Morning. Welcome to, I guess, the third session of the morning here at the RBC Global Financials conference. We're fortunate this morning to have Rob Berkley and Bill Berkley of W. R. Berkley Corporation to join us here this morning and talk about their business. We thank them both for joining, and we thank all of you who are on the other end of the screen. It's still a little odd not being able to look out at the audience and see all your smiling faces. Hopefully wherever you are, you got a good, clear view of the three of us. Couple housekeeping things quick. I'll allow these guys to say some opening words, but if you have any questions, then type those into the box to the left of your screen. We'll get to those in the order that they pop up as we go along. I'll throw it over to you, Rob, to see if you want to make any opening comments, and if not, then we'll jump straight into a few questions. Thank you, Mark. I'll have a comment or two, and happy to address any questions you or others want to take, but maybe before we get rolling, if you wanted to open up with a comment. I just thought I would start by telling people that this is a really exciting time for us. Frequently, when you have these kinds of meetings, it's painful because there's not much to say. Yes, it's going to be like last year or the year before, but now we're actually in a time that's exciting. It's going to be in a time when there's a real opportunity to do terrific. I can't tell you if it's like the period around 2000 or the period around 1988, but it's really on the base of an extraordinary period. We've had increasing rates. We're about to have an increasing economy. We're having rate on rate for the first time in a long time, and not just rate on rate, but rate on rate where the rate is exceeding social and economic inflation by a substantial margin. We do have lower interest rates, but it's being more than offset by the kind of underwriting margin that's going to be available. We see 2021 and 2022 as extraordinary years, and maybe even a little past there. When people ask me what was the biggest mistake I made in this 50-odd plus years I've been in the business, I always tell them it was 1988. In 1988, we looked back and said, "How was 1986?" We said, "Oh, it was a pretty good year. We had a loss ratio in the Admiral Insurance Company sort of around 40. It's pretty good." By the time we got to 1988, people were cutting prices, I said, "You know, I'm not sure I want to grow aggressively." That was my big mistake because it ended up that in 1986, the loss ratio for Admiral was in the 30s, not the 40s, not the high 40s, but the mid to low 30s. I missed writing probably hundreds of millions, if not billions of dollars of business in 1988 and 1989 because I thought it was going to be unprofitable. Knowing how much money you're going to make is a really hard thing, you have to pay attention because when we look at numbers and when actuaries look at numbers, you're always looking in the rearview mirror, and that can oftentimes be distorted. We spend a lot of time trying to be sure we understand what the numbers are. It's why we don't, hopefully, have huge redundancies to release because in the past, we've been consistent because we wanted to get the numbers right, we still want to get the numbers right. We're going to continue to work on that. At any point in time, getting the numbers right is hard, though, in the short run. This is a great opportunity. Looking ahead, we're incredibly optimistic that this could well be one of the very best years in the company's history. Go ahead, Rob. I think you're fine, Mark. Please, Mark, go ahead. We're happy to take the conversation anywhere you like. Well, I was going to lead off with the first question, but I'm actually going to lead off with the first comment because back when I was a freshly minted junior, the last time I heard you, Bill, talk about 1986, was sometime early in 2001 when rates were just starting to turn, and I think you drew the same kind of analogy of you're at the beginning of a hill and you didn't know how high it was, but you knew it was going up. It's interesting to hear you speak on that again because the last great favorable pricing cycle was, that many of us know, was the early 2000 cycle. I do think that there's a lot of characteristics of this cycle that at least if they're not the same, they at least rhyme a little bit. Hopefully it will play out in just that way. At any rate, my first question actually, we're a year now from the start of the pandemic. As you think about your business, as you think about the P&C industry from a broader perspective, what impacts have you faced? What do you think has changed temporarily? What do you think may have changed on a longer-term basis? Maybe I'll jump in there with a couple of initial thoughts, Mark. I think without a doubt, some of the obvious things that have changed are how people are working, how we're engaging with clients as everyone has been working in a remote environment. I think some of the other, perhaps more changes that will have a longer-term impact are how people are thinking about these type of systemic exposures. Without a doubt, the insurance industry, amongst others, and perhaps society in general, never fully contemplated what it would be if one faced a situation such as COVID-19 or a pandemic like this. I don't think that you are going to see the industry reverse course off of that anytime soon. As far as how we transact, how we interact, clearly the industry, for the most part, has been able to operate in a more digital manner than it was before, particularly with people working from their kitchen tables. While I think that has stood up reasonably well and there's been a lot of chatter about people continuing to work remotely long term, certainly this organization, our expectation is that people will be back in the office. We do think it is still a relationship business, and ultimately, while the screen is better than the phone receiver, I don't think that that's going to fully replace how people engage. Yeah, it's definitely been a lot of changes for everybody in that regard. You bring up a good point in terms of just how people are assessing risk. It reminds me of 2001 when people