Robert Berkley - CEO & President William Berkley - Executive Chairman Gene Ballard - EVP Rich Baio - CFO.

Josh Shanker - Deutsche Bank Kai Pan - Morgan Stanley Amit Kumar - Macquarie Arash Soleimani - KBW Jay Cohen - Bank of America Ian Gutterman - Balyasny Ryan Tunis - Credit Suisse Bob Farnum - Boenning & Scattergood.

Good day and welcome to the W.R. Berkley Corporation's First Quarter 2017 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 limitations, 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 31, 2016, 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. W. Robert Berkley, Jr. Please go ahead, sir..

Thank you, Valarie, and good afternoon and welcome to our first quarter call. Joining me on this end of the phone is William Berkley, our Chief Executive -- excuse me former Chief Executive Officer, Executive Chairman, I almost give up my title there for a moment, Gene Ballard, our Executive Vice President; and Rich Baio, our Chief Financial Officer.

So the agenda is consistent with what we've done over the past few calls is I'm going to kick it off with some general highlights from the quarter, both as to what we see going on in the market as well as a couple of observations on our quarter then I'm going to relatively quickly hand it over to Rich to run you through our results for the quarter in a bit more detail.

So at a macro level, generally speaking while some would suggests the bloom is off the rose to a certain extent with market conditions. While clearly things may not be as rosy as they were about a year ago from our perspective, things are not withering on the vine at all, in fact there are many opportunities.

By example, workers' compensation from our perspective for those that have appropriate skills and expertise are able to navigate a more competitive market and still find opportunities that offer great margin.

And quite frankly from our perspective, pricing in the first quarter in many of the parts of the markets that we participate remain better than we have budgeted or expected. Professional, very broad space some lines within the space are very competitive such as parts of the D&O market as well as some of the medical classes in particular.

Having said that, we continue to be able to find opportunities within the professional lines that we think are exceptionally attractive. And by extension you can see some of the growth that we had in the quarter. And no, we're not going to be specific as to the lines that we think offer those great margins.

Much of the shorter tail lines are very challenged from our perspective nothing new there, property and marine, offshore energy, much of the A&H space, a very challenged to say the least.

And perhaps in part is what's leading some of the noise that you hear coming out of the London market and how that market is grappling with quite a few issues and some pain.

Speaking of pain, reinsurance market, it remains from our perspective a bit of a mess, unfortunately every time you see a bit of a spark of sanity it seems like it gets stomped out or extinguished pretty quickly. A few other macro topics.

Certainly one of the topics is your Ogden table the change that came out of the UK as it relates to the discount rate. This let me pause here to think about the right way to phrase it.

This is a concerning situation, it's a concerning situation because when you see policymakers make this type of change, where there will be a retroactive impact, it creates great challenges for all of us in trying to achieve what presumably was a shared goal that goal being offering a consistent and predictable market for the good of society and all stakeholders.

It struck us as a bit odd after the discount rate having been left in the same spot for approximately a decade and a half through financial crisis and beyond for event to be adjusted to the extent that it was not just prospectively but retroactively as well.

Another head scratcher as it relates to the Ogden tables would be when you look at the projections for the impacts of the industry, seeing the number 6 billion, seeing the number 7 billion thrown around, but when you compare that to what the announcements have been by industry participants as it relates to the impact on their numbers, you're coming up with a small fraction relative to what the projected economic impact is projected to be for the industry.

Few other macro topics, claim trends, something I think we talked about on the last call or the call before that. We continue to be cognizant and very aware of what the impact of eight years of Washington being somewhat controlled by individuals and a group that are historically friendly to the plaintiff bar.

I think it's not perfectly clear what the impact would be. Having said that we are seeing early signs that the trickledown effect may be there and we'll only know for sure with time. Two other quick ones, distribution another topic I think we've touched on in the past.

It is concerning to us how the tension between carriers and distribution continues to be on the rise. The fighting over pennies on the dollar of commission seems to be getting in the way of the macro challenge and macro opportunity. Distribution and carriers working together to bring greater value to ultimately insurers or customers, if you like.

