BERKLEY W R CORP

Previous wording

The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate adequacy of premium rates is not known with certainty at the time an insurance policy is issued because premiums are determined before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change the extent of coverage and the effects of economic inflation on the amount of compensation for injuries or losses. General insurance prices are also influenced by available insurance capacity, i.e., the level of capital employed in the industry, and the industry’s willingness to deploy that capital.

Current wording

The profitability of the Company’s insurance business is affected primarily by the adequacy of premium rates. The ultimate adequacy of premium rates is not known with certainty at the time an insurance policy is issued because premiums are determined before claims are reported. The ultimate adequacy of premium rates is affected mainly by the severity and frequency of claims, which are influenced by many factors, including natural and other disasters, regulatory measures and court decisions that define and change the extent of coverage and the effects of economic and social inflation on the amount of compensation for injuries or losses. General insurance prices are also influenced by available insurance capacity, i.e., the level of capital employed in the industry, and the industry’s willingness to deploy that capital.

Previous wording

In June 2023, the Company completed a sale of the property and casualty insurance services division of Breckenridge IS, Inc. and recognized a pre-tax net realized gain on investment of $89 million.

Current wording

In June 2023, the Company completed a sale of the property and casualty insurance services division of Breckenridge IS, Inc. and recognized a pre-tax net realized gain on investment of $88 million.

Previous wording

Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include commercial automobile, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of business with short reporting lags than for lines of business with long reporting lags.

Current wording

Another factor affecting estimates of loss frequency and severity is the loss reporting lag, which is the period of time between the occurrence of a loss and the date the loss is reported to the Company. The length of the loss reporting lag affects our ability to accurately predict loss frequency (loss frequencies are more predictable for lines with short reporting lags) as well as the amount of reserves needed for incurred but not reported losses (less IBNR is required for lines with short reporting lags). As a result, loss reserves for lines with short reporting lags are likely to have less variation from initial loss estimates. For lines with short reporting lags, which include auto, primary workers’ compensation, other liability (claims-made) and property business, the key assumption is the loss emergence pattern used to project ultimate loss estimates from known losses paid or reported to date. For lines of business with long reporting lags, which include other liability (occurrence), products liability, excess workers’ compensation and liability reinsurance, the key assumption is the expected loss ratio since there is often little paid or incurred loss data to consider. Historically, the Company has experienced less variation from its initial loss estimates for lines of business with short reporting lags than for lines of business with long reporting lags.

Previous wording

Our net reserves for losses and loss expenses of approximately $16.0 billion as of March 31, 2024 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above. The impact of such changes would likely be manifested gradually over the course of many years, as the magnitude of the changes became evident.

Current wording

Our net reserves for losses and loss expenses of approximately $16.5 billion as of June 30, 2024 relate to multiple accident years. Therefore, the impact of changes in frequency or severity for more than one accident year could be higher or lower than the amounts reflected above. The impact of such changes would likely be manifested gradually over the course of many years, as the magnitude of the changes became evident.

Previous wording

Approximately $3.2 billion, or 20%, of the Company’s net loss reserves as of March 31, 2024 relate to the Reinsurance & Monoline Excess segment. There is a higher degree of uncertainty and greater variability regarding estimates of excess workers' compensation and assumed reinsurance loss reserves, which predominantly comprise these reserves. In the case of excess workers’ compensation, our policies generally attach at $1 million or higher. The claims which reach our layer therefore tend to involve the most serious injuries and many remain open for the lifetime of the claimant, which extends the claim settlement tail. These claims also occur less frequently but tend to be larger than primary claims, which increases claim variability. In the case of assumed reinsurance our loss reserve estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is also extended. Management considers the impact of delayed reporting and the extended tail in its selection of loss development factors for these lines of business.

Current wording

Approximately $3.3 billion, or 20%, of the Company’s net loss reserves as of June 30, 2024 relate to the Reinsurance & Monoline Excess segment. There is a higher degree of uncertainty and greater variability regarding estimates of excess workers' compensation and assumed reinsurance loss reserves, which predominantly comprise these reserves. In the case of excess workers’ compensation, our policies generally attach at $1 million or higher. The claims which reach our layer therefore tend to involve the most serious injuries and many remain open for the lifetime of the claimant, which extends the claim settlement tail. These claims also occur less frequently but tend to be larger than primary claims, which increases claim variability. In the case of assumed reinsurance our loss reserve estimates are based, in part, upon information received from ceding companies. If information received from ceding companies is not timely or correct, the Company’s estimate of ultimate losses may not be accurate. Furthermore, due to delayed reporting of claim information by ceding companies, the claim settlement tail for assumed reinsurance is also extended. Management considers the impact of delayed reporting and the extended tail in its selection of loss development factors for these lines of business.

