Good day, welcome to W.R. Berkley Corporation's Q1 2023 Earnings Conference Call. Today's conference call is being recorded. The speaker's 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 you 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 31st, 2022, and our other filings made with the SEC for a description of the business environment in which we operate and 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. Rob Berkley. Please go ahead, sir. Emma, thank you very much. Good afternoon to all participants. Thank you for finding time to join us this afternoon. Co-hosting with me today is Bill Berkley, Executive Chairman, as well as Rich Baio, Executive Vice President and Chief Financial Officer. We are gonna follow our typical agenda, where momentarily I'll be handing it over to Rich. He's gonna run through some of the financial highlights from the quarter. Once he gets through his comments, he'll be handling it back to me. I will follow up with a few of my own observations, and then the three of us will be available for Q&A to answer any questions people may have. With that, Rich, if you would please. Thanks, Rob. Appreciate it. The company is off to a strong start with the Q1 of 2023, despite the significant catastrophe losses facing the industry. Our scale, specialization, and disciplined management approach positioned us well to report an annualized return on equity of 17.4%. Contributions to this performance was reflected in both underwriting and investment income. The current accident year combined ratio, excluding catastrophes, was a strong 87.7%, and investment income approached the record level achieved in the Q4 of 2022, driven by significant growth in our core portfolio investment income of more than 80%. The balance sheet also strengthened with stockholders' equity growing to a record level of more than $6.9 billion and book value per share increasing 3.7% in the quarter. The company returned almost $300 million of capital to shareholders through regular and special dividends, as well as share repurchases, resulting in growth in book value per share before dividends and repurchases of 7.2%. The short duration in the fixed maturity investment portfolio of 2.4 years and high credit quality of AA- benefited unrealized investment losses by approximately $181 million. Continuing on investment performance, net investment income increased almost 29% to $223 million. The income attributable to the core portfolio substantially increased due to a higher new money rate on fixed maturity securities compared to the roll-off of existing investments. Strong operating cash flow of approximately $445 million in the quarter increased our investable assets and will further contribute to growth in net investment income. The book yield is increased from 3.6% in the Q4 of 2022 to 3.8% in the current quarter on fixed maturity securities. The investment funds reflected income of $2 million for the quarter, primarily arising from declines in market value in the financial services and consumer goods sectors, partially offset by income from transportation and energy funds. Pre-tax net investment gains reflected an increase of $43 million in unrealized gains on equity securities, bringing our total unrealized gains to approximately $114 million on the balance sheet. Equity investments in the technology sector drove the quarterly improvement. Partially offsetting these unrealized equity gains were losses recognized of approximately $21 million. Turning to underwriting results. Underwriting income was $234 million, which included current accident year catastrophe losses of $48 million or 1.9 loss ratio points and prior accident year unfavorable development of $24 million or one loss ratio point, principally from property catastrophe losses. Winter storms impacted both the current quarter and carried over from late loss activity in the Q4 of last year. This compares with catastrophe losses in the Q1 of 2022 in the amount of $29 million or 1.3 loss ratio points. The calendar year loss ratio for Q1 of 2023 was 61.8%, and the current accident year loss ratio excluding catastrophe losses was 58.9%. The growth in net premiums earned of almost 11% continues to benefit the expense ratio. A number of factors are causing the expense ratio to increase a half a point to 28.8%. The change in our reinsurance over the last year has lowered our ceding commissions on certain treaties where we've moved from proportional covers to excess of loss and/or reduced our quota share percent ceded to reinsurance partners. In addition, increased compensation costs and new startup operating unit expenses are contributing to the higher expense ratio. We still expect our expense ratio to be comfortably below 30% as communicated on our Q4 call. Wrapping up with premium production, net premiums written grew by almost 7% to approximately $2.6 billion. The insurance segment grew 6.6% to $2.2 billion. As you saw in the supplemental information on page 7 of the earnings release, all lines of business improved with the exception of professional liability. The reinsurance and monoline excess segment increased 7.1% to $363 million, a record level for the segment with growth in all lines of business. With that, I'll turn it back to you, Rob. Rich, thanks very much. That was great. Let me, let me provide a couple of observations through my lens. Again, as promised, we'll open it up for Q&A. Upon reflection, certainly one of the things that we chat quite a bit about, on our end of the phone is just taking note of how clearly the cycle remains alive and well, and the emotions that drive the behaviors, remain very much intact. We continue to take note of the fact how major product lines, while they are still subject to the cyclical behavior, the fact of the matter is they are clearly not in lockstep at all. We've talked about this in the past, but it seems to be becoming more and more pronounced. To that end, just a snapshot on how we're thinking about property. Clearly in what I would suggest is early stages of meaningful firming. From our perspective, it is a little bit disappointing as to the momentum that we saw