The fact of the matter is that customers are demanding greater transparency; customers want greater clarity as to what the value proposition is; and by and large we as an industry as opposed to focusing on those needs are somewhat wrestling amongst ourselves as opposed to trying to address what really needs to be addressed for the long-term.

One other quick macro topic, I'll highlight and again one I think we've touched on in the past alternative capital. As we suggested on prior calls, we think that this is here to stay, it will continue to evolve. There's no doubt that the relationship with capital and expertise will continue to evolve.

And again we're paying close attention to this and trying to assess what this means for our business and are developing strategies for how we think to take advantage of this evolution. But regardless of the source of capital and how it presents itself, I think what will not change is the need for that capital will have for having expertise manager.

Couple of quick comments from the quarter and again I'll keep it brief because Rich is going to get you into the weed. Top-line impacted just fundamentally by underwriting discipline. It was particularly evident in the reinsurance segment and Rich will give you some more detail on that.

But as we suggested to you in the past, we're not in a business of issuing insurance policies or issuing reinsurance treaties, we are in the business of managing capital and making a good risk adjusted return. When the opportunity is there, we will take what we believe is full advantage of it.

When it isn't we will not be deploying our shareholders capital in a way that we view is less than responsible. Loss ratio we touched on Ogden earlier, we certainly felt that.

In addition to that, while our CAT number was relatively benign compared to perhaps some of the announcements that you've heard from others, we did have somewhat I would define short tail losses, some of that was related to weather but didn't trigger our definition of CAT that being PCF. And some of it was not related to weather at all.

So I would not overreact if I were you to the current accident year. Expense ratio, again Rich is going to give you some details on this, negatively impacted by some businesses that we've started recently.

Some of those you presumably are clearly aware of because the press releases we have done, some of them are businesses or new operations that we started within new businesses so the clarity may not be there to the same extent.

To make a long story short the businesses that are three years old or less impacted our expense ratio to the tune -- or negatively our expense ratio to the tune of approximately 60-ish basis points or so in a moment Rich will correct me if I'm wrong but that's my recollection.

In addition to that as we've suggested in the past I think Berkley One was the example that we used but we do have some other businesses that are in the incubator, if you like, where they are not operational those expenses we hold in the corporate expense line and that negatively impacted corporate expense to the tune of a few million dollars.

I think something that we've touched on in the past with, with many of you and I won't let the opportunity go by without highlighting it. Much of our business has been and will continue to be built on organic growth. Many of our counterparts in the industry build the business in part through organic growth but heavily based on acquisitions.

When they make acquisitions, they pay a premium to book value if you like and that goodwill sits on their balance sheet indefinitely. In our case the equivalent of goodwill we effectively much of that we expense as we are starting these businesses from scratch.

I highlighted because it is a difference and it does impact our earnings and ultimately our economic model over at least in the short run and as long as we continue to build business this way. Finally, investment portfolio kudos to colleagues in that part of the organization continued to enjoy capital gains coming through.

I think, as we suggested in release we're on target to meet or more likely than not perhaps exceed the target that we put forth which as you may recall is give or take about 100 million bucks a year call it 25 million a quarter, Rich is going to give you a little bit more color on the gains or gains that we had in the quarter.

In addition to that, our funds performed particularly well and Rich will give you a little more color on that front also. Finally, just on that topic duration shortened up a little bit but I -- he is kind of nodding his head at me which kind of means I'm starting to tread on his turf.

So I will pause there and I want to hand it over to Rich, once Rich is done you'll have the four of us at your disposal to answer any questions that you may have.

Rich?.

Great. Thanks Rob. Appreciate it. For the first quarter, we reported net income of $123 million or $0.96 per share compared with the prior year's net income of $120 million or $0.93 per share.

Due to our focus on total return from an investment perspective and how we manage the business, we have decided to discontinue reporting operating earnings beginning with this quarter. Net income grew approximately 3% due primarily to an increase in pre-tax net realized investment gain of $45 million and pre-tax net investment income of $19 million.