Previous wording

(1) Reserves for workers’ compensation and Reinsurance & Monoline Excess are net of an aggregate net discount of $378 million and $390 million as of March 31, 2024 and December 31, 2023, respectively.

Current wording

(1) Reserves for workers’ compensation and Reinsurance & Monoline Excess are net of an aggregate net discount of $390 million as of both June 30, 2024 and December 31, 2023.

Previous wording

Net prior year development (i.e., the sum of prior year reserve changes and prior year earned premiums changes) for the three months ended March 31, 2024 and 2023 are as follows:

Current wording

Net prior year development (i.e., the sum of prior year reserve changes and prior year earned premiums changes) for the six months ended June 30, 2024 and 2023 are as follows:

Previous wording

The ultimate net impact of COVID-19 on the Company’s reserves remains uncertain. As of March 31, 2024, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately $386 million, of which $328 million relates to the Insurance segment and $58 million relates to the Reinsurance & Monoline Excess segment. Such $386 million of COVID-19-related losses included $383 million of reported losses and $3 million of IBNR.

Current wording

The ultimate net impact of COVID-19 on the Company’s reserves remains uncertain. As of June 30, 2024, the Company had recognized losses for COVID-19-related claims activity, net of reinsurance, of approximately $388 million, of which $329 million relates to the Insurance segment and $59 million relates to the Reinsurance & Monoline Excess segment. Such $388 million of COVID-19-related losses included $385 million of reported losses and $3 million of IBNR.

Previous wording

During the three months ended March 31, 2024, favorable prior year development (net of additional and return premiums) of $1 million included $9 million for the Reinsurance & Monoline Excess segment largely offset by $8 million of adverse prior year development for the Insurance segment.

Current wording

During the six months ended June 30, 2024, favorable prior year development (net of additional and return premiums) of $2 million included $7 million for the Reinsurance & Monoline Excess segment partially offset by $5 million of adverse prior year development for the Insurance segment.

Previous wording

For the Insurance segment, the adverse development during the first quarter of 2024 was driven by commercial auto liability and excess other liability, including umbrella, and was partially offset by favorable development for workers’ compensation and professional liability. The adverse commercial auto liability development was concentrated in accident years 2019 through 2023, while the excess other liability, including umbrella, development was focused in accident years 2017 through 2021. A significant portion of the excess other liability, including umbrella, development related to underlying commercial auto exposures. The Company believes that commercial auto-related claims are being particularly impacted by social inflation, which is contributing to an increase in the frequency of large losses beyond expectations. Social inflation can include higher settlement demands from plaintiffs, use of aggressive actions by the plaintiffs' bar such as litigation funding, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among others.

Current wording

For the Insurance segment, the adverse development during the first half of 2024 was driven by commercial auto liability and other liability (mainly umbrella and excess liability), and was partially offset by favorable development for workers’ compensation and professional liability. The adverse commercial auto liability development was concentrated in accident years 2020 through 2023. The other liability development was mainly driven by umbrella and excess liability claims, and was focused in accident years 2017 through 2021. A significant portion of the umbrella and excess liability development related to underlying commercial auto exposures. The Company believes that commercial auto-related claims are being particularly impacted by social inflation, which is contributing to an increase in the frequency of large losses beyond expectations. Social inflation can include higher settlement demands from plaintiffs, use of aggressive actions by the plaintiffs’ bar such as litigation funding, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among other factors.

Previous wording

The favorable workers’ compensation development for the Insurance segment was mainly related to accident years 2018 through 2023, while the favorable professional liability development was mainly in accident years 2021 and 2022. For workers’ compensation, favorable reported claim frequency, below expectations, continued to drive the favorable reserve development. For professional liability, the reported loss experience for the 2021 and 2022 accident years was better than expected. These accident years also feature business written at peak pricing levels, which the Company now believes will result in higher profitability than initially anticipated.

