WR Berkley

[omagh]

Bill Berkley presented at the KBW conference -- one of his better presentations.

 

Lots of commentary on the hard P&C market, causes of the market turn, some evidence of a market turn in 4Q2010, calls BS on industry peers use of models.  Some interesting poker analogies and thoughts on management of capital.  Q&A session is outstanding, including commentary on how excess capital isn't a limiting factor in a hard market.

 

http://ir.wrberkley.com/events.cfm

http://ir.wrberkley.com/common/download/download.cfm?companyid=BER&fileid=400975&filekey=6d5e97ea-12d6-4d08-a674-7f7753973a2c&filename=KBW%209-7-2010.pdf (slides)

 

-O

[onyx1]

Thanks for posting...he is an original thinker.

[Viking]

Just finished listening to the presentation and Q&A. For those interested in learning more about insurance, the future and WRB I highly recommend you listen to this.

 

My key takeaways: Industry current year underwriting continues to be poor. As bond yields fall, interest and dividend income will continue to shrink. It looks to me that all that is saving the industry are reserve releases (likely being fueled by lower than expected inflation). Clearly not a sustainable situation. Perhaps all that is needed to drive in a hard market is a couple of large catastrophes. Regardless, once reserve releases are burnt through the day of reconing will arrive and select companies (WRB, BRK, FFH) will do very well.

 

In the presentation Bill reviewed their minimal exposure to catastrophes so I will spend some time thinking about when I want to re-establish a position in the stock...

[omagh]

Some interim confirmation of Berkley's thesis.  Underwriting is deteriorating yet the industry is declaring increased profits.

 

http://www.pciaa.net/LegTrack/web/NAIIPublications.nsf/lookupwebcontent/D3BE20E82E1D898D862577A00071502

JERSEY CITY, N.J. – Private U.S. property/casualty insurers’ net income after taxes rose to $16.5 billion in first-half 2010 from $6 billion in first-half 2009, with insurers’ overall profitability as measured by their annualized rate of return on average policyholders’ surplus increasing to 6.3 percent from 2.6 percent.

 

Reflecting insurers’ $16.5 billion in net income and other developments in first-half 2010, policyholders’ surplus — insurers’ net worth measured according to Statutory Accounting Principles — rose $19.1 billion, or 3.7 percent, to $530.5 billion at June 30, 2010, from $511.4 billion at year-end 2009.

 

Insurers’ net investment gains — the sum of net investment income and realized capital gains (or losses) on investments — grew $13.3 billion to $25.8 billion in first-half 2010 from $12.5 billion in first-half 2009, powering the increases in the insurance industry’s net income, overall rate of return, and policyholders’ surplus.

 

Partially offsetting the improvement in investment results, insurers’ net losses on underwriting grew to $5.1 billion for six-months 2010 from $2.1 billion for six-months 2009. The combined ratio — a key measure of losses and other underwriting expenses per dollar of premium — deteriorated to 101.7 percent for six-months 2010 from 100.8 percent for six-months 2009, according to ISO and the Property Casualty Insurers Association of America (PCI).

 

The profits will likely be short-lived.

 

-O

 

 

Just finished listening to the presentation and Q&A. For those interested in learning more about insurance, the future and WRB I highly recommend you listen to this.

 

My key takeaways: Industry current year underwriting continues to be poor. As bond yields fall, interest and dividend income will continue to shrink. It looks to me that all that is saving the industry are reserve releases (likely being fueled by lower than expected inflation). Clearly not a sustainable situation. Perhaps all that is needed to drive in a hard market is a couple of large catastrophes. Regardless, once reserve releases are burnt through the day of reconing will arrive and select companies (WRB, BRK, FFH) will do very well.

 

In the presentation Bill reviewed their minimal exposure to catastrophes so I will spend some time thinking about when I want to re-establish a position in the stock...