reevaluated terrorism and things like that. I think we've all, in all of our various ways, have grown a much more healthy respect for viruses and colds and flus and how that all can impact us both individually and societally. You talked about on the fourth quarter call just the pricing that we're seeing in the market. Bill talked about his enthusiasm going forward. Can you just drill down into that a little bit deeper? Where are you seeing the greatest need for rate? Are there any places that are starting to get adequate? Just take us behind the curtain to the extent you're able to without giving away the family store, about where the pricing environment is most robust and where the opportunities are. Sure, Mark. Well, I think as far as how the hardening of the market will this momentum continue, by and large, we do not see it eroding at this stage, and we expect it will continue. The drivers that were the initial catalyst, maybe to just name a few, particularly loss cost trends, specifically with social inflation. Number 2, you have the low investment return environment driven by low interest rates. Number 3, you have a reinsurance marketplace that seems to be waking up, recognizing they probably have lost a lot of capital over the past several years, and they need to think about price adequacy in a different way, then that's obviously having an impact on the overall cost of capital. One of the interesting things about the marketplace these days compared to a couple of the historical mile markers that were referenced earlier, back in 2001 into 2002, let alone 1986, back then you saw product lines marching much more in lockstep when you think about how they made their way through the cycle. At this stage, different product lines are at different places, if you will, in the cycle. Workers' compensation in the U.S. being the big outlier, if you like. Other than workers' compensation, as far as the commercial marketplace that we participate in, every product line is getting rate increases that outpace loss cost trend based on our measurements and our metrics. Workers' comp, again, an outlier. Where have we seen the greatest rate increases? We've seen big rate increases in public D&O. We've seen big rate increases in excess liability across the board. I would tell you that one should not leap to a conclusion that just because you got the greatest rate increases, that means that's where you're going to have the greatest margin. There are parts of, for example, our portfolio where we feel as though the market will bear more rate increase or the market will bear less. We have a view as to what adequate rate is, and that varies by product line, by territory in some cases. Certainly, excess liability has had opportunity. Commercial auto has been on a roll for a while. Property lines, we have seen rates moving up for a couple of years now. While I think there are some folks that thought that maybe property had peaked, and while there were still perhaps rate increases to be had, they were going to be slowing, the events recently in Texas clearly may have an impact on that. By and large, we are very optimistic as to the rate environment for 2021. The one outlier, again, which has been workers' compensation, we continue to see early evidence that would suggest that that product line is in the early stages of bottoming out, and we are expecting to see by the time we get to the end of this year, maybe early next year, rates moving up. Just one bit of an outlier there, perhaps, is California workers' compensation, which from our perspective remains notably competitive and is probably a pace or two behind the broader comp market. I think I'd like to just add, Mark, one thing I think it's really important that people understand, too. A lot of people talk about the new external capital coming into the business. In the scale of the marketplace called property casualty insurance, it's like a drop in the bucket. The storm in Texas, I don't know if it's going to be $25 billion or $50 billion of a loss, but that's probably five or 10 times the amount of capital that people are talking about coming into the industry. This is a huge business, and all the capital together that's come in is just not significant to the volume needed as this business starts to tighten up. We're not particularly concerned with new capital rushing in. It's very marginal. Likewise. While there certainly has been some capital formation, it's been nothing like what we saw in 1986, 1987, and in 2001 and 2002. In dollar terms, it might've been similar amounts, but as you said, the size of the industry capital base is so much broader that a $20 billion of new money or whatever just doesn't move the needle like it used to in, say, 1986 or 2001. Definitely a good point there. Rob, you were mentioning workers' comp, and it's a question that we've been getting a lot just in terms of two things really. One is just kind of the general why it's lagged and what would make it turn. Likewise, is there concern of as the economy begins to reopen and so forth, concern that there could be some acceleration in loss trend frequency there or potentially severity just as people get back to jobs that they're unfamiliar with or less experienced people hired to do jobs? Maybe taking the first part of the question to start with, Mark. I think what will turn the market results, bad results, when all of a sudden that will force people to pause, and they will become more disciplined as a result of the underwriting profitability dramatically eroding. We certainly are sensitive to the second point that you were making, and that has to do with frequency. We think severity trend has continued to remain on the trajectory it's been, where it keeps getting to become more and more of a challenge, which quite frankly, just to digress for a moment, it's a wonderful thing through the lens of society because science and technology is getting better, so people who once upon a time may have not had a lot of options or may have not lived, the science, the technology, the medicine has gotten to the point that they can offer better solutions and better outcomes. That comes at a cost, and a lot of that is what's driving the severity. The frequency piece, from our perspective, there