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WR Berkley Corp  (NYSE:WRB)
Q1 2019 Earnings Call
April 23, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to W.R. Berkley Corporation's First Quarter 2019 Earnings Conference Call. Today's conference call is being recorded.

The speakers' remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words including, without limitation, beliefs, 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, 2018, and our other filings made with the SEC for a description of the businesses 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. Rob Berkley. Please go ahead, sir.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Thank you very much, Jimmy and good afternoon, all again. And thank you for joining us. So with me on this end, we also have Bill Berkley, our Executive Chairman; and Rich Baio, our EVP, CFO, CPA and probably a bunch of other acronyms as well.

So we are going to change the agenda around a little bit from what we've followed in the past and we're going to start off with Rich walking us through the quarter, hitting some of the highlights and framing it for you a bit, and then I will follow on his comments with a few brief thoughts and we will quickly make our way over to Q&A.

So, Rich, if you would, please.

Richard Mark Baio -- Senior Vice President, Chief Financial Officer & Treasurer

Thanks, Rob. To begin with, our results are adjusted to reflect a 3-for-2 stock split. We reported an increase in net income of approximately 9% to $181 million or $0.94 per share. This compares with $166 million or $0.87 per share for the prior year's quarter. Our return on equity for the quarter on an annualized basis improved 1% to 13.3%.

Pre-tax underwriting income improved in the quarter along with net investment income from our core investment portfolio, net investment gains and foreign currency gains. Offsetting these improvements is lower net investment income from investment funds and higher non-recurring other costs and expenses for performance based compensation.

Pre-tax cat losses in the quarter were $12.7 million or 0.8 loss ratio points. We did experience slightly elevated non-cat weather-related losses due to winter storm events. The total non-cat weather-related losses amounted to 0.9 loss ratio points. Both cat and non-cat weather-related losses were in-line with expectations and within a reasonable range of our reported results over the past several years.

Prior year loss reserves developed favorably by $7 million or 0.4 loss points, compared with $12 million or 0.8 loss points for the same period last year. Accordingly, the current accident year loss ratio before cat of 61.6% was largely unchanged from the year ago quarter. To level set the comparable periods, pre-tax underwriting income on an accident year basis excluding cat was $96 million compared with prior year's quarter of $79 million, representing an increase of approximately 22%.

Before discussing the segment results, we have highlighted for numerous quarters that our reinsurance operations declined due to the competitive nature of the business. As such, the reinsurance business has become a more modest percentage of the overall group. We have continued to evaluate our reporting segments and concluded, we should reclassify an operation that's solely retains risk on an excess basis. This reclassified business has similar characteristics to the excess of loss reinsurance business.

To this end, we have renamed the reinsurance segment to Reinsurance and Monoline Excess. Net premiums written increased 2.7% to approximately $1.7 billion. The insurance segment grew 1.6% to about $1.5 billion, while the Reinsurance and Monoline Excess segment grew to $212 million. The expense ratio improved by 0.9% to 32.3% quarter-over-quarter and 0.6% better than the preceding consecutive quarter. The benefit in the expense ratio is driven by higher net earned premium, as well as lower underwriting expenses.

In dollar terms, underwriting expenses declined 1.2%, while our net premiums earned increased 1.6%. The improvement in underwriting expenses is primarily attributable to lower commissions and compensations. We continue to innovate and bring operational efficiencies to the business and expect to benefit from these initiatives.

As a reminder, the improvement in our expense ratio may not be a smooth linear decline due to investments we are making in the business. This brings our reported combined ratio for the first quarter 2019 to 94.3% and our accident year combined ratio, excluding cat to 93.9%. Net investment income is $158.3 million, compared with $174.5 million for the year-ago quarter. The core investment portfolio increased approximately $7 million or 5.6%, led by fixed maturity securities with an investment yield of 3.6%.

The arbitrage trading account, which focuses on public -- publicly announced M&A transactions also improved 104% to approximately $11 million. Investment funds declined to $11 million, primarily due to real estate and energy funds.

