Rob Berkley - President and CEO Bill Berkley - Executive Chairman Rich Baio - SVP and CFO.

Michael Nannizzi - Goldman Sachs Kai Pan - Morgan Stanley Arash Soleimani - KBW Ryan Tunis - Credit Suisse Jay Cohen - Bank of America Merrill Lynch Ian Gutterman - Balyasny.

Welcome to the W.R. Berkley Corporation’s Third Quarter 2016 Earnings Conference Call. Today’s conference 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 without limitations, believe, expect or estimate.

We caution you that such forward-looking statements should not be regarded as 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 end December 31st, 2015 and our other filings made with the SEC for 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 forward-looking statements whether as a result of new information, future events or otherwise. I would like to turn the call over to Mr. Rob Berkeley Jr. Please go ahead, sir..

Thank you, Karen and good afternoon, everyone and welcome to our third quarter call. As in the past, on this end of the phone I'm joined by Bill Berkeley, our Executive Chairman, as well as Gene Ballard, our Executive Vice President and Rich Baio, our Senior Vice President and Chief Financial Officer.

The agenda for today, as I'm going to start out with some general comments about the market and how we see things and then I'm going to offer a few sound bites about our quarter and then be handing it over to Rich to get into some more details around our quarter and the company's performance specifically.

So as far as the market goes, generally speaking a continuation of what we've seen over the past few quarters. The marketplace overall is becoming incrementally more competitive. Reinsurance remains somewhat consistent as it seems to bounce along the bottom in search of a catalyst for change.

One of the interesting things about the reinsurance market is putting aside property tax and peel back a few layers of the situation there, the loss ratios by and large are not particularly problematic, what's is really driving is the seeding submissions that are creating a challenge for their economic model, from our perspective.

As it relates to the insurance marketplace, again a continuation of what we've seen over the past few quarters. The property market remains notably competitive, the workers' comp market becoming incrementally more competitive again I would suggest it's peaking, if you will.

Professional again is a mixed bag as it has been in the few quarter, depending on the product and finally casualty continues to be the bright spot from our perspective.

While the marketplace overall continues to be I guess almost hohum [ph] or as I suggested earlier a continuation of what we've seen for the past few quarters from our perspective, actually the market is primed for significant change.

There's been a fair chatter about this over the past couple of years and we think that this is becoming closer and closer a reality. And there are three areas in particular that I'd like to touch on today. One has to do with the shifting in asset growth and how historically we as a society have seen much of our assets in a tangible form.

And as we see in the development of cyber insurance coming around and wait to see - here in that is the beginning to scratch the surface, the fact is that intellectual assets are going to become a growing class and we as an industry need to find ways to grapple with that and help society figure out how they will manage that exposure.

And again, I think there is a great deal of room in that area for growth and a lot of opportunity.

Second something that we've talked about in the past and that is the recognitions and the shifted behavior of customers and how they want to transact and how they'd like to be served in the future and if personal lines or consumer space is any type of leading indicator for the SME space, clearly the industry is ripe for quite a bit of disruption.

From our perspective, the solution is going to be both distribution and carriers working hand in hand, trying to find ways to bring additional value in other ways or new ways to customers. Otherwise again there will be great change in those that do not adapt are going to be left behind.

And finally again, a topic that has been discussed in the past, but is continuing to come more and more of a reality and that is the evolution as it relates to the relationship between capital and expertise. We've seen this developing early on in the reinsurance space.

It is our expectation that this is going to be spilling over more and more to the insurance space and ultimately, we think this creates a real opportunity for organizations like ours as capital becomes more and more of a commodity and it's expertise and intellectual capital that is increasingly the differentiator. Change is an interesting thing.

In some ways over a period of a year or two, it doesn't feel like much changes at all over a five, seven or 10-year period, it can be shocking actually how much can change. We as an industry have been somewhat insulated from certain types of change for many generations and I think that it's about to change over the next five, seven years or so.