Current wording

The favorable workers’ compensation development for the Insurance segment was mainly related to accident years 2016 through 2023, while the favorable professional liability development was mainly in accident years 2018 through 2022. For workers’ compensation, favorable reported claim frequency, below expectations, continued to be the main driver of the favorable reserve development. For professional liability, reported loss experience for accident years 2018 through 2022 was better than expected, which drove the favorable reserve development. Accident years 2020 through 2022 also feature business written at peak pricing levels, which the Company now believes will result in higher profitability than initially anticipated.

Previous wording

For the Reinsurance & Monoline Excess segment, the favorable development was driven mainly by favorable development in excess workers’ compensation, partially offset by adverse development in the non-proportional reinsurance assumed liability line of business. The favorable excess workers’ compensation development was driven by continued lower claim frequency and reported losses relative to expectations, and to favorable claim settlements spread across many prior accident years. The unfavorable development for non-proportional reinsurance was concentrated mainly in accident years 2017 through 2019 and was associated primarily with our U.S. and U.K. excess general liability reinsurance businesses, including accounts reinsuring construction projects.

Current wording

For the Reinsurance & Monoline Excess segment, the favorable development during the first half of 2024 was driven mainly by favorable development in excess workers’ compensation, partially offset by adverse development in the non-proportional reinsurance assumed liability line of business. The favorable excess workers’ compensation development was driven by continued lower claim frequency and reported losses relative to expectations, and to favorable claim settlements spread across many prior accident years. The unfavorable development for non-proportional reinsurance was concentrated mainly in accident years 2017 through 2019 and was associated primarily with our U.S. and U.K. excess general liability reinsurance businesses, including coverage for cedants insuring construction projects.

Previous wording

During the three months ended March 31, 2023, adverse prior year development (net of additional and return premiums) of $24 million included $12 million for the Insurance segment and $12 million for the Reinsurance & Monoline Excess segment.

Current wording

During the six months ended June 30, 2023, adverse prior year development (net of additional and return premiums) of $21 million included $19 million for the Insurance segment and $2 million for the Reinsurance & Monoline Excess segment.

Previous wording

This overall adverse development for both segments was primarily attributable to property catastrophe losses related to 2022 events which were still being adjusted and settled during the first quarter of 2023. In particular, losses related to U.S. winter storms which occurred during the month of December were a significant driver of the development, as information gathering and evaluation of many of these losses were still ongoing into 2023.

Current wording

Overall adverse development was recognized during the first quarter of 2023 in both business segments due to property catastrophe losses related to 2022 events that were still being adjusted and settled. In particular, losses related to U.S. winter storms that occurred in December were a significant driver of the development, as information gathering and evaluation of these losses were still ongoing into the first quarter. As a result, prior year reserve development (net of additional and return premiums) overall was adverse by $24 million in the first quarter, but was favorable by $3 million during the second quarter of 2023.

Previous wording

In addition to the property prior year adverse development discussed above, during the first quarter of 2023, the Insurance segment experienced adverse prior year development on casualty lines for the 2016 through 2019 accident years, which was offset by favorable prior year development on casualty lines for the 2022 accident year. The adverse development on the 2016 through 2019 accident years was concentrated in the other liability line of business, and to a lesser degree, professional liability, including medical professional. The development, which particularly impacted business attaching excess of primary policy limits, was driven by a larger than expected number of large losses reported. The Company believes social inflation contributed to an increase in the frequency of large losses for these accident years. Social inflation can include higher settlement demands from plaintiffs, use of tactics such as litigation funding by the plaintiffs’ bar, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among others.

Current wording

For the Insurance segment, in addition to the property prior year adverse development discussed above, the adverse development during the six months ended June 30, 2023 included adverse prior year development on casualty lines for the 2016 through 2019 accident years, which was largely offset by favorable prior year development on casualty lines for the 2021 and 2022 accident years. The adverse development on the 2016 through 2019 accident years was concentrated in the other liability line of business, and to a lesser degree, professional liability, including medical professional. The development, which particularly impacted business attaching excess of primary policy limits, was driven by a larger than expected number of large losses reported. The Company believes social inflation is contributing to an increase in the frequency of large losses for these accident years. Social inflation can include higher settlement demands from plaintiffs, use of tactics such as litigation funding by the plaintiffs’ bar, negative public sentiment towards large businesses and corporations, and erosion of tort reforms, among others.