on the insurance side when it comes to property in January. We saw a little bit more momentum in February, and quite frankly, March, we started to see real progress. In April, I think there was meaningful traction as far as rate goes. While it perhaps is a little bit more pronounced or extreme on the cat side, I would tell you these comments apply to non-cat or risk exposure as well. Professional liability, on the other hand, clearly it's a very broad category, and it is a mixed bag. I think on the miscellaneous E&O front, particularly written on an E&S basis, there is still great opportunity, and we are making meaningful hay there. On the other hand, the D&O marketplace, particularly large account D&O, I would tell you for some number of quarters, and it continues to be in a state of freefall as far as rate adequacy or pricing, if you will, and it is concerning to us. In addition to that, though a smaller line than D&O, I would tell you hospital professional liability is another product line where it's in desperate need of some discipline returning to the marketplace. Moving away from professional onto the topic of casualty, I would tell you that it seems from our perspective, there is also meaningful opportunity there, particularly in the E&S lines on the primary front. On the excess front, particularly large accounts becoming more challenging. Clearly, a similar situation on the auto classes as well, where excess is becoming a bit more competitive and the primary there is competition, but not as bad. I think the industry needs to be very careful with the professional casualty and auto in particular because they are notably susceptible to social inflation. From our perspective, while there are signs that economic inflation is cooling a little bit from the heights that it reached, social inflation, there's really no sign or indication that we see that calming at all. Moving on to comp, clearly continues to bounce along the bottom. One observation there historically, or at least oftentimes, California has lagged the rest of the market as far as where it stood in the cycle. There is some evidence that California is actually ahead of the rest of the market and showing potential signs of firming. Finally, reinsurance. I think there was a lot of excitement and discussion around a firming reinsurance market. Certainly, from our perspective, the reinsurance market, particularly around property and property cat, has gained a meaningful level of additional discipline relative to where it's been in past years. That having been said, the casualty somewhat disciplined, and there are certain parts of the professional marketplace that have given us reason to pause as we are just not seeing the ceding commissions coming down, even though we are seeing the pricing of the underlying erode. Pivoting over to us, a couple of sound bites. I think as Rich suggested, 17.4% return, a great way to start the year. In our opinion, the top line was impacted by what I would refer to as strong or excellent cycle management by our colleagues as we are de-emphasizing certain product lines and leaning into other product lines. Just as a reminder, our priority is the bottom line. We are focused on building book value through a lens that we refer to as risk-adjusted return, and we applaud the discipline and opportunistic approach that our colleagues operate with. On the topic of rate as we were touching earlier, clearly the rate was quite strong in the quarter, which we were pleased to see. The 8.3 ex comp is the strongest that we've seen on the rate front since this time last year or same time last year. Additionally, I would mention that the renewal retention ratio still is hanging in there around 80%, which as we've mentioned in the past, we think it's an important data point because it reminds us that we are not churning the book, but it actually the rate we are getting is sticking. We are not changing the quality or integrity of the book. Important thing again. I guess finally, just on the 8.3, I think by any measure, we are comfortably outpacing trend, and I think it is likely that you will see that coming through in our loss ratios over time. Even with the cat activity, the 90.6 combined, I think is quite attractive. If you're a but for person, which I am not, it would have been an 87.7. Obviously the difference as Rich alluded to, and you would have picked up in the release was two things. One, obviously the cats that we had during the period, which equated to approximately 1.9 points. Then we had a point of negative development. Before anyone gets too carried away with the negative development, it was essentially driven by property and property cat losses that happened during the Q4. As people will recall, some of that cat activity happened late in the fourth quarter, and we just didn't have our arms fully around it. Please don't misconstrue the development for being something different than it really is. Paid loss ratio, 48 and change. I think people will presumably continue to take note of the delta between the paid versus what we are booking the loss ratio to. We get questions from time to time, you know, given how well the paid loss ratio has been running relative to the loss ratio picks that we are carrying, when are those going to converge? I would tell you that it's coming. In my opinion, I think there's a reality for the industry, and we are not completely insulated from it. 16 through 19 was a challenging period of time. I think that we have been cautious and measured as to how quickly we want to recognize the progress that was made, 20 and more recent than that. I think that's coming. I think it's gonna come more into focus as we make our way through this year into next year, likely will have implications for the loss picks that we are carrying in the more recent years and also how we think about current year loss picks. Rich touched on the expense ratio, the 28.8, as he suggested, partly driven by new business initiatives, partly driven by some investments that we are making, particularly on the technology front. Finally, some shifts that we are making on the reinsurance, as he alluded