You may recall that, first quarter 2018 reflected significant mark-to-market adjustments in the real estate funds, contributing to the heightened investment income from investment funds of $40 million. The current quarter's investment income from investment funds of $11 million is marginally below our expected range, primarily due to mark-to-market adjustments on energy funds.

We also have maintained an average rating of AA minus and slightly reduced the average duration to 2.7 years for fixed maturity securities, including cash and cash equivalents. We are well positioned to benefit from rising interest rates, while minimizing any adverse impact on the balance sheet. We reported pre-tax net realized and unrealized gains on investments of $69 million.

First quarter 2019 marks the first quarter of comparable accounting treatment for equity securities, as it relates to the change in unrealized gains and losses to the income statement. The pre-tax realized gains from the sale of investments amounted to $27 million and the change in pre-tax unrealized gains on equity securities was $42 million. The effective tax rate was 20.8% for the quarter, largely unchanged from a year ago. The effective tax rate differs from the US Federal Income Tax rate of 21%, primarily because of tax exempt investment income, offset by foreign operations with the higher tax.

Stockholders' equity increased 6% or approximately $325 million from the prior consecutive quarter. The growth in book value was comprised of strong quarterly earnings, as well as an increase in after-tax unrealized investment gains of $125 million and a reduction in the currency translation loss of approximately $20 million.

Thanks, Rob.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Rich, thanks very much. So let me offer a couple of quick thoughts. And again, as promised, we'll get on to your questions in short order. So I has an opportunity as I was trying to stare out the window and figure out what I could share with you all beyond Rich's comment. And one of the thoughts at my mind have being drawn back to is something that my boss taught me early in my career and the industry. And that is, for the industry to change, it always seems to take longer than you would expect it would or then it should. And that was clearly the case a couple of decades ago when I was taught that lesson and I think it's still the case today, in spite of the fact that we have better data and analytics.

I think the other piece that was shared with me or taught that was shared with me is that, as a result of that delay in recognizing the need for change, or the opportunity for change. When things look bad, they tend to actually end up being worse than you expect. And when things look good, they tend to actually be better than you expect.

I think those two thoughts apply very well to the industry everyday, but they are particularly applicable these days. The property market everyone expected would have shifted after the cat activity that we saw in '17, it didn't respond in early '18. We are now seeing our early early signs, but meaningful signs that it is responding to the cat activity.

The casualty market, perhaps, even more impaired, but not as visible because of the nature of the business and the time that it takes for the results come through is perhaps equally challenged in the position that it is in. From our perspective, with the exception of worker's compensation by and large every major line of business within the commercial lines space is in some point affirming.

It is worth noting, as we've commented in the past, our product lines do not march in perfect lockstep with one another. But from our perspective also directionally, they are moving together again with comp being the exception.

One of the data points that we have been able to identify to support this is, what we were able to achieve and raise during the quarter. Ex-comp the organization achieved 6.4% rate increase. It's worth noting that, we achieved this with our renewal retention ratio remaining at a similar level to what it has been for the past several years. Lots of people talk about rate and they talked about premium growth and a variety of different things. I want to briefly define for you when we talk about rate increase, what that means for us.

We look at a unit of exposure and how much we charge for that unit of exposure and we compare that with the same unit of exposure, if you will from prior periods. So for us, we are looking to compare the amount of rate or $1 per unit of exposure that we're getting in corresponding periods. There are obviously lots of different ways to do it, that is our approach.

We take a similar approach on new business, but obviously, it's a little bit more challenging for us, because the nature of new business and trying to compare that to our in-force book is not as easy. Rich mentioned the loss ratio, the only comment I would add to his were, obviously, he mentioned the cat activity, as well as the non-cat weather related. We use PCS as our definition forecast, so we did have a fair amount of weather-related losses that did not fall under the PCS umbrella. A lot of people get pretty hung up on this stuff. The math is that, we had 1.7 points of weather-related losses, some folks back it out of the results from our perspective, as part of the business and you got to leave it in. But it would seem as though we are in the minority.

