W. R. Berkley Balances Record Earnings With Market Risks

W. R. Berkley Corporation ((WRB)) has held its Q4 earnings call. Read on for the main highlights of the call.

W. R. Berkley Signals Confidence Amid Record Results and Market Strains in Earnings Call

Management painted a broadly upbeat picture of W. R. Berkley’s latest quarter and full-year performance, highlighting record earnings, underwriting income, premium volumes, investment income and cash generation, all supporting a robust return on equity and strong book value growth. At the same time, executives were candid about tough industry conditions: persistent auto liability pain, falling property catastrophe reinsurance rates, pressure in certain professional lines, uneven premium growth and a one-off investment fund loss. The tone balanced confidence in the company’s disciplined underwriting and capital deployment with clear acknowledgment of pockets of stress and the need to invest heavily in technology to sustain future advantage.

Record Quarterly Operating Earnings

W. R. Berkley reported record operating earnings of $450 million, or $1.13 per share, for the fourth quarter, a 9.5% increase versus the prior year. This translated into a striking 21.4% return on beginning-of-year equity, underscoring the company’s ability to convert underwriting and investment strength into shareholder returns. Management stressed that this level of profitability reflects both strong core operations and disciplined risk selection rather than outsized one-off items, reinforcing confidence in the sustainability of earnings power.

Record Underwriting Profit

Underwriting performance hit new highs, with pretax underwriting income of $338 million in the quarter, up 14.9% year over year. The company credited the current accident year underwriting strength for much of the improvement, suggesting that pricing and risk selection in recent years are now flowing through the income statement. Berkley’s ability to grow underwriting profit at a double-digit pace, even in the face of competitive pressures and pockets of difficult lines, was a central point of management’s message about maintaining discipline rather than chasing volume.

Strong Premium Volumes

Premium volume remained a key growth engine. For the full year, W. R. Berkley generated record gross premiums written of $15.1 billion and net premiums written of $12.7 billion. Net premiums earned for the quarter also reached a record $3.2 billion, underscoring the scale the company has built across its specialty and commercial lines platforms. Management framed these records as evidence that the firm can grow meaningfully while still insisting on adequate pricing and terms, even though they acknowledged that growth was more mixed late in the year.

Healthy Combined Ratios

Profitability metrics stayed firmly in attractive territory. The current accident year combined ratio excluding catastrophes came in at 87.9% for the quarter, while the full calendar year combined ratio was 89.4%. The current accident year loss ratio excluding catastrophes was 59.7% in the quarter, reflecting solid underwriting discipline and favorable risk selection. These ratios signal that the company is earning strong margins on its core insurance operations before considering investment income, an important indicator for investors focused on through‑the‑cycle profitability.

Catastrophe Loss Improvement

Catastrophe losses were notably lighter, giving an additional boost to underwriting results. Current accident year catastrophe losses were $48 million in the quarter, equivalent to just 1.5 points on the loss ratio. This represented a decline versus prior periods, suggesting a relatively benign catastrophe experience in the quarter. While management emphasized that cat losses will always be volatile, the reduced impact this quarter provided further support to the strong combined ratio and underscored the benefits of portfolio management and reinsurance strategies.

Investment Asset Growth and Income

The investment portfolio was another major contributor to earnings. Invested assets grew 11.4% during 2025 to $33.2 billion, driven by strong operating cash flows and retained earnings. Fixed-maturity investment income rose 13.3% quarter over quarter to $346 million, with total pretax net investment income at $338 million despite fund losses elsewhere. Management also noted a move in portfolio duration to roughly three years from 2.6, positioning the company to capture higher yields while managing interest rate risk. The combination of growing asset base and improving yields is a key earnings lever going forward.

Strong Operating Cash Flow and Liquidity

Cash generation was a standout theme. Operating cash flow approached $1.0 billion in the quarter and totaled $3.6 billion for the full year, providing ample fuel for investment in both the business and the portfolio. These robust cash flows allowed Berkley to enlarge its invested asset base, sustain strong liquidity and retain flexibility in capital allocation. Management framed this cash-flow strength as a competitive advantage, enabling the company to reinvest at attractive yields, fund growth and return capital without straining the balance sheet.

Capital Return and Balance Sheet Strength

Capital management remained shareholder-friendly while preserving financial strength. In the fourth quarter alone, W. R. Berkley returned $608 million to shareholders through a combination of special and regular dividends totaling $412 million and share repurchases of $196 million. For 2025, total capital returned reached $971 million, more than 10% of shareholders’ equity. Despite this, stockholders’ equity grew 15.6%, aided by strong earnings and rising asset values, and the company’s financial leverage remained modest at 22.6%. This blend of aggressive capital return and a conservatively financed balance sheet was positioned as a key part of the company’s appeal to investors.

Outstanding Full-Year Financials

Full-year results were described as among the best in the company’s history. Underwriting income reached $1.2 billion, net investment income was $1.4 billion, operating income totaled $1.7 billion and net income was $1.8 billion. Book value per share rose 26.7% before, and 16.4% after, dividends and share repurchases. These figures underscore the combined power of disciplined underwriting, growing investment income and active capital management. Management suggested that this performance demonstrates the strength of Berkley’s diversified specialty franchise and its ability to produce attractive returns even in a complex insurance environment.