to. The, the cede on something proportional or a quota share obviously is very different than an XOL. While we are very keen for our reinsurance partners to make a reasonable return, we are unaccepting of being inappropriately gouged, and we will use our flexibility as appropriate. Pivoting over, excuse me, to the investment portfolio, without a doubt, a lot of momentum there. I think we've discussed it in some detail in the past. You can kind of see it coming our way. I think there is more opportunity from here, the duration at 2.4 years. I think we are looking opportunistically to nudge that out. I don't think we're gonna move the needle dramatically overnight, but certainly our hope is that there will be windows of opportunity to nudge that out a little bit. The book yield at 3.8 is notably below where the new money rate is. Our best guesstimate that a new money rate today is sort of between 4.25%, 4.5%. You can do the math as to the upside there. Rich touched on the funds. We had a little bit of noise in the quarter. Not a complete surprise. By and large, it was stemming from some private equity funds that we participate in. We feel like we have clarity around it, and it is our expectation that going forward, funds performance more likely than not will return to sort of that range of between $20 million and $50 million a quarter. Long story short, 17.4% return, combined ratio of a 90.6 with some cat activity both in the quarter and a bit spilling over from Q4 2022. Rate increases are robust as effort. Of course, the new money rate, 50 basis points plus upside relative to the book yield. I think all those things put together are very encouraging. To the extent you're a but for person, which I am not, again, 87.7 would deliver you, a 20%+ return. I think that was more than enough for me. Why don't we, Emma, go ahead and open it up for Q&A, please? Thank you. If you would like to ask a question today, press star followed by one on your telephone keypad. Your first question comes from the line of Michael Zarembski with BMO. Your line is now open. Hi, Mike. Good afternoon. Good afternoon. I guess first question on some of the premium growth changes. It looks like some of the growth rates were somewhat notable in the insurance second segment especially with workers' comp growing a lot, and some other lines as well. Then, you know the numbers better than me. Anything you wanna call out of, you know, why workers' comp's growing so fast? Is that the California comment or some of the lines that were shrinking a bit? Well, you know, as far as comp goes, Rich, you'll correct me if I'm wrong, I think we were kind of flattish. I think we went from $303 million in the quarter to $310 million, which isn't a large uptick. That having been said, I would tell you it's mainly payrolls. Certainly we're getting a little bit of traction from our new initiative in California, but what would be driving it more than anything else would be, I think we all have an appreciation for where wage inflation has been going as of late, and we're picking that up, whether it be initially or coming through in the audits afterwards. Rich, am I correct on that? Yes. On the primary side, that's right, Rob. Okay. My bad. I think I looked at a stale number. I'll do my best to ask a better follow-up question. So, on the investment portfolio, you know, we've gotten a lot of questions about commercial real estate. You know, clearly W. R. Berkley has an excellent track record, but any stats you wanna offer or additional color on Berkley's commercial real estate portfolio, you know, such as maybe LTVs or anything you think we should be thinking about that could be helpful? Well, a couple of things there, Mike. First of all, These buildings, much of it is unleveraged, so as far as the whole loan-to-value thing. I think the other piece is that we are very comfortable with the occupancy rate, and we're also comfortable with the credit of the tenants. As you'd expect, it's something that we pay attention to. The occupancy rate, the credit of the tenants, and the duration of the leases, you know, we think we're in a fine spot. Okay. You know, and lastly, I guess looking at. Thinking about your prepared remarks, you know, it. You know, when looking at the growth rate, trend, you know, it feels like there's a number of puts and takes. I mean, it sounds like a guarded optimism. I... Any help? Yeah. Just kind of thinking about the top line? Let me try and give you a little bit more color from my perspective without boring you or anyone else too much. The fact is that, you know, from an underwriting perspective, we're focused on the margin. It's when we see what's going on, for example, in the D&O market, you know, we are not gonna follow that down the drain. My expectation, which I think will prove to be right, it's just taking longer than anticipated, you are going to see us on the property side be able to flex up a bit. January, as I mentioned, was disappointing. February, maybe you saw a couple of green shoots. March was encouraging, and April so far, there's visible traction. You know, we have a diverse book of what I would define as specialty insurance. As I tried to allude to earlier, various products, they don't march in lockstep. If we were a monoline player, you know, we the peaks would be high and the valleys would be lower. Because of the diversity and how the cycle has decoupled by product, you know, it's a more stable ship. My best guess is that you're likely going to see our growth rate tick up as we make our way into this. It could be in the Q2, but certainly as we make our way into the second half of the year. I think you're gonna see us writing some more property. I think you're gonna see our momentum continue to build with some of our E&S casualty. I think you're going to start to see some of the comp lines bottoming out. I think you're going to see the D&O market at some point, you know, at least the erosion will slow. My best estimate is that you're going to see the growth rate tick up certainly in the second half of the year based on what I can ascertain, and it could tick up a bit in Q2. Thank