Previous wording

The favorable prior year development on casualty lines for the 2022 accident year in the Insurance segment was concentrated in the other liability, professional liability, and workers’ compensation lines of business. Due to uncertainty regarding incurred loss frequency and severity in light of ongoing social inflation and the emergence from the COVID-19 pandemic, the Company set its initial loss ratios for the 2022 accident year prudently, and largely maintained these estimates through the end of 2022. The reported loss experience for these lines of business for the 2022 accident year was significantly better than expected, and the Company reacted to this favorable emergence in the first quarter of 2023.

Current wording

The favorable prior year development on casualty lines for the 2021 and 2022 accident years in the Insurance segment was concentrated in the professional liability, workers’ compensation, and other liability lines of business, partially offset by adverse development in commercial auto liability. Due to uncertainty regarding incurred loss frequency and severity in light of ongoing social inflation and the impacts of the COVID-19 pandemic, the Company set its initial loss ratios for the 2021 and 2022 accident years prudently, and largely maintained these estimates through the end of each respective accident year. The reported loss experience for these lines of business for the 2021 and 2022 accident years has been better than was expected, and the Company has begun to react to this favorable emergence as the accident years mature beyond 12 months. Commercial auto liability experienced adverse prior year development during the six months ended June 30, 2023 for the 2021 accident year, which was driven by a larger than expected number of large losses reported.

Previous wording

Reserve Discount. The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’ compensation reserves that were discounted was $1,311 million and $1,352 million at March 31, 2024 and December 31, 2023, respectively. The aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was $378 million and $390 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024, discount rates by year ranged from 0.7% to 6.5%, with a weighted average discount rate of 3.5%.

Current wording

Reserve Discount. The Company discounts its liabilities for certain workers’ compensation reserves. The amount of workers’ compensation reserves that were discounted was $1,324 million and $1,352 million at June 30, 2024 and December 31, 2023, respectively. The aggregate net discount for those reserves, after reflecting the effects of ceded reinsurance, was $390 million at both June 30, 2024 and December 31, 2023. At June 30, 2024, discount rates by year ranged from 0.7% to 6.5%, with a weighted average discount rate of 3.5%.

Previous wording

Assumed Reinsurance Premiums. The Company estimates the amount of assumed reinsurance premiums that it will receive under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the related amount of earned premiums, commissions and incurred losses associated with those premiums are recorded. Estimated assumed premiums receivable were approximately $63 million at March 31, 2024 and $65 million at December 31, 2023. The assumed premium estimates are based upon terms set forth in reinsurance agreements, information received from ceding companies during the underwriting and negotiation of agreements, reports received from ceding companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be received under its assumed reinsurance agreements.

Current wording

Assumed Reinsurance Premiums. The Company estimates the amount of assumed reinsurance premiums that it will receive under treaty reinsurance agreements at the inception of the contracts. These premium estimates are revised as the actual amount of assumed premiums is reported to the Company by the ceding companies. As estimates of assumed premiums are made or revised, the related amount of earned premiums, commissions and incurred losses associated with those premiums are recorded. Estimated assumed premiums receivable were approximately $66 million at June 30, 2024 and $65 million at December 31, 2023. The assumed premium estimates are based upon terms set forth in reinsurance agreements, information received from ceding companies during the underwriting and negotiation of agreements, reports received from ceding companies and discussions and correspondence with reinsurance intermediaries. The Company also considers its own view of market conditions, economic trends and experience with similar lines of business. These premium estimates represent management’s best estimate of the ultimate amount of premiums to be received under its assumed reinsurance agreements.

Previous wording

As of March 31, 2024, the Company has recorded an allowance for expected credit losses on fixed maturity securities of $23 million. The Company has evaluated the remaining fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.

Current wording

As of June 30, 2024, the Company has recorded an allowance for expected credit losses on fixed maturity securities of $22 million. The Company has evaluated the remaining fixed maturity securities in an unrealized loss position and believes the unrealized losses are due primarily to temporary market and sector-related factors rather than to issuer-specific factors. None of these securities are delinquent or in default under financial covenants. Based on its assessment of these issuers, the Company expects them to continue to meet their contractual payment obligations as they become due.

