to say the least. So when you look at our organization, our portfolio, and you think about from a valuation perspective, no. I do not think that it would be appropriate to discount the bonds per Richard's comments earlier or when you think about what does it mean for book value. that is how we think about it for all the reasons that we just referenced. In fact, I think a different way to think about it is what is the opportunity for this organization to put more money to work at higher rates push out the duration, lock those rates in, and what does that mean for the earnings power of the business? that is how I would suggest would be alternative view.

Joshua Shanker: Mhmm. Do you have the ability to find some capital gains in your system that would cause you to want to offset it with a loss on some of these bonds, neutralize them, and put that capital to work at a higher yield.

William Robert Berkley: There are things that we look at all the time, and Joshua as we have shared with you in the past from our perspective, we think that there are meaningful off balance sheet, if you like, gains or not fully reflected gains that could be had through some of our assets that we hold that we carry at something less than what we believe market value is. So is that something we could do?

Joshua Shanker: You can you can you can liquefy them when you wanted to, I suppose.

William Robert Berkley: That. that is that is correct. Yep. Yep.

Joshua Shanker: And, no, those are just my questions. Trying to understand this time. If interest rates go up higher, how that might make change your investing ambitions. that is so that is what I am trying to get at.

William Robert Berkley: I think you might think about it that given where interest rates are and given what our duration currently is and given the average life of our reserves. there is a reasonable chance we will continue to nudge out that duration and cap And I think the higher you see rates go, the more that opportunity could present itself.

Joshua Shanker: Okay. Thank you very much. Congratulations on the quarter.

William Robert Berkley: Thank you very much, Joshua.

Operator: Your next question comes from the line of Mark Hughes with Truist. Line is open. Please go ahead.

Mark Hughes: Yeah. Thank you very good. Much.

William Robert Berkley: Robert, the Thank you, Mark.

Mark Hughes: Good afternoon. Good afternoon. The smaller account growth you described a little earlier how material is that? what is been the catalyst for that? I assume maybe some of the technology advances you have you have talked about, the improved efficiency. Could you just give a little more on what you are doing with this smaller accounts?

William Robert Berkley: Sure. it is really twofold, Mark, and thank you for the question. First off, larger accounts as the market becomes incrementally more challenging or competitive, Larger accounts, more zeros turn into eye candy, compromise people's discipline. We are a very disciplined shop to my colleague's credit. So that is 1 reality. The other reality is because of the investments that have and continue to be made on the technology front, we are able to be more responsive than many of our peers in turning quotes around. And speed is a huge advantage in the small account space. Slash responsiveness in differentiating oneself.

Mark Hughes: Very good. And then the cash flow in the quarter was down from last year. Maybe just a couple of the key drivers of that decrease in the quarter.

William Robert Berkley: Richard can give you more detail on it, but 1 of them had to be. Do with a very large tax payment. So, you know, I guess, that was like, taxes when you have to pay more. I guess that is supposed to be happy news, but it does not always feel like it when you send the money. And then there were a couple of other items, but Richard can unpack it. Would suggest that I would not read too deeply into it. There are a couple of onetime items, but the tax piece was the biggest. But give us a call, and we can go through a chapter and verse if you like.

Mark Hughes: Appreciate it. Thank you.

William Robert Berkley: Yes, sir. Thank you.

Operator: Your next question comes from the line of Brian Meredith with UBS. Your line is open. Please go ahead.

Brian Meredith: Hey. Thanks. Good afternoon. Afternoon. Hey. So, Robert, you made this comment about being 20% plus more efficient, you know, given some of these technology investments that you have you have been implementing here. Where are we gonna see that in financial results? Are we seeing it already? Is that is that gonna jive you know, drive lower expense ratios, lower LAE? How should think about it from an outsider's perspective?

William Robert Berkley: I think 1 of the ways to think about it is that contributes in our ability to able to get to a lot more small accounts. So we are able to touch, quote, more business more easily than we could in the past. The comment that I was making and perhaps I should have been more specific is our ability to take in submissions and quote them is up by that 20%. So we are getting that many more at bats, if you will. And that is allowing us what historically when we would lose the large accounts, we would struggle to make up for it with the small accounts. Right now, because of this efficiency, we are able to keep up and then some So that would be an example just on the front end of being able to leverage that technology, and we have it in a couple of spots, and I think you will see us push that out more and more across the organization. And we have a few different solutions that are able to do in this. So we. You know, we are always trying to internally through different organizations create a little bit of a horse race, between solutions, and then we call less around fewer and leverage it.

Brian Meredith: James sense. Thanks. And then, Robert, second question, I am just curious. In you may have talked about this before, but this higher interest rate environment we are hearing here, the interest rates are 10 year treasuries are higher than they have been in 20 years. Right? How does that affect your, call it, pricing decisions when you think it? Right? Are you writing to an ROE, and you are pushing that down to your business units? And therefore, can they be a little more competitive if we are thinking that we are sitting here at 5%-plus treasury yields?