you. Your next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is now open. Hi. Thanks. good evening. My first question, can you just provide a little bit more color, on what you have the accident year ex cat loss ratio deterioration in insurance? How should we think about the balance of the year given, your design ratio concept? I think probably the biggest driver there would be non-cat property related losses, Elyse. I think we had alluded to in prior calls that we had been looking at this. I think there are a couple of things that needed to be tightened up. They are being tightened up, and I think that pig is making its way through the python at this stage. I think that would be the biggest driver of non-cat property. How large were the non-cat property losses? Or is that the sole driver of the year-over-year deterioration in the underlying loss ratio in insurance? I don't have the exact number in front of me, but that was a big contributor. Okay. You know, following up, I guess on the growth question, you know, it sounds like you expect, you know, growth to pick up in the H2 of the year. You know, you guys used to talk about double-digit growth, and I recognize there's a lot of moving pieces. You know, if everything plays out the way that you expect, Rob, I mean, do you think, you know, we'll be back to seeing, you know, double-digit growth in the back half of the year? That's what we would like to see. You know, obviously we'll see if the D&O market continues to erode. Akin to the D&O market is transactional liability, which has kind of hit a wall, which has had an impact as well. In addition to that, just getting a little deeper into it, Elyse, there were a couple of relationships that we had, specifically in the commercial auto space, where we had a different view than our partners do around rate adequacy. As a result of that, we've gone our separate ways. Other areas within professional liability, as I alluded to earlier, you know, we just have a view as to inflation and social inflation. You know, the cost or the price that you pay for trying to be on top of it is sometimes you're early or ahead of the market, and eventually, more often than not, they will catch up. The benefit of that is you don't have the same level of pain that you have to deal with in the future. Long story short, I think we have many, many parts of our business growing at a very high growth rate, certainly well north of the 10% that you talked about. There are some parts of the business where, to my colleagues' credit, they are operating with the appropriate level of discipline. They recognize they can't control the marketplace, they can control their own actions, and we appreciate and applaud what they're doing. When you put it all together, what comes out in the wash is, I think more likely than not, you are going to see our growth rate tick up from here in the second half of the year. Thanks. One last quick one. Am I right in assuming that the adverse development, the property cat, that that all was in your insurance segment in the quarter? Rich, I believe so, yeah? Yes, for the most part it is. Yeah. Yeah. The vast majority was. Right. Okay. Thank you. Your next question comes from the line of Joshua Shanker with Bank of America. Your line is now open. Hey, Josh. How's it going? Good evening, everybody. Good evening and good afternoon. At the risk of speaking on behalf of the but-for people. I was wondering, you know, look, if we go to the last cycle, and obviously things are never the same, but at the end of 2004, 2005, 2006, I don't know when you want to put the end of the last cycle, it turned out that pricing was so adequate that although some people pulled back, you really had another healthy five, maybe longer years to write stuff that was very attractive. Maybe the lesson learned was that we should have been more aggressive. I don't know, maybe that wasn't the lesson learned. There was a lot of opportunity even as pricing cooled off. We have from, I guess, the 2019 through 2021, 2022 cycle, pricing has cooled off, and it looks like, you know, maybe there will be some property hardening here, but things have changed really, really quickly. Where I'm going with this is, has the industry changed that you're always going to be following the loss costs, that everything has gotten more technical and more advanced in a way that there's not a extended period of excess pricing where the insurance companies are allowed to flex their muscles a little bit and gain some excess earnings? Are you as a company and the industry is always going to be tied to the pricing and the loss trend such that it's going to be tight going into the years to come? If that makes any sense? I think I follow, Josh, and if I'm not answering the question, then please kind of stop me in my tracks and, you know, we'll have another crack at it. I think the answer is that there's more data, there's more analysis, the more technical so on and so forth in the industry today than there was yesterday. That having been said, in spite of all of that, I think it continues to be examples that would suggest the industry continues to struggle with getting its arms around its loss costs in a timely manner. We can look at what has happened to the reinsurance marketplace over the recent past years. We can look at workers' compensation, where clearly it proved even more recently to be much more profitable than people had anticipated. Is there more data analytics and so on involved? Yes, sir, I believe there is. Is it proving to be the silver bullet or the holy grail? I think there's a lot of data as of late that would suggest it's not, and it remains a struggle. That would be my perspective. Not to beat the topic up too much. I think one of the big differences these days is, again, how separate and distinct major product lines are from one another, where they are in the cycle, and the implications for that, what that means to organizations' overall profitability, and how that may impact their behavior. We'll have to see with time. I don't know if I answered your question. If I didn't- Yeah, I mean, here's where I'm going. As a