Those increases were partially offset by lower underwriting income which was due to a $30 million increase in prior accident year reserves for the change in the Ogden discount rate that Rob had mentioned. The effect of which was approximately $0.17 per share.

We reported lower income from non-insurance businesses largely due to the sale of Aero Precision's operations in August 2016 as well as higher start-up cost associated with new operations including our previously announced high net worth business and higher interest expense due to the repositioning of our capital structure we undertook in the first half of 2016.

Overall, our net premiums written decreased by 1% to slightly less than $1.65 billion, the insurance segment grew about 1% to approximately $1.5 billion, while the reinsurance segment declined 17% to $153 million.

The growth in the insurance segment was due to increases of 9% for professional liability, 7% for workers' compensation, and 4% for commercial automobile. On the other hand, short tail lines and other liability decreased in the quarter due to competitive pressures.

For the reinsurance segment, the ongoing competition and inadequate REIT environment has limited the company's ability to achieve acceptable risk adjusted returns for certain business and accordingly net premiums written in both property and casualty have declined over the comparable period.

We continue to maintain a disciplined approach to deploying capital on a risk adjusted basis. The accident year loss ratio before CAT losses and excluding the change in the Ogden discount rate was 59.8% compared with 60.2% a year ago. The reduction in the Ogden discount rate gave rise to an increase of 1.9 loss ratio points in the quarter.

CAT losses were $14.5 million or $1 million lower than the prior year's quarter. This represented 0.9 loss points in first quarter 2017 compared with one loss point in 2016. Loss reserves developed favorably by $2 million or 0.2 loss points compared with $12 million or 0.8 loss points for the same period a year ago.

That gives us a calendar year loss ratio of 62.4% including the impact of Ogden an increase of two loss points from a year ago. Our overall expense ratio for the first quarter of 2017 was 33.3% compared to 33.1% in the first quarter of 2016.

The insurance segment expense ratio increased four-tenths of a point to 32.9% due to the addition of new operation and new product offerings like transactional insurance and professional casualty line by existing companies. We have also expanded in Latin America and the Asia Pacific region.

The reinsurance segment expense ratio decreased 1.4 percentage points to 37% due primarily to lower acquisition costs. In pure dollar terms, the underwriting expenses decreased by 5.9% while net premiums earned decreased by 2.4% quarter-over-quarter.

That brings our combined ratio to 95.7% for the first quarter 2017 compared with 93.5% for the same quarter a year ago, most of the differential relates to the change in the Ogden discount rate. Investment income increased approximately 14% or $19 million to $149 million resulting from a couple main contributors.

First, income from fixed income securities was up about $6 million to $108 million with an annualized yield of 3.2%; and second, income from the investment funds increased $10 million dollars compared with the year ago quarter, which is primarily attributable to investments in energy related funds.

At March 31, 2017 after-tax unrealized investment gains are $418 million relatively unchanged from the beginning of the year.

The average rating was also unchanged at AA minus and the average duration for fixed income maturity securities including cash and cash equivalents decreased from 3.1 years at year-end 2016 to three years at the end of the current quarter.

The effective tax rate was 32.4% primarily due to higher net investment gains and a lower proportion of tax exempt interests to pre-tax income in the quarter. That gives us net income of $123 million and an overall return on equity of 9.8% on an annualized basis, and for comparison purposes, a pre-tax return on equity of 14.5%.

Book value per share increased $1.08 to $42.73 in the quarter representing an annualized increase of 10.4%. Thanks Rob..

Thank you, Rich. Okay, Valarie, if we could open it up for questions that will be great..

Thank you. [Operator Instructions]. Our first question comes from Josh Shanker of Deutsche Bank. Your line is open..

Two questions. One that go through when you're setting the development numbers did those include or exclude the Ogden numbers, maybe we can just repeat that again I realize you said but just trying to figure that out..

The net development of positive $2 million that did include the impact of Ogden..