With regards to our quarter and again Rich is going to get into the details, the growth came in as something just above 2% that was somewhat offset or negatively impacted by FX.

Putting that aside, there are part of our business at any moment in time are growing, there are other parts that are shrinking, that's the beauty of the diversity in the group.

In addition to that, I would tell you that there may be parts of our business that may be appear as though they're shrinking from a premium perspective but we're growing in a unit of exposure perspective due to feeling that there's appropriate margin available in the business I would use workers compensation as an example of that.

On the other hand the auto line would be an example of a place that we’re probably shrinking even more than it appears on the surface because of the rate increase that we're getting so in fact our units of exposure are on the decline.

Loss ratio coming in at 16.9 was generally speaking in-line with our expectations though it was somewhat negatively impacted by some noncash short-tail losses and of course the expense ratio with a 33 was a modest improvement from the same period last year and this number tends to ebb and flow depending on where we're in starting new businesses as we've mentioned to you in the past, when we start new businesses before they're operational we hold those expenses at the holding company once the businesses are running business and operational, then their expenses will appear in the expense ratio along with of course their revenue.

On the investment front, it was a good quarter for a couple different reasons and hopefully more good news to come certainly would appear to be the case.

Investment returns on the portfolio came in at 3.3 which was an improvement of about 10 basis points from the same period last year and this was achieved while the duration was maintained in three years. So kudos to my colleagues in the investment portfolio and how they're managing the traditional portfolio.

Another comment that I would like to highlight on the topics of investments has to do with the alternative portfolio.

As we talked about I don’t know if it was last quarter or perhaps over the past couple of quarters, as interest rates came down and available yields came under pressure with traditional alternatives, we started to - left with relatively modest percentage of the portfolio to alternative opportunities, specifically in real estate as well as private equity.

As we allocated investable assets in those direction, we found ourselves in a position where we gave up investment income that would come into our operating numbers and when we realized gain, they would come in through net income but not into operating.

It's been a little bit of a concern because we're not sure that we've gotten full credit for this along the way and people realize that from our perspective, what we've done in real estate and what we've done in private equity is really dove tails with our overall approach to managing the business, focused on total return.

What we do on the risk bearing side of the business or the underwriting side if you'd like, as well as the investment side both of those are grounded in a concept of risk adjusted return. It's also worth mentioning that some of the expenses associated with the alternative investments come into operating income though the gains do not.

So I just thought that would be worth clarifying that Rich is going to be talking about some of the gains that we took in the quarter as well as some of the gains that we're going to see coming through in the fourth quarter as well. So I'm going to pause there. And I'll hand it over to Rich..

Thanks , Rob, appreciate it. For the third quarter, we reported net income of $221 million or $1.72 per share, compared with the prior year's net income of $153 million or a $1.18 per share.

The growth in net income was due to an increase in realized gains of $122 million, primarily from the sale of our investment in Aero Precision Industries and to an increase in investment income of $12 million. Those increases were partially offset by lower income from Aero Precision's operations due to its sale in August.

Higher start-up costs associated with new operation, including our previously announced high net worth business and our other yet to be announced companies. Higher interest expense related to recent debt offerings and to a decline in insurance service profits and foreign currency gains.

Our operating income for the third quarter was $114 million or $0.88 per share, compared with the prior year's operating earnings of $119 or $0.92 per share. Overall our net premiums written increased by 2.3% to more than $1.6 billion, the insurance segment represented the entirety of the increase while the reinsurance segment was largely unchanged.

The growth in the insurance segment was led by a 13% increase and our other liability business, in addition professional liability was up approximately 9% while workers compensation, commercial automobile, property and other short tail lines declined a few percentage points on average quarter over quarter.

For the reinsurance segment, the increase in properties, net premiums written largely offset the decline in casualty, resulting in total reinsurance net premiums written of approximately $158 million.

As Rob referenced in his comments the reinsurance market continues to be competitive and we have maintained our disciplined approach to deploying capital on a risk-adjusted basis.