follow-up, the growth was obviously single digits. You're hoping to get back to double digits. You have the best pricing ex workers' comp than you've had in a number of quarters at 8.3%. It doesn't feel like with 8.3% that you're so excited to lean into it just yet. You're saying, look, you're gonna see that margin come through in the next few quarters, if it were at 8.3%, I would think that you'd feel pretty good about things, and we'd already be at the double digits. I'm not telling you how to run your business, it just seems like y ou're already cautious about things. No, I appreciate the observation. When you first started to ask your question, I was wondering whether you've been sitting in on some of our staff meetings because the point that you're raising is one of the important points that we grapple with. That is, how do we make sure that we're appropriately forward-looking and that we don't tap the brake prematurely? At the same time, how do we make sure in an effort to not tap it prematurely, we don't wait too long to address changes in the market. I agree with your point about the 8.3 is very healthy, and we are very much encouraged by that. That having been said, one, as I think you have an appreciation for, you know, we are focused on underwriting margin. We are sensitive to social inflation. We see the claims that the industry is facing every day. Many people read about them in the paper, and the trajectory is quite steep, and we don't wanna get caught flat-footed. I think our growth rate was adversely impacted by a handful, if you will, or so of operating units, handful and a half of operating companies that are in the group, where market conditions became so challenging and so less attractive than they were that they drew a line in the sand, and that had an impact. In addition to that, sometimes we have a different view than distribution does, as I was suggesting earlier, around rate adequacy. Our obligation is to many stakeholders, including our shareholders, and we are not going to consciously expose the capital unless we believe the rate is appropriate. I think much of what I'm referring to as far as the headwinds we faced, I don't think that they are necessarily gonna continue to blow and certainly will not blow as hard in the second half of the year as they did in the Q1. As a result of that, I think the other product lines, you're going to see them continue to lift us, and the drag will be reduced. All right. Well, I appreciate the fulsome answers. If there's time, I may ask more arcane questions, but I'll let somebody else have a chance. Thank you. Thanks, Josh. Appreciate the question. Your next question comes from the line of Ryan Tunis with Autonomous Research. Your line is now open. Hi, Ryan. Good evening. Hey. Good evening, Rob. How's it going? Yes, the first question, I guess you mentioned that the property losses again hit you this quarter, and you seem to have your hands around that issue. Are you expecting, you know, potentially losses to stay elevated there for the time being, like as you're fixing that book or? Look, I can't, I can't say with any conviction or certainty, Ryan, how quickly that's gonna get back to where we would like it to. What I can tell you is I think we're getting our arms around it. It takes a little bit of time for that to earn through. The other point as it relates to the accident year loss ratio, which I know is a topic that I've had the opportunity to visit with you about, is how we think about the current year in light of the rate increases that we have gotten. I would tell you that I think the challenges that the industry, and again we to a certain extent faced 2016 through 2019 are shrinking in the rearview mirror. I think the more recent years, every quarter, every day sees them a little bit more, and that could have implications how we think about loss picks for the second half of the year. Got it. On the expense ratio, it was sub 29. I heard Rich say you expect it to be sub 30 for the rest of the year. Is that just sort of a generic comment or? Yeah Are you trying to say that you think the expense ratio will tick up from here? I think what we're trying to say is that the expense ratio is gonna float sort of between 28 and 30. We don't have it down to the basis point, if you will. The tick up that you've seen in part, as Rich mentioned earlier, some of it actually has to do with sort of just people traveling and engaging a bit more. There's some of that. The other part, as he indirectly referenced, is we're making some investments in technology as well and, of course, the ceding commissions. Which sometimes the cedes are going down with existing structures, but also as Rich suggested, which is often the case, we're pivoting from a quota share to an XOL, which carries a different ceding commission, but we like the trade. Got it. Then just lastly, Rob, on the buyback, can you give us some color on the timing of when you execute those repurchases? Have you guys been in the market at all during April? As far as the repurchase goes, to be perfectly frank, I don't have the data in front of me. We'd be happy to try and give you some more color if it wouldn't be too much trouble. Just circle back with Rich or Karen, or if you can't find them, grab me, you know, offline, and we'll do the best we can to give you some color on that. I don't have it in front of me. Thank you. Yep, thanks for the questions. Your next question comes from the line of Mark Hughes with Truist. Your line is now open. Yeah, thank you very much. Just. Hi, Mark. Good afternoon. Good afternoon. Just a little more detail on the other liability line. I think you've said the casualty E&S primary you think is attractive here. The other liability premium growth did slow in the quarter. I'm curious whether that's something you think is going to re-accelerate as the year progresses. If I might ask, you know, kind of what were you seeing in pricing trends in that liability line in Q1 versus Q4? I think the generally speaking, the most attractive areas that we're seeing is particularly in the E&S. I should have mentioned this earlier, Mark, I appreciate