may be some market participants that are not fully contemplating when the world opens back up and once the pandemic is behind us, and that frequency trend moves more towards a more traditional norm, what is that going to do to the overall loss trend? To a certain extent, the benign frequency trend that we have been experiencing more recently is subsidizing that component of severity trend. That's something we're paying a lot of attention to, and we think that there are some folks that may not be, if you will, peeling a few layers back and decoupling that overall loss trend and appreciating when frequency returns to a more traditional norm, what that will mean. That's a good observation, definitely. That was the other thing I learned long ago is that these cycle patterns definitely repeat themselves, and those who don't learn from the past are kind of condemned to repeat it. Good observation. You mentioned the high losses that are likely to have been sustained in Texas. I don't expect you to give any numbers unless you'd really like to. We have seen a pattern of relatively higher catastrophe loss totals over the last several years. I know catastrophe isn't a big part of your business, but how has your thinking changed about catastrophes in general and property exposure in particular, just with the pattern of claims evolution we've seen there? Mark, our view, whether it's property or any other line, is it's all about risk-adjusted return. By and large, more often than not, we don't think people get paid enough for the property exposure. The leading reason for that, in our mind, is people do not appropriately incorporate volatility as a component of when they're assessing risk and return. Look, clearly the rates have moved up. There's reason to believe that the rates are going to be moving up further on the heels of what has occurred in Texas. As we see the rates becoming more adequate and attractive, you'll see us participate, perhaps to a greater extent. Certainly, we grew our property book or our exposure to property considerably back in 2002 through 2004, and then it began to tail off over several years after that. Could it be a similar situation? Without a doubt. Do we write property today? Yes. Do we have the capacity to write considerably more under the right circumstances, i.e., right market conditions? Absolutely. We are certainly paying close attention to that. Again, for us, it's all about risk-adjusted return, and obviously, we think about volatility perhaps a little differently than others do. Okay. Thanks for that. I'm just going to remind the audience again, if you have any questions, enter those into the Q&A box, and we'll get those passed along to the group here and addressed. In the meantime, I'll go on with another one that I had had. Rob, you had talked about just it was a slide you actually put up at AFA, in terms of expected loss ratio improvement from a certain amount of pricing increases, how the role that changes in terms and conditions play. Can you just talk through on loss trend and change policy language, how you're thinking about how that enters into the underwriting decision, how that enters into the pricing equation? Clearly, when you think about trying to assess one's margin, in some ways, the rate piece is the easier piece to quantify. You do the math, you think about how much rate you got, you think about what loss trend is, then you can sort of back into what does that mean here for your combined ratio and the respective components of that. When it comes to terms and conditions, we all know they have value, it's not as easily quantified. That is particularly the case in the specialty market and even more the case in the E&S market. It's one of the reasons why we, as an organization, historically, and we believe it'll continue to be the case, do disproportionately well compared to many in a firming market. It's because much of what we do is in the specialty space, and we are one of the larger E&S markets. When you're in a specialty space, in the E&S market in particular, you have more opportunity to affect change with terms and conditions, especially in the E&S market, because you do not have filed forms. Long story short, depending on the product line, and we try very hard to try and quantify this when we think about our loss picks, without a doubt, my general observation is that change in terms and conditions for our non-admitted and to a certain extent our specialty businesses, those have as much of an impact, if not more of an impact, than just the pure rate itself. Changes in deductibles, reducing or constraining certain types of coverage, a whole host of other levers that we have to pull and push, that again, I believe, and I think our history would suggest, has a greater impact on our profitability than just rate on its own. Yeah. Truly, it's like the, you remember they used to call the 7UP the Uncola. It's like the un-rate increase, right? It doesn't show up on the top line. It shows up on what you didn't lose in the expense line because it was a loss that didn't happen, or it was a loss that was smaller than it might would've otherwise been. Absolutely. Absolutely. Again, that is why this company tends to outperform because if you look at the part of the market we participate in, it's where you have the greatest opportunity in a firming marketplace. Let me turn over to, I've got a couple of questions that kind of go together here from the audience. The question revolves around two things that are kind of interlinked. One is, at what point, as interest rates start to rise back up, does that then start to have a negative effect on how you're thinking about pricing? Similarly, since a lot of the interest rate move that we have seen is in response to potential inflationary forces building up in the economy, how does that factor in? Maybe it's an offset to that factor. Just how do all those pieces kind of relate together in the pricing decision? We think about when we're coming up with our loss picks, which obviously goes hand in hand with pricing, we are clearly spending a lot of time thinking about inflation. What will the impact of inflation be over the life of that reserve? It's not just at the time of the claim, but what is it that