Right.

And second so I noticed that obviously there is about a 4% increase in premium volume in commercial auto my guess is that positive rate but probably some negative exposure, I'm wondering if you can talk about where the market is in commercial auto, this is a baseball game, how many more years and how far do we need to get adequate?.

Well your comment towards the beginning there that yes we're getting a fair amount of rate certainly more than the growth and by extension the exposure is going the other way. From our perspective, Josh, it depends how quite frankly how hard the market gets and how quickly that that happens.

So from our perspective, we continue to shrink the business and demand additional rates. There are others out there that are doing the same thing but we don't think that they are going as far as is required. As we are going to write business that we think is adequately priced to the extent that it's not there, we won't write the business..

And do you have a view on how much further the market needs to go before it becomes generally attractive?.

Josh I'm not going to get into specific rate needs but I would suggest using a very broad brush, the market needs more ways than it is generally speaking obtaining today but obviously the commercial auto space is a pretty big space, so it one would need to use a finer brush than I'm using..

Thank you. Our next question comes from Kai Pan of Morgan Stanley. Your line is open..

So just follow-up on the reserve leases, if you take out the Ogden rate charge of $30 million, so your underlying reserve release is like something like $32 million per quarter is that right?.

That's correct..

It's much bigger than the previous quarters; I just wonder could you give a little bit more detail on which line and which accident year you are coming from?.

Yes, we will have some of that disclosure, I guess, Rich, in the Q, but that's typically not the level of granularity that we're going to get into on the call at this stage. I would tell you that we looked at our reserves every 90 days. We look at them at a very granular level. We had peer reviews done and we take it very seriously.

Obviously when we think about how we reserve our business, we take into accounts potential exposures for the unforeseen events, and that is something that is contemplated..

Okay, great. Then second question on your net realized gains, so you're on track to exceed $100 million for this year. I just wonder how much unrealized gains on your book as well as those not on your book that potentially could be materialized or monetized over time.

And in the current environment where do you find investment opportunities?.

I think that -- this is Bill; I think that there are lots and lots of opportunities. And we follow accounting rules to reflect unrealized gains that show on our balance sheet and that don't.

So health equity which now shows on our balance sheet until we got under 20% we had $400 plus million of unrealized gains that didn't show on our balance sheet because those are the accounting rules. We own real estate that we carry at cost because that that's how you do it.

And we think that, that there's substantial unrecognized value in most if not all of our properties which in value were probably certainly is in the hundreds of millions of dollars.

But you can't predict at any moment in time, if we could, we would because then we would have predictability and all of the analysts would love that predictability in a quarter-by-quarter basis.

And the answer is though we have lots of unrecognized gains some that aren't at all reflected on our balance sheet and it's likely they will be realized over the next few years and hopefully we find new investments to create more opportunities. We do that in our private equity business. We do that in all parts of our investment portfolio.

And at least as of this moment, we don't see anything that's causing us to believe that's not going to continue..

Thanks Bill.

Just follow-up on that do you feel the current environment is more of investing environment or more harvesting environment?.

It's a continuous process. Today may be a harvesting environment and tomorrow may be an investing opportunity; it just depends on the opportunities that are presented. We don't know ahead of time, I sit and talk to someone about an opportunity and maybe we'll be able to take advantage of it and maybe we won't.

But it's you look at a hundred things and three of them you invest in and one of them is terrific, one of them is okay, and one of them may not be really so great but it's a constant process. So I can't tell you that answer because it just, it changes all the time..

Thank you. Our next question comes from Amit Kumar, Macquarie. Your line is open..

Thanks and good evening. Two questions one I do want to go back to I guess Kai's question and I appreciate that we get the color in the Q but any broader color on the much higher than anticipated reserve release would be helpful..

And the answer is I think we will give you some clarity in the Q. We looked at our reserves on a quarterly basis and we felt comfortable with the release that you saw. I'm not sure what else there is to share with you. There is no different that we have done any other, other quarter.