The expenses, Rich touched on that earlier, obviously, the 32.3% was a significant improvement. I would caution people not to assume that, that is the new run rate for us. I do believe that we should be able to consistently do better than the 33%, but as Rich suggested, we are making some investments. Do I think we're doing better than the 32.9%, where we've been running recently? Yes, but I certainly do not think that people (ph) should be penciling of in 32.3%. Rich made the passing comments and I'll just highlight it a little bit. Part of the improvements in the expense ratio came as a result of the loss ratio ticking up due to some of the property losses stemming from weather.

On the investment side, again, Rich touched on the duration at the 2.7, we do not envision this shortening up from here. Having said that, I don't think you should expect it to start moving out or lengthening drastically anytime soon. Our view is that the yield curve is pretty flat, so there is no compelling reason to push out. And aside from that, we're not unhappy with the flexibility. I do think as windows of opportunities present themselves, you will see us take the duration out to distance year.

A couple other quick comments just on the investments as well. Rich talked about the realized and unrealized that came through the income statement, that is related to preferreds that we have in Fannie and Freddie that we've touched on in the past.

Overall, when we look at the quarter, I think it's pretty clear that we are making rate the priority. There are a whole host of reasons for that, including where we see social inflation. Having said that, we are feeling pretty comfortable at this stage that ex-comp getting 6.4% rate increase for the portfolio overall is well outpacing in all likelihood of loss cost trend translating into what is likely to be meaningful margin expansion as you see this higher earned premium earned through.

We as an organization are constantly trying to optimize the balance between exposure growth and rate. We are trying to optimize the balance between risk and returns. We are trying to ensure we strike the right balance between being opportunistic, but obviously offering continuity and predictability to our customers. We have a team, thay take an ownership mentality to how the business is run, they take a long-term view, we are not willing at any time to try and spruce up today to make tomorrow look better. And I think that is what allows us to be able to consistently perform at a reasonably high level.

So let me pause there and we should turn the microphone over to those that have dialed in and answer any questions to the best of our abilities that you may have for us.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from Mike Zaremski with Credit Suisse. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Mike. Good afternoon.

Mike Zaremski -- Credit Suisse -- Analyst

Hey, good afternoon. First question on the the P&C kind of competitive environment. Clearly there is some pricing momentum ex-comp that you've spoken to for a couple of quarters now. Anything else happening in terms of maybe changes in terms and conditions or I think you used the term returning discipline in your -- in the earnings release. So just curious if anything other than pricing is kind of help your margins going forward that maybe we're not thinking about?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

If you look back in history there is a series of steps. And yes, if you will, the playbook that we use. First, you start to see the rate move up, that's followed by tightening of terms and conditions kind of overlapping somewhat simultaneously that once we get the terms and conditions and the rate where we like, you're going to start to see the exposure count, if you will, grow as well. So we're pretty happy with where the margins are today, but you're going to probably see them enhanced tomorrow. And again, I think step one is the rates moving up, and history would suggest, you'll see the the terms and conditions start to tighten from there in the market and again that will be sort of our strike zone to open up the (inaudible) a bit more.

Mike Zaremski -- Credit Suisse -- Analyst

Okay. In terms of the top line, clearly profitability is excellent. That was -- I guess, if I look at consensus and what top line is growing, there was a little below expectations even though the expense ratio came in better than expected. So just curious, do you expect growth to pick up in the coming year?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Do I expect growth to pick up.

Mike Zaremski -- Credit Suisse -- Analyst

Or maybe workers comp pricing is more negative than quarter one to quarter two.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

My sense is that, we should be able to more than offset comp. And again, I'm kind of looking into a foggy crystal ball, but the latest data points that we have would suggest that we should be able to accelerate the growth from here, but again no promises. Do I think it's going to be explosive growth? No, not yet, but part of it, again, going back to the comment earlier. At this stage, we are more focused on pushing for the rates. And as we see that rate get to a certain level, then you will see us look to really try and expand the exposure or policy count if you like. So, yeah ...