William Robert Berkley: The answer is it is an element the equation, but it is not sort of blindly introduced. So we have lots of conversations around with people where quite frankly, the loss ratio or the combined ratio could tick up to a level that maybe some might be able to justify given where interest rates are but we are not willing just to completely open that faucet up. So it is really a combination. Are we conscious of the contribution investment income to make Absolutely. Does it play a role in how we think about loss ratio? Yes. It does. Does it drive it on its own? No. Because when the day is all done, when we write a piece of business, that piece of business is gonna lock up capital for the life of that exposure. And we need to be mindful of that as well.

Brian Meredith: James sense. Appreciate it. Thank you.

William Robert Berkley: Thank you, Brian. Have a good evening.

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

Katie Sakys: Hi. Thanks, Meyer. Hi. Good evening. A follow-up on the answer to the previous question about AI and, you know, where it shows up in financials. I think previously, Robert, you guys had discussed seeing an uptick in the expense ratio this year versus full year 2025. Are you still expecting that to be the case as we get into the end of the year here? Or is a potential for some early realization of cost saves here at the end of the year?

William Robert Berkley: I think the efforts of many colleagues throughout the organization to have the foresight to invest in technology and the data that powers it for some number of years will not necessarily keep the expense ratio undoubtedly from ticking up. But it will help mitigate it from picking up. So as our earned premium may begin to slow due to market conditions, the technology will allow us to maintain a level of efficiency that will contain that expense ratio from moving up as it perhaps would have in the past? It does not mean it will not move. It does not mean it will not move up It certainly does not mean we will not be potentially making other investments that could move it up. But all things being equal, we are well. More well positioned to control it today and even more so tomorrow than we could yesterday.

Katie Sakys: Got it. Thank you. Thank you for the color there. And then perhaps another follow-up to your discussion of robots and their impact on workers' comp. You know, what kind of time frame are we looking at here in your view? And are you guys seeing any early signs yet of a change in workers' comp loss cost trend from automation or other use of AI?

William Robert Berkley: So the short answer is I do not know. You know, change is a funny thing. It does not feel like much changes from day to day. But when you look back over a 2-year, a 3-year, a 5-year, let alone a 10-year period, it is shocking how much things actually change. When you travel to other parts of the world, particularly parts of Asia, it is noteworthy as to how there are certain environments how there are fewer people and more robotic activity that is going on. I would think that over time, we will see more of it here. How quickly that will come to be I do not know. But do I think it is on the horizon and getting closer every day yes, I believe that is very likely. Are we seeing any specific examples impacting the business that we operate in. Not through the lens of our. You know, the clients that we serve.

Katie Sakys: Appreciate the color. Thank you.

William Robert Berkley: Sure. Thank you.

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

Meyer Shields: Good evening. Thanks so much. Hello, Robert. How are you?

William Robert Berkley: Good. How are you?

Meyer Shields: I am doing well. Thanks. Curious as to whether or what the house view is in terms of the historical relationship between interest rates and inflation outside of social inflation because I think that relationship has broken down over the last few years. But as you anticipate higher interest rates, should we expect higher inflation on the noncasualty line, on the short tail line?

William Robert Berkley: On the short tail lines, we have quite frankly been pretty surprised over the past several years how there was not more of an impact on lost cost even during that period coming out of COVID where there was financial inflation. We just did not see the pop Additionally, it is been surprising to us that tariffs along the way did not play a greater role. Do I think that there could be a greater that is more visible tomorrow than today? Yes, that is certainly a possibility. But, you know, quite frankly, with market conditions as they are, it is starting to look. For commercial property, it is rapidly looking reasonably unattractive even without that happening.

Meyer Shields: Understood. That makes sense. And second question, this is more long term thinking, but it seems from some of the news in the reinsurance world, like third party capital is starting to break its way into casualty. And I was wanting. I was hoping to get your thoughts on how that plays out over the next few years.

William Robert Berkley: I think that 1 needs to unpack those models and really look at where the capital is coming from, whose paper it is, who is in control, and really understand particularly some of the ability to force commutation. So I would encourage folks as they are while I appreciate the point and agree that there is more activity, I think 1 needs to unpack it and really read the fine print and understand what type of risk transfer is going on and what type of security is associated with it.

Meyer Shields: Great. Thanks so much.

William Robert Berkley: Thank you. Have a good evening.

Operator: Have reached the end of the Q and A session. I will now turn the call back to Mr. Robert Berkley for closing remarks.

William Robert Berkley: Okay. Well, thank you very much, everyone, for your time and your interest again in the company. From our perspective, it was a very solid quarter. And equally, if not more interesting, that we think the business is particularly well positioned to continue to deliver outstanding returns. We will look forward to catching up with you all sometime in January. Thank you very much, and have a good evening.

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