I would tell you that certainly when we think about setting our reserves and we think about IBNR, we do take into considerations what we would define as a risk margin for the unforeseen events. So again I think you will see more disclosure in the Q..

I guess what I was trying to ask is there wasn't anything unusual nothing one-timer in nature et cetera. I think that was -- may be I should have phrased the question differently..

I think -- not I think I know the answer to question is that we look at the numbers every 90 days and we try and make a judgment about what is appropriate..

Okay, let's move on to something else. And the second question is going back to I guess Mike's question on, on the margins. When you look at Rob, when you look at pricing versus I guess loss cost inflation in some of your largest lines.

How should we think of the trajectory from here in terms of the overall marketplace and are we getting to the point where the inflection point is within sight or is it still challenging for the broader marketplace but relatively better for W.R.

Berkley?.

Let's give you a little bit of a sense. So for starters by and large in the -- the casualty lines and the workers' comp lines trend is proving to be better than we had anticipated when we come up with our picks. Number two we're in many of these lines getting more rate than we had expected and our renewal retention ratio is intact.

So speaking -- using again a bit of a broad brush we as a group in our insurance business got something just shy of 2% of rate in the quarter with our renewal retention ratio continuing to sort of hangout in that somewhere between 78% and 82% or so.

So the book and the integrity of the book we believe remains strong and you can see that in the renewal retention ratio combined with the rate.

And by extension we think the margin that we're achieving during my comments on trend remains give or take flattish there is some lines of business that quite frankly we think the margins are improving and there are other lines of business where clearly we're concerned about the margin.

I think you could use the reinsurance segment as an example of that. We are concerned consequently it's shrinking..

Fair enough. I'll stop here and Rich thanks for the answers and good luck for the future..

Thank you..

Thank you. Our next question comes from Arash Soleimani of KBW. Your line is open..

Thanks.

I know this has been asked, I just want to confirm so the net number for development is $2 million favorable right?.

Correct..

Okay, thanks. And my other question that the comment you made about the last eight years and the impact that could have. So is that should we take away from that again with a broad brush, are you sort of saying that favorable development should be expected to decline as a result of that..

Not necessarily. What I'm suggesting is something a bit more macro and we have not reached any conclusions.

It's just a general observation that you've had much of Washington being controlled by people that are friendly to the plaintiff bar and as many of those people play a role in setting policy and appointing judges and over the time we can see that tickle through..

Okay.

And do you have any updated thoughts I guess now kind of again in the -- talking politics a little bit but are you more favorable or less favorable in terms of what you expect for some sort of border adjustment tax to pass?.

Well I -- my two cents is yes there's questions around border adjustment but that doesn't mean there won't be tax reform that impacts the industry but fortunately for me and all of us on the call, we have our in-house experts joining us this evening..

I think ultimately our tax issue is really right in the process of the administration where the administration has recognized there are many areas most especially I think insurance industry where our tax laws have been twisted to favor non-domestic companies it's clear for us in the insurance industry where companies write United States business and reinsurer offshore and do not pay their fair share of taxes.

Many companies do it and in fact virtually all domestic reinsures have moved offshore. We're one industry that we understand. But similar advantages have been created by many companies where they do business here and find ways to move their income offshore.

We believe this administration wants to focus on those kinds of things and therefore we think we have a much improved opportunity to level the playing field..

All right. Thank you for that answer.

And are you able to disclose what the contribution of Berkley One was for the expense ratio this quarter?.

Well it doesn't come through on our expense ratio, it does comes through in corporate expense as you may recall, businesses that are not operational we hold those expenses at the parent company and I think it was somewhere between two and three million bucks for the quarter..

Thank you. Our next question comes from Jay Cohen of Bank of America. Your line is open..

Thank you. Two questions.

I guess first may be the shorter one, commercial auto for the first time in three quarters those premiums began to move higher, is that business becoming more reasonably priced given the amount of rate increases you've had over the past couple of years?.