Mike Zaremski -- Credit Suisse -- Analyst

Thanks for the color. Thank you.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Amit Kumar with Buckingham. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Amit. Good afternoon.

Amit Kumar -- Buckingham Research -- Analyst

Good afternoon. I guess, I wanted to build upon Zaremski's question. Just going back to the discussion on pricing and the figures (ph) percent number is very strong versus Q4 of 4%. Is there some way to maybe talk about broadly, some of the components was property, meaningfully higher and casualty was a much smaller number and hence it netted out to 6%. How should we think about the other components might be different now versus Q4?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

So what I would tell you is, that we perhaps look at it a bit more granular -- at a more granular level then you are suggesting. We looked at it by operating unit within the Group, we are looking at by product line with each operating unit in the Group. Clearly, the challenges that the industry has faced in such product lines as commercial auto, certain components of professional liability, certainly much of the property marketplace are leading to opportunities where there is meaningful rate increase available. So, again, I would tell you, but also as I commented earlier, other than workers' compensation, we are getting rate increases in every major product line we participate in.

Amit Kumar -- Buckingham Research -- Analyst

Okay. So there was no outlier per se, which is averaging out to a big number?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

A bigger (inaudible).

Amit Kumar -- Buckingham Research -- Analyst

There is no outlier per se, which -- there is no one sub segment which is having material rate increases. What -- I think, what you're saying is that, it's probably well distributed and obviously the cat exposed lines will have a higher number.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Well, I don't wanted to mislead you. What I think that each product line is getting -- it's not 6.4% across the board, we have a -- we use a much finer (inaudible) than that, it is by product line. I would tell you again, that things such as commercial auto, parts of professional liability and certainly much of the property market are probably among the areas that are getting the most meaningful rate increases and a couple of others as well. But again, it's not a barbell, it's more of a bell curve.

Amit Kumar -- Buckingham Research -- Analyst

That's what I was looking for. Okay. The other question is also sort of a follow-up. There is still debate in the marketplace about admitted versus non-admitted. And I think you referred to the competition and I think you made an interesting comment, it takes -- there's is always a lag when the market actually responds. Can you maybe talk the admitted versus non-admitted discussion a bit more?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

One second. Maybe, I'm the boy in the bubble here but, what's the broad chatter in the marketplace about admitted versus non-admitted that you referring?

Amit Kumar -- Buckingham Research -- Analyst

The point is that, legacy carriers are beginning to withdraw or restrict their writings and that's why there seems to be a discernible uptick and it's happening only very recently, where some numbers that you're adding to trade press are changed.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Look, I don't think that there's been this dramatic fee change. I think it would sort of go back into the -- or revert back to some of the comments. I at least tried to allude to earlier that, I think there is a gradual building or incremental affirming that is going on. There is no doubt that there are components of the marketplace that operate in a standard or admitted manner that probably over reached a bit and our choking and really should have left it to the non-admitted market. Yeah, but that's going on any time. Do I think there's a little bit more of that today than it was yesterday? Absolutely. Do I think there'll be more of it tomorrow than there is today? Yes, I do.

Amit Kumar -- Buckingham Research -- Analyst

Got it. I have (inaudible), I will stop here and thanks for the answers and (Multiple Speakers).

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Okay. Thanks for calling in. Jimmy?

Operator

Thank you. Our next question comes from Michael Phillips of Morgan Stanley. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Michael. Good afternoon.

Michael Phillips -- Morgan Stanley -- Analyst

Hey, good afternoon. Thanks, everybody. Well, I'm not going to get the direct call from what you said Rob earlier, but I'm kind of paraphrase. When things are bad, they're probably worse than you are thinking. Obviously, casualty lines are pretty impaired. It's hard to see, obviously, because of the tail. So one way to interpret that is that, since we are seeing more of a ferming (ph) in rates for the industry and certainly in the casualty lines. The things are bad, they are worse than you think. Then maybe the era of kind of industry reserve releases is coming to an end. We know that a lot of that has been comp has driven a lot of the releases, but ex-comp, it's not been that bad in terms of charges.