you raising it. The flow of business that we talk about from time to time coming out of the standard market into the E&S market remains quite robust, to say the least. You know, we're feeling very good about that. The one outlier would be products liability, where it would seem the standard market, particularly national carriers, regained a bit of an appetite. Beyond that, we're feeling really good. I think you should see some growth or accelerating growth potentially later in the year on the other liability front as far as we go. The non-insurance businesses, the revenue was up pretty meaningfully this quarter. Was that just a timing issue or, some other driver? Rich, was that Granite-Terre or? No, that was. We had acquired a business last year. Oh, right. Right, right. In the Q1 of 2022 it was not in the numbers 'cause we didn't acquire it at that point. Very good. Thank you. That was a business that's part of our in-house private equity, Rich, correct? That is part of our private equity operations, yes. Yeah. Our in-house operation. Yeah. It's a wholly owned sub. Appreciate it. Your next question comes from the line of Alex Scott with Goldman Sachs. Your line is now open. Hi, Alex. Good afternoon. Hi. First one I had for you guys was just going back to commercial real estate. You know, less about your portfolio currently, but more about, you know, could that be an interesting opportunity, particularly since you're a little short on duration right now, to go a bit bigger in, you know, a more distressed market? Alex, from our perspective, as I hope you're aware, you know, we are a, we're an opportunistic participant. We're certainly conscious of the challenges that the real estate asset class faces today, and we're again not gonna do anything that one would view as naive. At the same time, if we found attractive opportunities that we thought made sense for our shareholders, then I can assure you that we will be pursuing them. Real estate has its challenges, but we're not in a rush to become overweighted. At the same time, if we see opportunities, that's fine. Got it. Just on professional lines and, you know, the potential, you know, headwinds or I guess ongoing headwinds that you face there, you know, how would you quantify that in terms of how much it's, you know, sort of taken away from some of the other things that are contributing to margin improvement right now? Our margin improvement, our top line growth, or what are we talking about? Margin improvement. I'm sorry. I'm just interested particularly in, you know, is that a drag on margins? Can you help us think about how much of a drag is on-. I don't think that it's having a meaningful impact on our margins because of our colleagues' underwriting discipline. It certainly is having an impact on our top line also because of their underwriting discipline. It would be measured in percentage points on the group overall. Okay, thank you. Your next question comes from the line of Yaron Kinar with Jefferies. Your line is now open. Hey, good afternoon. It's Yaron. Good afternoon. I am just curious, with the comments on the shift from quota share to excess of loss in specifically in insurance, why is it that we wouldn't see the ceding ratio go down a bit as a result of that? I think it was pretty stable year-over-year. Rich, you wanna speak to that? We were just talking about it earlier. Sure. So when we move to the excess of loss, we don't technically receive ceding commissions, right? On a quota share basis, you're gonna receive ceding commissions. On an excess of loss basis, we're going to have minimums and deposits and cost based on subject premium. Those numbers are going to be more, I'll say fixed in nature as opposed to quota shares, which are proportional. So those are gonna move in parity, if you will, as gross premiums written move up or down. So for that reason, the ceded premium would not be moving up and down by being in a position where we have the excess of loss arrangements. So that's causing that change. And I think you could see that when you look at the change from a dollars perspective. Gross premiums written grew at 6.6% for the group overall. Net premiums written grew at 6.7%, and the ceded written premium changed by about 6.2%. It kind of moved in parity, if you will. That's. Once again, we have over 125 reinsurance arrangements that we purchase across the group overall, and there's a lot of moving pieces between them. Okay. I may follow up offline 'cause I-I'm still a little confused here. My second question, Rob, I think you may have alluded to kind of some seasoning of the 2020 and 2021 accident years and just the very strong environment that you faced in those years. Is that why we're starting to see maybe an acceleration of releases in some of the longer tail lines, such as other liability from 2020 and 2021? Quite frankly, as things, to your point, season out, we develop through the passage of time, greater comfort, greater clarity around where things are going to settle. We deliberately did not want to declare victory prematurely. I think, again, as time continues to pass, you're going to see us develop a greater degree of confidence as to what the outcomes are going to be of some of these more recent years. Right. I guess I'm coming at it from a slightly different perspective. It seems to me like we're seeing some acceleration of that favorable development from those years relatively early, considering that, you know, we're a year or two out for these longer tail lines. Is that just because the years were so incredibly good that you are gaining that comfort level sooner? I think the answer is that we've gone through a pretty extensive analysis that we'd be happy to talk with you about offline, but it probably would take up quite a bit of time. If you're interested, we'd be happy to walk you through what we've done. Great. Yeah, I'd definitely take you up on that. Thank you. Sure. Your next question comes from the line of Brian Meredith with UBS. Your line is now open. Hey. Evening, Rob. Hi, Brian. A couple quick ones here for you. Hey, the first one, was there any impact in the quarter from