Previous wording

The Company reported net income to common stockholders of $442 million in 2024 compared to $294 million in 2023. The $148 million increase in net income was primarily due to an after-tax increase in net investment income of $74 million mainly due to higher interest rates, a larger fixed maturity securities portfolio and investment income associated with our Argentine inflation-linked securities, partially offset by investment fund losses, an after-tax increase in underwriting income of $58 million due to growth in premium rates, an after-tax increase in foreign currency gains of $18 million mainly due to the strengthening of the U.S. dollar against other currencies in 2024, an after-tax reduction in corporate expenses of $3 million, an after-tax increase in net investment gains of $2 million and an after-tax increase in minority interest of $2 million, partially offset by an increase of $6 million in tax expense due to a change in the effective tax rate and an after-tax reduction in profit from insurance service businesses of $3 million. The number of weighted average diluted shares decreased 6.8 million for 2024 compared to 2023, mainly reflecting shares repurchased in 2023.

Current wording

The Company reported net income to common stockholders of $814 million in 2024 compared to $650 million in 2023. The $164 million increase in net income was primarily due to an after-tax increase in net investment income of $171 million mainly due to higher interest rates, a larger fixed maturity securities portfolio and investment income associated with our Argentine inflation-linked securities, an after-tax increase in underwriting income of $49 million due to growth in premium rates, an after-tax increase in foreign currency gains of $34 million mainly due to the strengthening of the U.S. dollar against other currencies in 2024, an after-tax reduction in corporate expenses of $6 million, an after-tax increase in profits from non-insurance businesses of $4 million and an after-tax increase in minority interest of $2 million, partially offset by an after-tax reduction in net investment gains of $88 million mainly due to the foreign currency losses from Argentine peso-denominated investments and reversal of prior unrealized gains on equity securities, an increase of $13 million in tax expense due to a change in the effective tax rate and an after-tax reduction in profit from insurance service businesses of $1 million. The number of weighted average diluted shares decreased 8.1 million for 2024 compared to 2023, mainly reflecting shares repurchased in 2024 and 2023.

Previous wording

Average renewal premium rates for insurance and facultative reinsurance increased 6.7% in 2024 when adjusted for changes in exposures, and increased 7.8% excluding workers' compensation.

Current wording

Average renewal rates (per unit of exposure) for insurance and facultative reinsurance increased 6.9% in 2024, and increased 7.9% excluding workers' compensation.

Previous wording

•Reinsurance & Monoline Excess - gross premiums increased 4% to $442 million in 2024 from $423 million in 2023. Gross premiums increased $27 million (32%) for property and $13 million (11%) for monoline excess, partially offset by a reduction of $21 million (10%) for casualty.

Current wording

•Reinsurance & Monoline Excess - gross premiums increased 4% to $799 million in 2024 from $766 million in 2023. Gross premiums increased $44 million (22%) for property and $15 million (10%) for monoline excess, partially offset by a reduction of $26 million (6%) for casualty.

Previous wording

Net premiums written were $2,851 million in 2024, an increase of 11% from $2,575 million in 2023. Ceded reinsurance premiums as a percentage of gross written premiums were 15% in 2024 and 16% in 2023.

Current wording

Net premiums written were $5,978 million in 2024, an increase of 11% from $5,386 million in 2023. Ceded reinsurance premiums as a percentage of gross written premiums were 16% in both 2024 and 2023.

Previous wording

Premiums earned increased 11% to $2,764 million in 2024 from $2,491 million in 2023. Insurance premiums (including the impact of rate changes) are generally earned evenly over the policy term, and accordingly, recent rate increases will be earned over the upcoming quarters. Premiums earned in 2024 are related to business written during both 2024 and 2023. Audit premiums were $88 million in 2024 compared with $91 million in 2023.

Current wording

Premiums earned increased 11% to $5,611 million in 2024 from $5,044 million in 2023. Insurance premiums (including the impact of rate changes) are generally earned evenly over the policy term, and accordingly, recent rate increases will be earned over the upcoming quarters. Premiums earned in 2024 are related to business written during both 2024 and 2023. Audit premiums were $184 million in 2024 compared with $183 million in 2023.

Previous wording

As of March 31, 2024, the book value of the Company's investments in Argentine bonds was $295 million, which is comprised of inflation-linked securities of $173 million and other Argentine bonds of $122 million (of these other Argentine bonds, $113 million are U.S. dollar-denominated). Pre-tax net investment income associated with these inflation-linked securities for the quarter ended March 31, 2024 was $96 million. Such investment income increased as a result of an adjustment to the inflation rate that was made by the Argentine government in late 2023. As certain of our Argentine bonds matured in the first quarter, we do not expect investment income relating to these securities to continue at this level. The proceeds from the Argentine inflation-linked securities that matured in the first quarter of 2024 have been reinvested.