So I wonder, I guess, just wanted to get your thoughts on that for the casualty lines specifically. What you think about that, I guess in terms of reserve adequacy for the industry?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Look, I think there are others that can speak to the reserve adequacy of the industry better than I, in general. My two sense for what it's worth is that, I think the industry has recognized some positive development over the past few years, which is quite frankly, it's a tough business when you don't know your cost of goods sold until some number of years after the fact. And I think, we went through what was a very benign period that the casualty market enjoys, particularly on the frequency side. I think that there are increasing signs that, that benign environment no longer exists, not to the same extent. And that may prove to create some challenges for the industry today.

And the question is, are people appropriately pricing for the legal environment, for example, that we are in today? So, look, I'm not going to predict the redundancy or the deficiency of the industry. I'll leave that to brighter people than me, but I would tell you that, I think that the marketplace has been pretty aggressive for the past couple of years. I think a lot of that has been glossed over as a result of what was a benign cat environment, as well as positive development from earlier years for the industry. And I think that, at some point you can't keep putting lipstick on the pig, that's my policy.

Michael Phillips -- Morgan Stanley -- Analyst

Okay. I haven't heard that before. Thanks. And then, I guess, a little (Multiple Speakers).

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Go ahead. Sorry.

Michael Phillips -- Morgan Stanley -- Analyst

Okay. In last quarter you -- I want to drill down a little bit more on the D&O market were last quarter you talked about, yeah, we can expect to see some meaningful change over the next few quarters. I guess, anything that you've seen since those comments in the D&O market?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

I think that certainly our perception is that, that would be -- when I mentioned earlier, parts of professional liability firming a fair amount, I think there are parts of the D&O market that are getting what I would define as significant rate increases. Rate increases that the industry hasn't seen for some period of time.

Michael Phillips -- Morgan Stanley -- Analyst

Okay, thank you. Well, I appreciate that.

Operator

Thank you. Our next question comes from Yaron Kinar with Goldman Sachs. Your line is now open.

Yaron Kinar -- Goldman Sachs -- Analyst

Hi, good afternoon. First question, just with regards to the resegmentation or the move from the excess mono from insurance to reinsurance. Can you help us think about maybe run rates for the accident year loss ratio or the expense ratio for the two segments as they currently stand?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Obviously, it depends on the performance of the business from any one period to another period. But certainly, what you saw in the release is not a bad placeholder for people to use going forward. But again, that's subject to the performance of the business in any 90-day period.

Yaron Kinar -- Goldman Sachs -- Analyst

Okay. Is there any seasonality in that block?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Well, yes, there is, but there always has been seasonality, obviously, in the reinsurance business, certain dates such as one, one are very material. And while we do not write a significant cat exposed book, there is a little bit there. So depending on how you want to define seasonality from a premium perspective or loss perspective, it's there, but it's been there in the past.

Yaron Kinar -- Goldman Sachs -- Analyst

Okay. And then my other question is just around net investment income. If we think about the core portfolio with core investment portfolio. How should we think about the impact of a lower yield environment? Do you think that you can still achieve yield expansion here or should we expect some yield compression in the core portfolio?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

We thing that the movement in the current environment with the flat yield curve, we can maintain the current yields in the portfolio, but clearly if we have a slowing down of the economy that will be more challenging, but at the moment, we think we can pretty much stay where we are. But I would not anticipate improving yields.

Yaron Kinar -- Goldman Sachs -- Analyst

Okay. And can you achieve this current yield by changing -- are you doing that by changing any of your portfolio mix or is that simply keeping your portfolio as if?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Generally as there is security selection, slight change in mix, but no consequential changes, still maintaining AA minus quality. And I think we like to find opportunities to improve yields and extend the maturity, but that doesn't seems to be in the cards in the present time.