your FI book from some of the banking kind of losses and maybe that had a little impact on some of your loss ratios or not? No, nothing that would be outside of the loss ratio picks that we're carrying for the product lines. Gotcha. Well, we have some exposure, yeah, but relative to the group overall, it just kinda flows through. Makes sense. I guess my second question is, as we look at you're looking into 2023 here, did you change your view at all on loss trend as you looked into 2023, particularly given your comments on even commercial auto? If I look at your, you know, Q1 2023, you talked about the, you know, non-cat weather, you know, issues. Did you change your casualty loss picks year-over-year? Did they go up, down, stay the same from a casualty perspective kind of overall? We, with some regularity, are looking at our picks and trying to make sure that they're where they should be. The answer is, Brian, that some move up and some move down, depending on the data. We look at the business at a pretty granular level by operating company, by product line. I don't have off the top of my head exactly what the net impact was, but there are certainly some things that we've picked up and maybe a couple of things that we've dropped In loss trend. As far as loss trend goes, you know, if the view that we had, generally speaking, around loss trend that we entered the year with remains intact. It certainly we appreciate that maybe economic inflation has cooled a little bit, but we remain very concerned about social inflation, and we think we're in a good place relative to that. We don't think that this is the moment in time to reduce the focus, the intensity, and making sure that we're collecting enough premium to keep up with that trend. Makes sense. Thank you. Thank you. Your next question comes from the line of Meyer Shields with KBW. Your line is now open. Great. Thanks so much. Rob, I was hoping we could follow up on some earlier questions by line of business. You talked about workers' compensation largely growing through, I guess, higher payrolls. Can you talk about what's driving the commercial auto growth? I'm asking because the sense we're getting is that there's still an awful lot of either social inflation or driver shortages that would pressure the line. I was hoping you could talk through what you're seeing. The commercial auto line and the growth that we're seeing is really a combination or primarily a lot of it's rate, for starters. I don't recall exactly how much rate we got in that product line, but it was meaningful, particularly on the auto liability front, but across the board. I think that is really the bigger driver, when you look at the growth. In addition to that, we do have a new operation in the space and they're getting some momentum as well. For the most part, I think what you're seeing as far as the commercial auto growth, a lot of that's really just driven by rate increases. Okay. No, that's good to hear. The second question, I don't know if this is better for Rich, but you talked about the impact of changing reinsurance on the expense ratio. Should we see some sort of benefit in the loss ratio to the extent that you're moving reinsurance to XOL from quota share? The answer is that we think that what you're gonna see is we're gonna hold on to more premium, and we think that the loss ratio is healthy. I don't think you're going to see that benefit immediately because of how we assume a recovery or not. Rich, did you have anything you wanted to add to that? No, I think that was exactly spot on, Rob. I would agree with your comment. That's great. Usually not the case. All right. I'm all set. Thank you. Thanks for the question. Your next question comes from the line of David Motemaden with Evercore. Your line is now open. Hello, David. Good afternoon. Hey, good afternoon. Just a question, just on the non-cat property losses this quarter. I think there were fire losses last quarter when you had it. Wondering if you could elaborate or, you know, was it fire again? Maybe talk about what changes outside of, you know, just seeking additional rate, you're making to address these and if this impacted your approach at all to growing property. The answer is that certainly fire and other non-cat related losses were a meaningful piece of the puzzle. While rate helps solve the puzzle, I think part of the solution is also coming from selection. The work that I referred to that colleagues have done on this front, certainly, again, rate is a piece of it, but I think it's even more so about selection. Was there another piece that I missed? Sorry. Yeah. I guess just, you know, there is, you know, we've seen it the past few quarters, in the underlying, or in the accident year loss ratio ex-cat, as well as in, you know, the cat line, I guess as well as adverse PYD this quarter. Is this, you know, this volatility, I guess, how are you viewing this? Has this impacted, you know, your approach to growing property at all? I think it hasn't necessarily had a blanket impact on us as to how we think about growing property, but it certainly has been instructive as we've done some work as to how we think about rate and selection. Got it. Okay. That's, that's helpful. You know, you mentioned a few times, throughout the call, Rob, just there are certain product lines that you're de-emphasizing a few, you know, a few operating units where you had to draw a line in the sand. Outside of, you know, public D&O, could you just touch on, you know, what lines those are? Sure. There was, you know, some it's a little bit anecdotal, so I would encourage you not to read too deeply into it. But certainly, there was some other professional liability that we took a firm or we have taken a firm position on, again, to my colleague's credit. Some of that is written out of the U.S., some of it's written out of our Lloyd's operation. In addition to that, we've taken a bit of a firm position on certain aspects of our participation in the commercial transportation space. Where again, as I suggested earlier, we just have a different view than our distribution partners did around rate adequacy amongst