Similar to recent prior quarter's our property reinsurance business has grown in large part due to structured reinsurance transactions which have very limited cat exposure and carry a lower than average loss ratio whilst being partially offset by higher profit commissions.

As we’ve discussed on prior calls, these transactions have features that cap our loss exposure and adjust commissions for experience.

Our overall pretax underwriting profits remained unchanged at approximately $97 million quarter over quarter, the [indiscernible] year loss ratio before cat losses was 60.9% compared with 61% a year ago and comparable to full year 2015.

Our cat losses for the current quarter were $12 million with 0.8 loss points compared with $8 million or 0.5 loss points in the prior year.

Loss reserves developed favorably by $13 million representing our 39th consecutive quarter with positive development that gives us a calendar year loss ratio of 60.9%, an increase of 0.4 loss points from a year ago. Our overall expense ratio for the third quarter was 33% that’s compared to 33.2% in the third quarter of 2015.

In pure dollar terms, the underwriting expenses increased 2.8%, while net premiums earned increased 3.6% quarter over quarter. The insurance segment expense ratio was 32.4% representing a decline of 2/10ths of a point from the third quarter of 2015 and slightly below the full year of 2015.

Similar to the overall expense ratio, the decline in expense ratio for the insurance segment is attributed to a higher increase in earned premium, relative to underwriting expenses.

The reinsurance segment expense ratio decreased one half of a percentage point to 38.5%, that decrease was due primarily to higher earned premium relative to underwriting expense.

Our net premiums earned increased 1.5% on relatively flat underwriting expenses that brings our combined ratio to 93.9% for third quarter 2016 compared with 93.7% for the same quarter a year ago. Investment income increased approximately $12 million or 9.3% to $146 million resulting from a few main contributors.

First, income from fixed income securities was up $10 million to $109 million with an annualized yield of 3.3% which rose slightly from the third quarter 2015 of 3.2%. The most significant contributor to the growth in fixed income is a larger investment base. If you would look quarter-over quarter our investment base increased by more than $1 billion.

Second, income from the merger arbitrage account and investment funds increased $4 million and $2 million respectively, compared with the year ago quarter. And finally earnings from loans receivable declined $3 million, resulting from the maturity and payoff of certain loans in the portfolio.

At September 30, 2016, after tax and unrealized investment gains were $315 million, representing an increase of $134 million from the beginning of the year or approximately 75%. The average rating was unchanged at -AA minus and we shortened the portfolio from 3.3 years at December, 2015 to three years, at September 30, 2016.

The overall tax rate was 33.5% which increased primarily due to the significant net investment gains in the quarter, much of which arose from the sale of Aero Precision industries which just as a reminder was not previously reflected in stockholders equity.

On an operating earnings basis, the effective tax rate for the quarter was 30.2% and year to date of 30.7% which is comparable to the nine months ended September 2015, that gives us net income of $221 million, an overall return on equity of 19.2% on an annualized basis and for comparison purposes, a pretax return on equity of 28.8%.

Also during the quarter our book value per share increased $0.51 to $40.48 which is an increase of 5.1% on an annualized basis.

In addition we returned capital to shareholders of approximately $140 million through share repurchases of approximately 1.1 million shares or $62.4 million as well as declared a special dividend of $0.50 per share above our ordinary dividend of $0.13 per share.

Our operating cash flows were strong with $394 million for the third quarter of '16 approximately $725 million on a year-to-date basis for 2016. One final comment regarding our investment in HealthEquity, we sold approximately 2.2 million shares in October and realized a pretax gain in the fourth quarter of approximately $65 million.

You may recall we’ve accounted for this investment under the equity method, following the completion of the sale we expect to begin reporting our investment in HealthEquity at as fair value.

Based upon the sale of these shares and the market price at September 30, 2016 we would expect book value to increase by approximately $2 per share in the fourth quarter. Thanks, Rob..

Thank you, Rich. Karen, that completes our formal remarks. So if you'd please open it up for questions..