Yaron Kinar -- Goldman Sachs -- Analyst

Thank you

Operator

Thank you. And our next question comes from Joshua Shanker with Deutsche Bank. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Josh. Good afternoon.

Joshua Shanker -- Deutsche Bank -- Analyst

Good morning -- good afternoon. I suppose part of your hesitation to talk about workers comp is that you don't want to give away corporate secrets, which makes sense. But maybe...

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

We're not hesitant to talk about workers comp, we are happy to chat with you about it.

Joshua Shanker -- Deutsche Bank -- Analyst

So, where do you think pricing is right now in workers comp. Where do you think relates to loss cost trends? And can you talk about the variance between primary and excess pricing?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Yes. So, as far as loss cost trends. I'm going to try and answer your question to the best of my ability. The loss cost trends have remained remarkably benign primarily due to frequency or a lack of, if you will. Severity continues to tick up a bit, just because of healthcare costs continuing to move up. It's astonishing how benign the frequency trend continues to be. I would tell you that, I struggle with that long term and whether it's sustainable. Clearly, we have better safety and a whole host of other things in place as a society which we benefit from.

At the same time, as we've suggested in the past, the tight labor market historically can lead to a tick up in injury of workers. Again, partly as a result of people not being as well-trained, partly as a result of people working overtime and quite frankly, when people are tired, they may not be as alert and take the same precautions. When it comes to certain aspects of inflation, as you know, comp is partially insulated because of the fact that comp is priced off of payrolls and as long as payrolls are keeping up or in some cases outpacing inflation that is something that needs to be factored in.

So I would tell you right now do I think is comp overall losing a little bit of altitude for the moment? Yeah, I think it probably is losing a little bit of altitude. Having said that, I think when the industry looks back on the past few years, it's likely, in my opinion to prove that there was more margin in the business than perhaps the industry realized. I think '18 and '19 are possibly the time pointed inflection when that may start to flip.

As far as the excess market goes, it's a pretty big space and overall we're reasonably happy with where the pricing is there, but I think it's tricky to start trying to compare it to the extent that the question may have suggested.

Joshua Shanker -- Deutsche Bank -- Analyst

And I guess if we benign frequency and slightly elevated severity. Can we assume that loss cost inflation in comp is still greater than zero?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

It's sort of been hovering right around there. I would tell you that -- Again, as you know, as well as we do Josh that, one of the tricky parts of this industry is you're pricing your product before you know your cost of goods sold. Back to that comment around frequency, I'm not convinced at this stage that '19 is going to benefit from the same frequency trends that we've seen in the past decadeish (ph) or so. So I think clearly it's possible that '18 is going to prove to be OK. I feel even better about '17 and earlier '19. It's really even almost too early to start speculating, at least on a conference call.

Joshua Shanker -- Deutsche Bank -- Analyst

Okay. Well, thank you for all the answers. Appreciate it.

Operator

Thank you. And our next question comes from Meyer Shields with KBW. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Meyer . Good afternoon.

Meyer Shields -- KBW -- Analyst

Good afternoon. How are you? So I guess -- starting off, in the insurance segment we see a little bit less than 3% gross written premium growth and ceded (ph) premiums were up a little bit more than 9%. I was hoping you could talk about what's driving that decision?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Not ignoring, I'm just thinking about it. Ultimately it may have to do with different programs that we are buying, it may have to do with pricing in the reinsurance marketplace. It may have to do with a variety of different things. But, ultimately, I would encourage you not to read too deeply into it. We have not changed our philosophy around how we buy reinsurance.

Meyer Shields -- KBW -- Analyst

Okay. Thank you, that's helpful. Second, hopefully an easy one. Should we look at the Monoline Excess line of business is being predominantly workers' compensation?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Rich, what's the breakdown of -- premium lines.

Meyer Shields -- KBW -- Analyst

Yes.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Yeah. I know it is actually --- I'm sorry, I misunderstood. It's primarily reinsurance, but as far as the Monoline Excess, it is at this stage solely excess comp.