other things. You know, that's life and we wish them well. Professional and commercial auto, would be the two big areas that come to mind. Got it. Thanks. Then maybe, you know, just a higher level question just on social inflation. You've mentioned it, you know, a number of times and, you know, potential problems looming for the industry on 2019 and prior years. I guess you know, just by your estimation, how far along are we in terms of seeing some of the courts reopen and maybe some of those, you know, some of those claims actually come through, you know, and actually see that starting to hit some of the, some of the carriers and just the industry overall? Certainly from our perspective, by and large, the legal system is up, and I almost said functioning. I really should say running because I'm not sure if it's always functioning. The short answer is, I think the general consensus in our shop, and again, it varies by jurisdiction, but, you know, there's probably still, call it give or take, a 18-month delay relative to where things were pre-COVID. I think people are trying to catch up. I think beyond the delay, I think it would be a mistake for anyone to underestimate how aggressive the plaintiff bar is these days. Oftentimes people read about, you know, some monster headline, and they think of it, some monster award in a headline, I should say, and they think about it in a one-off manner. I would suggest that oftentimes that's just the tip of the spear. It's a very challenging moment. We feel very good about how we have approached making sure that we have set enough aside for what claims costs will be both today and tomorrow. We think our colleagues that are handling these claims are very well skilled to ensure the appropriate outcome for all stakeholders, including our insureds. Okay, great. Thanks. I appreciate that perspective. Your next question comes from the line of Mike Zarembski with BMO. Your line is now open. Hi, Mike. Mike, you there? Hey, thanks. Yeah, I'm here. Just a quick follow-up on just the overall marketplace, competitiveness and dynamics. I just, you know, curious if anything other than, you know, increased data analytics has caused, you know, the pricing environment to, you know, maybe whipsaw is not the right word, but to change pretty fast in a number of lines of business. You know, you've said a number of times how the market is not moving in lockstep. Is anything like structural change with, you know, broker consolidation or just maybe barriers to entry are lower on the... I'll be quiet, but on the Marsh call today, for example, they talked about 20 new carriers entering the professional liability space, which, you know, has caused the soft market there. Just curious if anything's changed or this is just how it always used to be? Okay. I think if, you know, just picking up on that point, if I may, if we use, you know, public D&O, particularly large account public D&O, which is, you know, certainly a product line that is of great interest to an organization like Marsh, I think there's a couple of realities. What I mean by that is both the supply and the demand side are struggling. I don't know if the number is 20, but clearly there have been a lot of new entrants. I think some of the reality is there's not a lot of barriers to entry to getting into that space. Clearly there's more supply. I think the bigger issue relative to where we were not that long ago is the reduced demand. Given what's been going on in the capital markets, we have seen a dramatic reduction in IPOs. We've just seen a dramatic reduction in a lot of the activity that would drive D&O purchasing. In addition to that, transactional liability is something that tends to go hand-in-hand with those that are offering D&O. M&A activity has reduced dramatically. IPOs, SPAC activity, et cetera, et cetera, has fallen off a cliff. You have a little bit of a perfect storm, and not to create too much of a negative connotation, but the reality is that the demand has been reduced and the supply has increased, and that has led to an unattractive competitive environment from our perspective. Our colleagues, I think, as I suggested earlier, are very knowledgeable, very skilled. They understand that their job is not to issue insurance policies. They are capital managers, and they are going to expose the capital in ways that they think is sensible. Helpful. Thank you. Thanks for the question. This concludes our Q&A for today. I turn the call back over to Rob Berkley for closing remarks. Okay. Emma, thank you very much. We appreciate everyone's participation. We look forward to speaking with you again in 90 days. Before we sign off, I'm going to hand it over to my boss who's here, who has a couple of final comments. You know, I think that. It is a business that's easy to get into, and everyone needs to remember that it's not so easy to get out. You sign on to pay long-term commitments, and the brokers who have their customers really need to be sure they get paid. Very quickly, if you don't meet your commitments, you lose your place in the market. We've been here now for more than 55 years, and we've always operated with a long run view, always understanding what risk means and always understanding that our commitment to our customer, our ultimate customer, the insured, is paramount. Sometimes that means we don't go along with what everyone else does. We have a good, sensible approach. For us, the better the data you have, the better you can respond, the better job you can do. We continue to be optimistic that we're in touch with the marketplace, in touch with our customers and our distribution. While we may miss a beat here and there, we're pretty optimistic that we're going along right where we ought to be. We do see that we'll grow a lot when the opportunity to maximize our returns are there. We'll husband our capital when it's gonna be marginal return. I thank all of you. I thank all of you for supporting us all these years. I look forward to demonstrating our commitment and our success. Thank you very much. This concludes today's conference call. Thank you for attending. You may now disconnect.