Operational Efficiency and Expense Targets

Efficiency was another area of progress. The quarterly expense ratio improved to 28.2%, helped by record premiums earned and ongoing operational initiatives. Management indicated confidence that the expense ratio will stay comfortably below 30% in 2026, even as the company steps up technology spending. This low expense base provides a cushion against pricing pressure and claims volatility, and it gives Berkley room to invest in growth and innovation without sacrificing competitiveness.

Persisting Auto Liability Pressure

Despite the strong headline numbers, management was clear that auto liability remains a major trouble spot. They described the auto liability market as “ugly,” characterized by unsatisfactory rates and challenging loss trends. In response, Berkley is consciously shrinking its exposure in this area rather than writing unprofitable business. This retrenchment underscores the company’s willingness to sacrifice top-line growth in problematic segments to protect margins and capital, a stance that long-term investors often favor.

Property Cat Reinsurance Rate Compression

The company also flagged significant rate pressure in property catastrophe reinsurance. Its main property-catastrophe treaty saw a risk-adjusted rate decrease of 19% at the key January 1 renewal, signaling intense competition and a meaningful reset in pricing. This shift raises questions about future margins in catastrophe-exposed business for the industry as a whole. Berkley’s disclosure of this data point and its cautious tone suggested that management is very alert to the risk of underwriting discipline eroding in this segment as capacity grows and competitors chase market share.

Spillover of Property Competitiveness into Casualty

One of the more concerning trends highlighted was the spillover of property reinsurance competitiveness into casualty lines. Management noted early signs that companies squeezed on property-cat rates are increasingly turning to casualty business to chase premium growth. This dynamic risks introducing more aggressive pricing and looser terms in casualty lines over time. Berkley signaled that it intends to remain disciplined in casualty, even if that means moderating growth, but investors were cautioned that market conditions could become more challenging if this trend accelerates.

Professional Liability Weakness

Professional liability also remains under pressure. Directors and officers (D&O) liability was singled out as still challenged, with unfavorable pricing and claims dynamics. Architects and engineers (A&E) professional lines are facing similar headwinds. Management framed these as areas where the company is cautious and selective, emphasizing that it prefers to manage down exposure and focus on niches where risk-reward remains attractive. These comments underscore that not all specialty lines are equal in the current cycle, and careful portfolio management is critical.

Investment Fund Losses

While the core fixed-income portfolio performed well, Berkley recorded $32 million of investment fund losses in the quarter, driven largely by one disappointing fund relationship. Management stressed that this outcome is not expected to be representative of future performance and that it partially offset the strong gains from fixed-income investments. Investors were reminded that the company’s broader investment strategy remains conservative, anchored in high-quality fixed maturities, but that opportunistic allocations to funds can introduce some quarter-to-quarter volatility.

Mixed Premium Growth Momentum

Growth trends showed some unevenness late in the year. Management noted that premium growth in October and November was roughly flat, while December gross written premium rebounded, rising around 7%. Overall, the quarter’s top-line performance fell short of management’s expectations in certain areas and has created some uncertainty about the pace of growth heading into early 2026. This mixed pattern reflects a disciplined posture in troubled lines and growing competitive pressure in others, even as total premiums remain at record levels.

Workers’ Compensation and Medical Inflation Risk

Workers’ compensation performance is stable but not yet robust. While there are early signs of improvement in markets like California, management warned that medical inflation and changes in Medicare and fee schedules continue to pose severity risks. These factors could influence not just workers’ compensation but also related lines such as medical stop-loss. Berkley’s comments suggested a cautious stance, with underwriting practices and pricing carefully calibrated to reflect evolving medical cost trends.

Planned Technology Investments Will Increase Near-Term Costs

A central strategic theme was the decision to ramp up investment in technology, data and artificial intelligence. Management plans meaningful spending increases in 2026, with investments expected to continue into 2027. While these initiatives will raise near-term expenses, management believes they will enhance underwriting, claims handling and operational efficiency over time, ultimately improving margins and competitive positioning. The company aims to balance these investments with tight expense control elsewhere, keeping the overall expense ratio attractive while building capabilities for the next phase of growth.

Forward-Looking Guidance and Strategic Outlook

Looking ahead, W. R. Berkley guided to continued expense discipline, targeting an expense ratio “comfortably below 30%” in 2026 and an effective tax rate around 23%. Management reiterated its ambition to maintain underwriting margins and to exceed a long-term return on equity target of 15% through the cycle, even as technology and AI investments peak in 2026 and start yielding benefits from 2027 onward. Capital return will remain opportunistic, supported by strong operating cash flow, a growing invested asset base, modest leverage and rising equity. On the underwriting side, early January trends were described as encouraging, with December gross written premiums up about 7% and rate increases excluding workers’ comp slightly above 7%, though the company warned that competitive pressures—especially following the 19% risk-adjusted rate cut on its main property-cat treaty—could constrain pricing in some lines. The investment portfolio, now with a duration of about three years, is positioned to reinvest cash flows at attractive yields, with fixed-maturity income already up 13.3% quarter over quarter.

In sum, W. R. Berkley’s earnings call combined strong backward-looking performance with a clear-eyed view of emerging risks. Record underwriting and investment results, robust cash generation and sizable capital returns demonstrated the strength of the business model and balance sheet. At the same time, management was transparent about persistent challenges in auto liability and professional lines, intensifying competition in property and casualty markets, and the short-term cost of substantial technology investments. For investors, the story is one of a disciplined insurer willing to trade some growth and near-term margin for long-term resilience and returns—backed by a track record that, for now, supports that strategy.