Meyer Shields -- KBW -- Analyst

Okay, perfect. Thank you very much .

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Thank you.

Operator

Thank you. And our next question comes from Brian Meredith of UBS. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Brian. Good afternoon.

Brian Meredith -- UBS -- Analyst

Hey. A couple of things here for your. First one, just curious, big growth in the casualty reinsurance area, was there some kind of one-off transactions or is that also become a much more attractive market?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

I think there were a couple of pieces. There are a couple of opportunities that we saw that we thought made sense. And some of that growth actually is coming from outside of the United States as well. I didn't mentioned this earlier, but when we think about the reinsurance business, I think certainly the UK and certain other territories are probably a couple of pieces ahead of the US 3D market in firming. So there are early signs that the US market may be moving in that direction.

Brian Meredith -- UBS -- Analyst

Great. So I mean -- so I guess there is couple opportunities, type of growth that you're seeing in casualty reinsurance. Should we expect that, that may continue here going forward or it is opportunities this quarter, opportunistic?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Look, I don't even want to speculate beyond what I've already speculated. I think that we feel as though that the reinsurance market is starting to grapple with the realities of the states that the industry had made in the past. And as a result of that are beginning to incrementally take action and our hope is that. And quite frankly, our expectation is that, it will build from here. I think some of the business that they see is, is reasonable business, but in many, many cases the ceding commissions are not sustainable. And as the results come through, I think the reinsurance market is responding to that reality and there is across the board or virtually across the board, pressure on ceding commissions for seasons.

Brian Meredith -- UBS -- Analyst

And then second question, Rob. It's been a couple of years since you started Berkeley One. I'm just curious, any observations on that business, is it better than you kind of expected to be or a little bit more challenging. Just curious with your thoughts. I know it's still quite small for you guys.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

I think a couple of reactions would be and you got to understand, this comes from someone, when we've done most of our start-ups a lot of them -- they are almost all commercial lines and a lot of them are non-admitted. So a team joins us and two days later we'll run it on Excel and Word until we have a system in place. So we're not a custom to or experienced with the significance of the platform that was required to build, not just from an IT perspective, but from a people perspective, as well as from a filings perspective, it's just a big platform. But from our perspective, while that does take time, we think that that is a really a great opportunity. And if you build it right, it serves as -- I wouldn't say a barrier to entry for others, because we're doing it, but it certainly is an obstacle for others to come in.

I think there are a few people that have come into the space and when I look at the platform, that they've coupled together and I look at what my colleagues are building. I think it's like day and night. So saying long story short, I think the team of people that we have is good or better than we could have even hoped for. I think the platform that they're building is as robust as any out there and certainly, second to none. Having said that, I think that it's a little bit longer of a road to get that platform stood up. Then some of us at the same time, if we could do it all over again when tossed twice, we'll definitely do it. I think it is going to prove to be a tremendous asset for our shareholders.

Meyer Shields -- KBW -- Analyst

Great. Thanks for answers.

Operator

(Operator Instructions) Our next question comes from Ryan Tunis with Autonomous Research. Your line is now open.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Hi, Ryan. Good afternoon.

Ryan Tunis -- Autonomous Research -- Analyst

Hey, good afternoon, guys. Just have a few. First one, in terms of the workers' comp, I'm curious if you're seeing anything different from a loss cost standpoint on the Excess Monoline versus just a normal primary comp. I noted, there is more of a severity element there or is it pretty much still benign, just like what you're seeing on the primary book?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

I mean, obviously, they're different animals, but I would tell you what we're seeing on both fronts are reasonably consistent with what we've seen over the past couple of years.