[Operator Instructions]. Our first question comes from the line of Michael Nannizzi from Goldman Sachs..

So I just had one question I had, just to confirm it was $13 million of favorable development for the crossbow segments is that correct?.

Yes..

Okay. So when I looked at the underlying loss combined - or the underlying loss, that would take it to about 61 about flat with last year and up a bit sequentially.

How should we be thinking about, like, is there anything that's different sort of from a book of business perspective that would have caused a little bit of a lift up here, just compared to the prior couple of quarters? Obviously we tend to look at things on a year-over-year basis, but it did pick up here from obviously the last three quarters.

So just a little bit of maybe color clarity on that would be great..

We experienced what I would just define as some meaningful as I suggested short-tail losses that are not normal. An example of that would be a couple of good-sized by our scale property losses not overwhelming but good size, but perhaps even more noteworthy, we had some exposure to SpaceX which was the [indiscernible] that didn't get very airborne..

And then do you have any indication on potential [indiscernible] exposure in 4Q?.

Honestly we're reluctant to even put too much of a range on it from our perspective just because of the potential flood component and how that will work out and how insurance departments will choose to interpret certain things.

But from our perspective, we view this as something that would affect our earnings, certainly not something by any stretch of the imagination that could ever affect capital.

I guess the other piece is obviously the business interaction as well, but again we think it will be a manageable number but I don't think it would be exempt from one at right now..

Okay and then on the high net worth business, you sort of talked a little bit about the start-up expenses there.

Any further granularity on that in sort of what the outlay was and what sort of a headwind to the expense ratio that created in the quarter?.

Well, that's actually in the holding company expense, that's not in the expense ratio. So as we were suggesting earlier, until a business is operational, our definition of operational is they're writing business.

We hold those expenses at the holding company once they start writing business, you'll see that coming through obviously both in the expense ratio as well as the loss ratio etcetera..

And last real quick one, on the $2 per share increase in 4Q book value, so that’s basically facilitated by the fact that you sold some of the shares and that gets mark to market and pretty much everything gets mark to market, but was that $2 inclusive, I'm assuming it is inclusive of the $65 million pretax gain on the shares that are sold?.

Yes, it is..

Our next question comes from the line of Kai Pan from Morgan Stanley..

So first question on the reinsurance, you mentioned a bit in the prepared remarks. Two things one is on the gross and the property reinsurance, talk a little bit more about that.

And secondly, if you look at the whole segment at a 99.7% percent combined ratio for the first nine months you mentioned - is that sort of underwriting result satisfactory? And you mentioned the seating commission, particular high. I just wondered is that because of the scale of the business that we're having.

I just wonder like what is kind of like the target or probability we would like to see the reinsurance segment?.

Okay, so I think there were a couple of questions there. Let me try and take them one at a time and if I miss one, please bring that to our attention.

So as far as the growth that we saw, as you can see in the release, it was really in the property lines and as Rich had mentioned earlier, some of that comes from structured transactions where perhaps the available margin is limited.

But given that the loss ratio is effectively capped, our downside is limited and consequently that allows us to take a different approach on the capital allocation than we would with traditional business.

In addition to that, I think a couple of quarters or so ago, we had announced how we had started an operation to write global property FAC, non-U.S., if you will and that's contributing to some of the growth as well. As far as the results go, no, we do not think that the results for the quarter are our target.

I think that the difference between our results and some other people's results are first of all we do not write a meaningful amount of cats and that's by design.

And if you look at a significant amount of the profitability that the reinsurance market today is experiencing, it's through as a result of a benign cat environment, people release the cat load and then all of a sudden not such a pretty picture, looks more rosy than it probably is, if you peel a few layers back of the situation.

Having said that, when we look on the casualty front for example and overall our loss ratio, the loss ratios quite frankly are they ideal? No. Are they acceptable? Generally speaking yes.

The problem is the seeding commission/if you lump that in with the acquisition cost, that makes the model less attractive than what we would like it to be and that's certainly something that my colleagues are aware of, they're sensitive to and are focused on..