you're going to have to be writing the check for? What's sum, and what is the impact of inflation? There are two kinds of inflation, both of which we are very laser-focused on. One, which I'll refer to as financial inflation, if you like, and the other one being social inflation. We've been through a period of time where both of those have been reasonably benign. More recently, we have been seeing social inflation rearing its head. We started talking about it, I don't know, two to three years ago, I think a lot of people didn't really follow what we were saying or agree with it. I think more people have started to come around and it's coming into focus in their lens as well. The financial inflation piece, our general view is, given the level of economic stimulation amongst other things, it's likely that you are going to see more financial inflation over some period of time. We're looking at both of those pieces and we are actively factoring them into our loss picks. Yes, we come up with them when we come up with our original picks through our budgeting process, we are revisiting those. We are watching it daily, we are actively revisiting it every 90 days. Thanks for that. That's helpful to understand. I guess while we're on the topic of interest rates, you guys mostly, I think it was the second or the third quarter, you made the specific public view that you were going to focus on shortening up some of your durations a little bit. Take a little less interest rate risk on the balance sheet, perhaps at the cost of a little bit of current income. Things are starting to turn a little bit. Maybe just talk about how you continue to regard that decision and what it means for investment returns and book value growth over the near term. I think the comment that you may be referring to, Mark, and I'm not sure, I think this is one, is we talked about our duration, which we have held quite short for an extended period of time relative to our liabilities. It was just a conscious decision that we made because we were of the view that you didn't get paid enough to go out on the yield curve. We've seen other folks being willing to reach for yield, compromising on quality, taking the duration out. When the day's all done, when we looked at if you saw interest rates move up, call it 100 basis points, what's that going to mean for book value if we had taken the duration out a year further, versus how much are we giving up on the investment income side on a quarterly basis? I think at the time when I made the comment, we would give up about $160 million of book value if we took the duration out from 2.3, 2.4 years to 3.3 years if rates move up 100 basis points. On the other hand, we right now, by having that discipline, it's probably costing us about $5 million or so a quarter. We think for the moment that trade made sense. As far as taking the duration out, we're watching the rates very carefully. I don't know, you may have some other thoughts that you want to Well, I think that it's not just duration, it's the quality of the portfolio. I think that you're seeing a steepening of the yield curve. You're seeing lots of opportunities for marginal investment grade investments that tempt people to give up on the quality. While there's no question the economy is going to do better, at least initially as we come out of the pandemic, there's a lot of damage that's going to be done and has been done, and clearly there'll be a lot of risk to financial inflation. We just think it's a cautious approach and, for the moment, it's not something you're going to come back from. There are good opportunities in a business like ours where we don't need short-term liquidity. We have lots of cash flow and plenty of short-term liquidity. We have the flexibility of giving up instant liquidity and getting slightly better yields. Beyond that, you've been extremely successful, particularly in recent years, with a lot of the real estate and non-traditional investments that you've pursued. You've always said the goal is to build book value and growth over time, not necessarily in any given quarter. That philosophy marries up very tightly. We continue to be able to do that, the greater the differential between those two methods of investing, the more worthwhile it is for us to do what we do. I think we're just about out of time. Any closing remarks or any closing comments you'd like to make? Go ahead. Maybe just going back to some of the comments from earlier, Mark. There's the expression that my father likes to use that even a broken clock is right twice a day, perhaps that applies to the insurance industry. This is one of those moments where the clock is right, and while the insurance industry may not get it correct oftentimes, this is one of those moments when the planets and stars are all lining up. People, I think, have observed the momentum that has been built over the past several quarters. I think that a lot of those higher rates have yet to fully earn through. I think the trajectory of rates moving upward is going to continue. I think that there is a lot of runway in front of us as far as opportunity. In addition to that, I think it's important to keep in mind, Mark, the point that was made earlier stemming from one of your questions. In a firming market, all ships rise, but some ships rise more than others. A lot of that has to do what part of the market you focus on. If you're primarily a standard lines player, yes, your ship will rise, but it's not going to rise as much as your specialty player. If you're an E&S player, you're going to see your ship rise tremendously. We're one of the largest specialty players. We are one of the very largest E&S markets, and quite frankly, these are the type of market conditions that this business is built to succeed in in particular. We are very enthusiastic. We think we got a lot of opportunity in front of us. I think over the next couple of years, it will be a very rewarding experience for all stakeholders. Well, I think that's a great place to end it. We thank you very much for sharing your time with us this morning. Thanks to the audience for your interest and participation. With that, we'll close down the session so everybody can get to their next one. Thanks very much. Thank you.