Sorry, Jay, you broke up on the first part of the question, would you mind repeating that, I just want to make sure I got the whole thing. Apologies..

No, no, no commercial auto, is this the first time you have seen in five quarters with the premiums grew year-over-year is that business becoming more reasonable?.

I think that we are finding parts of the commercial auto space attractive. I would tell you that the growth is really driven by rate increase, and as mentioned earlier, our exposure is down, so the rate is up even more than perhaps comes through.

Is it adequate? We are talking about a big part of the market in one breath there are parts of the market where we are seeing the rates reach adequate, there are parts of the market where we just sit back and shake our head and wonder what it is that they seem to know or don't know that we don't get.

So I would tell you Jay it's one of the advantages of being a specialty player. You can bob and you can weave and figure out where you want to participate and that can evolve. But I would tell you, if you want to talk about just a general commercial lines marketplace, there's still ways to go.

And we've been surprised quite frankly by some of the national carriers in particular that are -- had backed away and now seem to be coming in at nowhere to write some pretty good sized fleets which have really left us scratching our head. So again, I think that there is opportunity there but one needs to be careful..

Got it. Second question you mentioned in your early remarks about alternative capital and you're watching developments there.

As you think about new capital coming into the business, alternative capital are you thinking more about managing third-party capital or simply using it somehow to get rid of risk?.

Well I think that we are considering lots of different approaches to using potentially other capital than just what sits on our balance sheet.

I don't believe we envision our organization not having a meaningful balance sheet in the future, at the same time clearly there are large pools of capital in the world that seem to have a different hurdle rate than what our view of a hurdle rate is and have also a desire to participate in the marketplace, the insurance marketplace to be more specific.

And to the extent that we can bring value to those the capital through utilizing our expertise, we are open to that.

Now whether that be done through something like reinsurance or whether we manage someone else's capital in a more permanent way, we are open to in considering lots of different concepts of the approach that several carriers have taken already. But I think our priority versus some others may be possibly a bit different.

We look for things in more perhaps permanent manner than a temporary manner..

Thank you. Our next question is from Ian Gutterman of Balyasny. Your line is open..

Hi thank you.

First numbers question, Rich, do you have the pay loss ratio?.

I do, it's 55.5%..

Great, thank you.

Rob, if I can follow-up on the comments earlier about loss trends and judicial changed in so forth, I guess related to the judiciary changes are you also seeing changes in Jury behavior, I think that's at least on the commercial auto aside anecdotally it seems that's been part of the story is just Juries are more populist if you will are -- are we seeing that spread at all?.

We have seen, I think the industry has seen a gradual increase in severity coming out of court rooms certainly in the commercial auto space, it's hard to understand the trend specifically certainly during the financial crisis, we actually were surprised by what happened with loss trends and they proved to be a bit more benign than we would have expected in certain lines.

But clearly more recently, I think the industry is experiencing an increasing severity trend coming out of Jury awards, we will have to see how that plays out over time and somewhat is adjunct to the Ogden discussion or other situations.

Ultimately what ends up happening and I think often times is forgotten society overall pays the price because all the industry does is redistribute that expense back to society and it just rears its head ultimately in the premiums everyone else pays..

Great.

Of course, of course does it also suggests that that excess writers especially maybe excess writers who used to pay higher up are sort of creeping down are those the guys more likely to get caught on that kind of severity?.

Not necessarily certainly attachment point is important always has been for those that are excess writers. But I think ultimately risk selection is paramount important as well but clearly once upon a time a $1 million loss in a commercial auto space was very exceptional, it's not as much the exception anymore as it once was..

Right, okay..

In other words the definition of severity, I think continues to evolve..

Exactly, exactly.

And then if I could just add one more quick one, there was a footnote in the press release about moving a couple lines of business I think was some insurance to reinsurance just curious what those were or maybe it's not just big a deal, I'm just curious?.

No, I don't think it's a big deal but Rich you want to just comment on it..