It's only like 10% overall portfolio.

I just wondering the ease of scale you want?.

For us, whether it be the insurance business or whether it be the reinsurance business, we're in business to make money, to make good risk adjusted returns. We're not in business to issue insurance policies or treaties if you will in the reinsurance space or service for that matter.

So our review is that if there are opportunities to make good risk-adjusted return, we're happy for the business to grow. If it would seem as though that's not the case, then we will shrink the business.

I would suggest to you though when you think about returns, combined ratio is not necessarily a perfect indicator, particularly when you talk about structured transactions when the capital allocation is not consistent with what is a traditional capital charge might be..

Okay, that's good. And then second question on the alternative portfolio, you're going to realize $400 million like a gains on the house equity, like a holding.

Opportunity used for like sort of like this becoming to reported sale value on this one, also the sale of the Aero Precision industries, are there sort of major holdings [indiscernible] portfolios that are not currently mark to market and how big is it?.

Meaningful. If you're asking for a number, I don't think that's something that we could give, but this is an ongoing process where we're constantly receding while we're simultaneously harvesting. But also as we've discussed in the past, it can be lumpy as time.

So as our chairman has suggested, on average you should expect give or take $25 million a quarter. There'll be moments in time when it's meaningfully more than that and there may be periods of time that we go through where there won't be gains that are realized, but our chairman and our colleagues are focused on creating value..

So given the sort of, realizing the gains that you have found additional investment opportunities or do you think it's more for shareholder returns?.

I'm sorry, could you repeat the question? I beg your pardon?.

Yes, given the sort of realized gains, your harvesting gains on the prior investments.

Are you sort of reinvesting in other opportunities on the investment side or could be used for capital returns?.

The answer is that we will be looking for new opportunities, if the opportunities exist, we will take advantage of those to the extent that the organization has excess capital. We'll return the capital to shareholders in as efficient way as possible one way or another.

Our goal is not to have excess capital, having said that, if there are good opportunities to put money to work we'll do so..

Lastly, it's like a broader picture question.

You mentioned in your prepared remarks about the significant change of pace the industry going forward and how do you think about your sort of your decentralized structure? Was the pros and cons in dealing with these structural changes? Are you going to start a new company [indiscernible] it or your underlying business can be side where - is it a top-down approach or a bottom-up approach?.

I think fundamentally the world is moving in a direction where they are looking for value and their definition of value is evolving over time. A corner stone for value yesterday, today and in all likelihood tomorrow is expertise.

The way we're structured lends itself to attracting, embracing and leveraging expertise and in a manner that customers can find true value. So I think our structure, while it has had to evolve over time, it will continue to evolve fundamentally our structure will lend itself quite well to the evolving environment..

Our next question comes from the line Arash Soleimani from KBW..

Just wanted to confirm on the net investment income, the core portfolio, did you say, the year-over-year jump there was most mostly attributable to the asset base increasing by $1 billion?.

No, Arash our fixed income portfolio increased by about $1 billion of investable assets. And that is large contributor to the increase in our investment income quarter over quarter. Yes..

And the comment you made earlier in your prepared remarks about distribution and carriers needing to work together, so is the point there something that we should read into regarding some almost direct distribution, that's going to become more common on the commercial front?.

I think that the point of the comment was nothing more than an observation about the environment around us. The fact is, there's not that much new to talk about us, so to speak, every 90 days. The world isn't changing in how we operate day to day, every 90 days.

But the environment that we operate in, this industry is evolving and it is going to evolve more and more over time and we're conscious of it, we're trying to make appropriate plans for that and that's really where it starts and ends.

But it was not meant to be some leading comment, that you're going to see some announcement from us tomorrow, taking the business in a radically different direction. Rather, it's a recognition that the world is changing, the industry needs to change and we're part of that..

And lastly, you mentioned again, as you have for a few quarters, that commercial auto is declining faster than meets the eye. But you had also mentioned I think that commercial auto is looking a bit better and could have some bright spots in it? Just wanted to weigh those two comments..