Current wording

Pre-tax net investment income associated with the Argentine inflation-linked securities for the six months ended June 30, 2024 was $159 million. Such investment income increased as a result of an adjustment to the inflation rate that was made by the Argentine government in late 2023. As certain of our Argentine bonds matured and were sold in the first six months of 2024 and the inflation rate has continued to decline, we do not expect investment income relating to these securities to continue at this level. The proceeds from the Argentine inflation-linked securities that matured and were sold in the first six months of 2024 have been reinvested.

Previous wording

Insurance service fees were $25 million in 2024 and $33 million in 2023. The decrease in service fees resulted from the sale of the property and casualty insurance services division of Breckenridge IS, Inc.

Current wording

Insurance Service Fees. The Company earns fees from an insurance distribution business (part of which was sold in June 2023), a third-party administrator and as a servicing carrier of workers' compensation assigned risk plans for certain states. Insurance service fees were $53 million in 2024 and $58 million in 2023. The decrease in service fees resulted from the sale of the property and casualty insurance services division of Breckenridge IS, Inc.

Previous wording

Change in Allowance for Expected Credit Losses on Investments. Based on credit factors, the allowance for expected credit losses is increased or decreased depending on the percentage of unrealized loss relative to amortized cost by security, changes in rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. The pre-tax change in allowance for expected credit losses on investments decreased by $14 million ($11 million after-tax) and $399 thousand ($315 thousand after-tax) in 2024 and 2023, respectively, which are both reflected in net investment gains, primarily due to a change in estimate.

Current wording

Change in Allowance for Expected Credit Losses on Investments. Based on credit factors, the allowance for expected credit losses is increased or decreased depending on the percentage of unrealized loss relative to amortized cost by security, changes in rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. The pre-tax change in allowance for expected credit losses on investments decreased by $16 million ($13 million after-tax) and increased by $10 million ($8 million after-tax) in 2024 and 2023, respectively, which are both reflected in net investment gains, primarily due to a change in estimate.

Previous wording

Revenues from Non-Insurance Businesses. Revenues from non-insurance businesses were derived from businesses engaged in the distribution of promotional merchandise, world-wide textile solutions and aviation-related businesses that provide services to aviation markets, including (i) the distribution, manufacturing, repair and overhaul of aircraft parts and components, (ii) the sale of new and used aircraft, and (iii) avionics, fuel, maintenance, storage and charter services. Revenues from non-insurance businesses were $121 million in 2024 and $124 million in 2023. The decrease mainly relates to aviation-related business and promotional merchandise, partially offset by an increase in the commercial and residential textile business.

Current wording

Revenues from Non-Insurance Businesses. Revenues from non-insurance businesses were derived from businesses engaged in the distribution of promotional merchandise, world-wide textile solutions and aviation-related businesses that provide services to aviation markets, including (i) the distribution, manufacturing, repair and overhaul of aircraft parts and components, (ii) the sale of new and used aircraft, and (iii) avionics, fuel, maintenance, storage and charter services. Revenues from non-insurance businesses were $247 million in 2024 and $238 million in 2023. The increase mainly relates to aviation-related business and commercial and residential textile business, partially offset by the decrease from promotional merchandise business.

Previous wording

Losses and Loss Expenses. Losses and loss expenses increased to $1,664 million in 2024 from $1,539 million in 2023. The consolidated loss ratio was 60.2% in 2024 and 61.8% in 2023. Catastrophe losses, net of reinsurance recoveries, were $31 million in 2024 and $48 million in 2023. Favorable prior year reserve development (net of premium offsets) was $1 million in 2024 and adverse prior year reserve development was $24 million in 2023. The loss ratio excluding catastrophe losses and prior year reserve development increased 0.2 points to 59.1% in 2024 from 58.9% in 2023.

Current wording

Losses and Loss Expenses. Losses and loss expenses increased to $3,444 million in 2024 from $3,108 million in 2023. The consolidated loss ratio was 61.4% in 2024 and 61.6% in 2023. Catastrophe losses, net of reinsurance recoveries, were $120 million in 2024 and $101 million in 2023. Favorable prior year reserve development (net of premium offsets) was $2 million in 2024 and adverse prior year reserve development was $21 million in 2023. The loss ratio excluding catastrophe losses and prior year reserve development increased 0.1 points to 59.3% in 2024 from 59.2% in 2023.