Sure. We have the participation in Lloyd’s Syndicate that is in the reinsurance business for property and casualty. So we moved that over and then we also had an assumed reinsurance business in the workers' comp space that we also moved over from the insurance segment to the reinsurance segment relatively small..

Okay.

It didn't look like other than obviously the premiums look like it affected the ratios that much is that correct?.

Correct..

Yes, it was really more of a housekeeping thing for us for purposes of clarity, we thought we should have all the reinsurance where it is and not be pre-occupied with internal reporting and more the nature of the business..

Thank you. Our next question comes from Ryan Tunis of Credit Suisse. Your line is open..

Hi thanks. Just I guess on NPW growth in insurance, listening to Rob talk it seemed like a mixed bag from a growth standpoint but we saw -- we saw growth I guess continue to decelerate there.

Any indication of how much some of the new business objectives like the Berkley One contributed to the 1% growth rate?.

Sure. Well Berkley One it's not operational, they have written zero premium and we don't expect they will be operational probably until the fourth quarter. So they are great contributors to the organization just not in the premium line yet.

And as we have few other operations that would fall in that category where they are sort of irons in the fire in addition to that we have some businesses again that as commented about the impact on the expense ratio that are operational but at this stage are dilutive to the overall and are just beginning to get momentum.

I understand that perhaps the underlying question is how to actually figure out what your growth is going to be or our growth is going to be going forward. And I guess my response is to tell me what market conditions are going to be and I can tell you what the growth rate is likely to be.

So again we have -- the reason for my comment about not leaping to any conclusions as to this being a new norm for insurance growth, one is because hard to know market conditions are going to be; but two, we have a fair number of things in the hopper that are going to be coming online sort of gradually over the next 12 months or so which certainly over the next 12 to 24 and into 36 months could be very meaningful contributors to the top-line and we would expect the bottom-line as well..

Okay, that's helpful. And then my follow-up I guess was just sort of philosophical around the decision to get rid of the operating income definition..

Yes..

So yes I mean I understand the positives with the realized gains that don't get counted but I guess historically we thought about Berkley is having more steady results, lot of peers because of the amount of casualty business you guys write. I guess just curious how you weighed those offsets and thinking about going to the net income model..

So a couple of things. One I think that it's worth noting that we were trying to send a message as you referenced that we think about running the business from a risk adjusted return perspective we think about total return, we think about how we're building value, book value for shareholders.

As far as the comment around consistency of results it is certainly our expectation and hopefully as yours as well that our underwriting results will continue to be predictable and consistent as you suggested that has been the view historically.

At the same time as we've discussed and you're as aware as we are, we have taken some steps from as it relates to the investment portfolio to with some respect really again being focused on the total return and not just being preoccupied with the operating income number and traditional investment income because again when we've talked to shareholders the message that we've received from them is that is what is a priority.

So they change in how we report is merely us sending a message to you and others that this is how we are thinking about it, this is how our board is thinking about it, and in part this is how we've been asked to think about it or we are in agreement with our shareholders.

Having said all of that we don't think that we've created quite the enigma or puzzle for anyone to and we certainly are not trying to be anything but transparent. So if you look at the fourth bullet points under the highlights it's pretty straightforward math to back into an operating income number.

So again it's not that we are trying to be difficult or anything but transparent at the same time, we are trying to share with you and others how we think about the business..

That's helpful. I guess since we do have to think about that line just a little bit more I guess. I guess Rob's comments that are being ahead of pace for the 100 mill should we take that to just be a fact of the fact that you did 52 this quarter and we would have expected 25 or was that a broader comment about visibility into the harvesting pipeline..

I think the way that you should think about it is just as my boss is suggested to in the past give or take you should expect something in the neighborhood of $100 million a year that run rate sort of divide by four is going to get to the $25 million a quarter and the reality is it's going to be lumpy and there may be some years as we have had in the past where we exceed that and some years where we come up short.

I appreciate given one of the objectives that you have that that doesn't help you from a modeling perspective and we are sensitive to that but ultimately our charges to create value for shareholders.