I think that better can be - it's a comment that can be made in a relative manner. So I think the fact is that commercial auto found itself, as a product line, in a very deep hole. And the idea that a certain just one-off percent rate increase is going to fix that, I think is a pipe dream.

And we can all read in places like the Wall Street Journal about trucking whinging over rate increases, but the fact is, most folks that are writing their insurance haven't been making any money, in fact they haven't been getting paid appropriately for the risk, whatsoever. So, do I think that the situation is improving? Yes.

Do I think that it is still challenged? Without a doubt. But it is heading hopefully - well, it is heading in a better direction.

And again that's why we're getting meaningful rate increases, but you see the line still shrinking as far as premium, because our account or exposure is going down dramatically, in spite of the rate increases we're getting..

And our next question comes from the line of Ryan Tunis from Credit Suisse..

My first one is around Aero Precision and just thinking about whatever potential lost earnings have - that we've lost from that sale.

And it looks like, on my model, I show wholly-owned earnings having come down from like a $7 million quarterly run rate to about a $1.3 million quarterly run rate and I am wondering if that's the right run rate to use going forward, given the sale of Aero Precision or if it was lower or higher for whatever reason, just this quarter..

I think one thing you need to keep in mind here is that the business can be bumpy. Some of the business that's been still with us is the purchasing and selling of aircraft, as well. Small aircraft. And to that end, we could have earnings come through in one quarter that amount to much more than other quarters.

And as a result of that, it's hard for us to really give you a specific number to include in your model, to project for that..

Okay. So may have been seasonally a little bit light. And my other question, I guess, is just on squaring Rob's comments about the environment becoming a little more competitive, opportunities for growth being a little more difficult and also, the longer term objective of trying to bring down the expense ratio.

I'm just curious if - should we look at, I guess the lower single digit NPW growth as making - the objective of bringing down the expense ratio more difficult, in the near to medium term?.

No. I would not lead to that conclusion at all. I think that first of all, I don't think that we as an organization are of the view that our growth rate for the foreseeable future will remain at this level. I think it can change from quarter to quarter.

In addition to that, beyond what we've talked about, as far as high net worth that we have announced, we have some other things that we have been working on, that we have not announced which I think over time will make a considerable contribution. I don't know what the market conditions will be tomorrow.

So it's hard for me to predict exactly what the growth rate will be, but I'm not prepared to make the leap that it sounds like you're suggesting, that it will be low single-digit growth going forward. It may or it may not. But again we have certain things that we haven't announced which we think could offset some of the market conditions.

Number two, from our perspective, while there are parts of the market, the reinsurance market being probably the best example, that are particularly challenging, there are still lots of opportunities.

So one of the benefits of our structure and our 52 different operating units, most of these businesses, compared to industry scale, have a lot of runway, have a lot of opportunity. So again, I would not count out the growth. As far as the specifics around the expense, certainly, growth helps offset that, but I don't think that's the only solution.

As far as expenses go, we do have some initiatives as to how we can become more efficient. Sometimes that will require us to take one step back in order to take two steps forward. Lastly, just on the topic of expense, because it's one that we all do pay attention to, the expense ratio for a specialty company of a 32% to a 33% may not be ideal.

But it's really not that - it's really what I would define is quite competitive. True, if we were a national carrier with a multi-billion dollar personal lines platform and we could have that bring down our average expense ratio, that would be helpful.

But if you look at fact that we're in the specialty commercial lines business, that expense ratio, we think, is quite competitive. And as it relates to the reinsurance and it ties back in with the comment earlier, the internal expenses, if you will, are by and large flat and actually flat with what they were some number of years ago.

It really had to do with acquisition costs and ceding commission, that is putting pressure on that model. So lots of moving pieces, I understand why you may raise the question. May prove to be as you suggest.

But I'm not, at least in my mind and I believe others on this end, we haven't reached that - any conclusion as far as growth going forward and what that means for expenses..

