WR Berkley CEO sticks to reinsurance but favours primary market

WR Berkley CEO Rob Berkley said during the first quarter 2018 results conference call that the situation in the reinsurance sector remains tough but that it is a core business for the firm while he currently sees better growth opportunities in the primary segment.

Berkley said that he does not understand why the property reinsurance market has not responded more after the record losses in the second half of 2017.

Experts have been blaming the alternative capital market for the subdued rate environment because it is willing to accept lower returns.

But Berkley remains committed to the sector nevertheless. “It is the core activity for us as a group,” he said according to a call transcript. There will be an opportunity to scale up the business and deploy capital when market conditions shift, he explained. “Fundamentally, we believe long-term in the reinsurance business,” he said. “We have a great deal of interest in being partners with those that value us beyond just capacity.”

The situation in reinsurance looks somewhat better in the casualty area, Berkley noted. “It seems to have incrementally more legs than the property market,” he said.

“The reinsurers are assuming to get enough leverage that they can push rates up”.

WR Berkley shrank gross premiums in reinsurance to $141.5 million in the first quarter of 2018 from $166.8 million in the same period a year ago. The combined ratio improved to 107.4 percent in the segment from 112.9 percent over the period. Pre-tax income grew to $14.6 million from $4.6 million.

Berkley currently sees more opportunities to grow in the primary market, where casualty remains “quite attractive”, workers compensation “has peaked” but with still plenty of margin in many territories, while there are “pieces of the professional market that are getting some traction”. Berkley is also pleased to see that auto is continuing to build momentum.

Gross premiums written in the insurance segment grew to $1.84 billion in the first quarter of 2018 from $1.77 billion in the same period a year ago. The combined ratio in the segment improved slightly to 93.4 percent from 93.8 percent over the period. Pre-tax income increased to $229.0 million from $200.0 million.

“We grow where the margin is and we shrink where it isn’t,” Berkley said.  “Reinsurance still remains exceptionally competitive and as a result of that you can see that we’re off considerably. On the other hand, the insurance market, we still find opportunity there. And it’s meaningful and as a result of that the insurance business grew more than 3 percent,” Berkley said.

Overall, WR Berkley grew net premiums written slightly to $1.67 billion in the first quarter of 2018 from $1.65 billion a year ago. Net income increased to $166.4 million from $123.4 million over the period.

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