Ryan Tunis -- Autonomous Research -- Analyst

Got you. And I guess the other thing that -- I'm shifting gears to premium growth question in insurance, but some of that stood out to us was, actually the premium growth was the least in the lines where I would have expected the most incremental rate in your short tail professional liability and commercial also they have also got a liability comp? Just trying to sort something why that might be tune?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

I would interpret, that is underwriting discipline and places where we have decided that we want rate and we are -- when you think about sort of the rate/growth balance or trade, we choose rate. And I think what you'll see happen over time or at least history would suggest you will see, and I believe you will see as well is that, those lines where we're pushing the rate, you are going to -- at some point, start to see those oftentimes are some of the lines where the growth rate will eventually evolve to be the highest. But it starts out in these product lines where we are taking our heels in and saying, we will get this much rate or we will not write the business. And we expect that over time the market will cooperate and it's cooperating somewhat and we expect that, that will accelerate.

Ryan Tunis -- Autonomous Research -- Analyst

So that mean -- sorry, go ahead.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

We does have a history as an organization, trying not to be late. So when we identify something we get on it and when we look at these lines of business, we're saying we need rate and we are going to have it or we will not write the business. I think it will come more into focus for others, but maybe they not as inclined to move in a timely manner as we are.

Ryan Tunis -- Autonomous Research -- Analyst

So, I mean, not to pull words in your mouth Rob, but it sounds like you're seeing that the rate environment is better, but not lot of these lines were now loss affected, rates -- pricing is probably not adequate rate or adequate yet, is that probably the right way to think about it?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

There is a -- it really depends on the particular product line. So my comment to you is that, when we look at the loss environment and we also look out on the horizon with sort of the legal environment, some of the issues we talked about around social inflation. Our view is that, it makes sense to charge more in some of these lines of business for a unit of exposure. And if we are not able to get what we believe is an adequate rate, then we will not write the business, and that's OK too. If we end up not writing in the business and have excess capital, we will return it to our shareholders.

Having said that, certainly the early signs would say that we are able to achieve the rate and the market will start to bear it more and more and we expect that other market participants will be moving in a similar direction.

Ryan Tunis -- Autonomous Research -- Analyst

Fair enough. And then just quickly one out one on the non-cat weather piece. Not used to you calling that one out, Rob. But I guess it is useful, there was a point in this quarter, what would you expect that to be in a normal quarter?

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

I don't know. Rich is saying 60 basis points. So he is a (inaudible) right about this stuff. So that's the number. But at the same time, as part of the business, so people who back out cat, the buzz for I think is doesn't make a whole lot of sense, unless you're going to back out the premium too as my boss says. So the delta is sort of the 30 basis points between the 0.9 and the 0.6.

Ryan Tunis -- Autonomous Research -- Analyst

Cool. All right. Thanks so much guys.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Thank you. Have a good evening.

Operator

Thank you. And I am showing no further questions in the queue at this time. I like to turn the call back to Rob Berkley for any closing remarks.

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Okay. Thank you, Jimmy. Well, first off, thank you all for calling in. We appreciate your time and interest. From our perspective, we think that there is many encouraging signs on the horizon here, more than we have seen in some extended period of time. What we were able to achieve with the rate and also maintain a renewal retention ratio, I think speaks volumes to the fact that the market is willing to accept it. And we have every intention of continuing to ensure that we are getting an appropriate risk adjusted return, and that we optimize whatever the opportunity maybe.

So thank you again for calling. We'll speak with you next quarter. Good bye.

Operator

Ladies and gentlemen, thank you for your participation in today's call. This does conclude your program. You may all disconnect. Everyone have a great day.

Duration: 47 minutes

Call participants:

William Robert Berkley -- W. Robert Berkley, Jr. President and Chief Executive Officer

Richard Mark Baio -- Senior Vice President, Chief Financial Officer & Treasurer

Mike Zaremski -- Credit Suisse -- Analyst

Amit Kumar -- Buckingham Research -- Analyst

Michael Phillips -- Morgan Stanley -- Analyst

Yaron Kinar -- Goldman Sachs -- Analyst

Joshua Shanker -- Deutsche Bank -- Analyst

Meyer Shields -- KBW -- Analyst

Brian Meredith -- UBS -- Analyst

Ryan Tunis -- Autonomous Research -- Analyst

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