And our next question comes from the line of Jay Cohen from Bank of America..

I got two questions.

I guess first for Rich, the $2 per share in book value, is that $2 is only coming from the investment side? You're not including operating or underlying earnings in that number, are you?.

You're correct, Jay, that's right. It's only the gain from the sale of the 2.2 million shares, net of tax and then the pick-up for the unrealized gain that will come through in the fourth quarter, net of tax..

And then I guess for Rob, as you think about all these potential changes over the next five to seven years, do you feel you have the right type of people in the organization? Will you have to hire additional expertise to really take advantage of some of these changes?.

Well, I do think that we have the right type of people, because going back to the comment earlier about expertise, certainly there will be changes.

But the cornerstone of how value is truly brought to customers, we think is in intellectual capital and expertise and knowledge around exposure and helping customers manage through that risk transfer experience. So do I think that we have the right people? Without a doubt.

Having said that, will we have to continue to invest in people and build our team going forward as the environment changes? Clearly..

Our next question comes from the line of Ian Gutterman from Balyasny..

A couple, just housekeeping ones and then a broader question.

Just to follow up on the HealthEquity, just to be clear, so reason your account is changing is because your sale brought you down 20% and that triggered the change; is that right?.

Correct..

Okay, are you signaling anything by this sale, that your intention is to reduce the stake at some measured pace over time? Or this is a one-time thing and we shouldn't expect anything further over the next year or two?.

I think you should assume that there is no signal one way or the other..

Perfect. That's what I was wondering. Okay.

And then do you have the paid loss ratio for the quarter handy?.

I do. It's 53.4% for the quarter..

And then my big-picture question is, I'm sure you saw some of the earnings releases from last week.

And I know Bill, obviously, you've been very vigilant over the years, talking about watching loss inflation and given the results from some of your competitors and just broader headlines out there and just, where this election may be headed, are you starting to get more nervous? Either Bill or Rob or both about the process for loss inflation? And specifically, I guess I'm thinking more severity than frequency.

It feels like maybe we're starting to see the beginnings of favorable juries, like we did in the late 1990s..

Well, I have a thought or two on that but I'm going to yield to our Chairman here to update you on his views..

I think that clearly, we have a country divided by extremes and views that are in conflict. And I think there's loss of stresses and pressures. But there's also beginning to be a recognition that there's no free lunch. That someone is going to pay for everything that comes about.

I think the last time we had runaway juries, there was a general sense that this was free money and it all came from heaven. I think there's now a reality, reinforced by the issues of increased premiums from the Affordable Care Act, that someone pays somehow or another for everything. So I'm not particularly worried about runaway juries.

I am concerned about inflation, because ultimately, the only solution to repayment of deficits for governments is inflation. And inflation in the short-run will put pressure on insurance pricing. Although with property casualty insurance companies have done better in times of inflation than in non-inflationary times.

So overall I'm okay with where we're going. And I - in the short run, there may be some pressures as we change over to probably a more inflationary time. But in the intermediate term, I think that's probably good for the business..

Thank you and that concludes our question-and-answer session for today. I would like to turn the conference back over to Rob Berkley for any closing comments..

Karen, thank you very much. And thank you, everyone, for calling in. From our perspective as suggested earlier, the marketplace is in the early stages of a transition and we think that it's important that people not misinterpret that. Yes, there are parts of the market that are becoming more competitive.

Having said that, there are a tremendous number of opportunities for an organization like ours. Clearly, there is a transition that is occurring in how the industry operates, both how it will serve its customers in the future, as well as how the relationship between capital and expertise exists and how it evolves from what it was in the past.

We think that our structure, our philosophy focused on people, their intellectual capital and expertise. We think our model of a decentralized structure and being closer to the marketplace is going to lend itself very well to these changing times.

Again, from our perspective, we think that we're well situated to capitalize on the changes that are coming the marketplace's way. And we would expect that this will inure to the benefit of our shareholders over time. Thank you all and we'll talk to you next quarter..

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone, have a good day..