Yes, as we -- just one last thing obviously as you suggested in the release while not to count any chicks before they hatch, at the same time certainly things are pointed in the direction again as we suggested that we will and we will likely to exceed the targeted number..

Thank you. Our next question comes from Arash Soleimani from KBW. Your line is open..

Good evening..

Good evening just had a couple follow-ups. So I know that the $30 million Ogden charge and so is it reasonable to expect going forward then that the current estimated loss rate should be higher in reinsurance..

Not necessarily. I think we tried to fully anticipate what the impact of Ogden would be. And ultimately we've addressed that with the charge or the development more specifically that we took in that part of the business. So I would suggest that you not lead to that conclusion at all..

Okay. And then on the --.

Actually one other comment that I should add to that is in fact it maybe possibly one of the green shoots and there aren't many in the reinsurance space that may serve actually as a catalyst for improved market conditions as well as the insurance market..

Thanks. That makes sense. And then if so, again if we exclude the CAT in the $2 million favorable that comes up for core loss ratio about 61.6% versus 60.2% last year, I know you said some of that is from weather losses or short-tail losses that didn't meet the threshold for a CAT.

Can you just quantify how much those contributed to the loss ratio this quarter? I'm just trying to get a --.

Honestly I don't have the dollars in front of me, if you won't mind giving Rich a call at your convenience he can -- or Karen, either one of them, they can get you that detail..

Thank you. Our next question comes from Kai Pan of Morgan Stanley. Your line is open..

Thank you for the follow-up.

Just on buybacks, there are no buybacks for the quarter, I just wonder what's it behind that decision is that you compare with your investment opportunities or is your stock prices less attractive?.

I think as we've suggested in the past when we have to the extent that we have excess capital we have three obvious alternatives one is to repurchase shares, two is repurchase debt, three is to pay a special dividend.

There's we're very conscious of our capital structure, we are very conscious of having the optimal amount of capital as far as the specifics around which trigger we choose to pull that's something that we discuss after we've done it.

So again I don't think that there's a threshold or a specific detail that we publicly disclose because quite frankly we don't think that's in the best interest of our shareholders..

Thank you. Our next question comes from Bob Farnum of Boenning & Scattergood. Your line is open..

Thanks.

Good evening and I've one quick question on the workers' comp rates, it sounds like pricing is better than expected I just want to know if that, is that you see that as broad based or is that just a few specific classes that are doing really well and all the rest are still going down the tubes?.

Bob, you need to use a fine brush and the comp well no different than the rest of the market.

There are certain parts of the comp market certain territories certain microcosms if you will within the broader market where we think that they're very attractive and we have some very skilled colleagues that understand their market well they have some good tools and they use a scalpel not a cleaver.

So I think they are -- they are knowledgeable about where their margin is and how much freight they need or how much headroom they have to give up in order to achieve targeted returns. So I would caution one not to lead to the conclusion that happy days in the comp market across the nation.

It's quite, it's not the case at all but for those that know what they're doing it's still a pretty good opportunity..

All right, that’s what I figured. Thanks for that..

Yes, thank you..

Thank you. I'm showing no further questions at this time. I would now like to turn the conference back over Mr. W. Robert Berkley, Jr. for any closing remarks..

Okay, Valarie. Thank you very much for your assistance this evening and certainly thank you to all that dialed in.

We think that in spite of the noise stemming from the things such as Ogden and a couple of other events that we referenced impacting the accident year, some non-CAT weather related and other short-tail lines, we think we’ve have a pretty decent quarter.

We think we have a lot of things again in a fire or the incubator that quite frankly position us well for the next couple of years and we remain quite optimistic.

We think we understand our business, we think this is one of those moments when being in the specialty business and being able to bob and weave and run between the legs of the giants is when you're able to actually deliver better long-term returns for shareholders.

So again thank you all for calling in and we look forward to speaking with you in give or take 90 days..

Thank you. Ladies and gentlemen this does conclude today's conference. Thank you for your participation and have a wonderful day. You may all disconnect..