Previous wording

•Reinsurance & Monoline Excess - The loss ratio was 49.8% in 2024 and 56.4% in 2023. Catastrophe losses were $3 million in both 2024 and 2023. Favorable prior year reserve development was $9 million in 2024, and adverse prior year reserve development was $12 million in 2023. The loss ratio excluding catastrophe losses and prior year reserve development decreased 0.9 points to 51.4% in 2024 from 52.3% in 2023.

Current wording

•Reinsurance & Monoline Excess - The loss ratio was 51.3% in 2024 and 53.9% in 2023. Catastrophe losses were $6 million in 2024 compared with $8 million in 2023. Favorable prior year reserve development was $8 million in 2024 and adverse prior year reserve development was $2 million in 2023. The loss ratio excluding catastrophe losses and prior year reserve development decreased 0.9 points to 51.5% in 2024 from 52.4% in 2023.

Previous wording

Policy acquisition and insurance operating expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. Policy acquisition and insurance operating expenses increased 10% and net premiums earned increased 11% from 2023. The expense ratio (underwriting expenses expressed as a percentage of net premiums earned) decreased 0.2 points to 28.6% in 2024 from 28.8% in 2023 mainly due to a non-recurring benefit associated with compensation costs.

Current wording

Policy acquisition and insurance operating expenses are comprised of commissions paid to agents and brokers, premium taxes and other assessments and internal underwriting costs. Policy acquisition and insurance operating expenses increased 12% and net premiums earned increased 11% from 2023. The expense ratio (underwriting expenses expressed as a percentage of net premiums earned) increased 0.1 points to 28.6% in 2024 from 28.5% in 2023.

Previous wording

Service expenses, which represent the costs associated with the fee-based businesses, was $21 million in 2024, down from $25 million in 2023, as a result of the sale of the property and casualty insurance services division of Breckenridge IS, Inc.

Current wording

Service expenses, which represent the costs associated with the fee-based businesses, was $45 million in 2024, down from $49 million in 2023, as a result of the sale of the property and casualty insurance services division of Breckenridge IS, Inc.

Previous wording

Net foreign currency (gains) losses result from transactions denominated in a currency other than a company's operating functional currency. Net foreign currency gains were $13 million in 2024 compared to losses of $9 million in 2023, primarily due to the strengthening of the U.S. dollar against other currencies in 2024.

Current wording

Net foreign currency (gains) losses result from transactions denominated in a currency other than a company's operating functional currency. Net foreign currency gains were $23 million in 2024 compared to losses of $21 million in 2023, primarily due to the strengthening of the U.S. dollar against other currencies in 2024.

Previous wording

Income Taxes. The effective income tax rate was 23.0% and 21.4% for the three months ended March 31, 2024 and 2023, respectively. The higher effective income tax rate for the three months ended March 31, 2024, as compared to the earlier period, was primarily due to the geographical mix of earnings and larger amounts being subject to tax at a rate greater than the U.S. statutory rate.

Current wording

Income Taxes. The effective income tax rate was 23.3% and 21.8% for the six months ended June 30, 2024 and 2023, respectively. The higher effective income tax rate for the six months ended June 30, 2024, as compared to the earlier period, was primarily due to the geographical mix of earnings and larger amounts being subject to tax at a rate greater than the U.S. statutory rate.

Previous wording

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $335 million of its non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. In the future, if such earnings were distributed, the Company projects that the incremental tax, if any, will be immaterial.

Current wording

The Company has not provided U.S. deferred income taxes on the undistributed earnings of approximately $400 million of its non-U.S. subsidiaries since these earnings are intended to be permanently reinvested in the non-U.S. subsidiaries. In the future, if such earnings were distributed, the Company projects that the incremental tax, if any, will be immaterial.

Previous wording

From 2023, as part of the Inflation Reduction Act of 2022, a 1% excise tax is imposed on common share repurchase activity, net of common share issuances, and included in the cost of treasury stock acquired. During the three months ended March 31, 2024, the Company did not repurchase any shares of its common stock.

Current wording

From 2023, as part of the Inflation Reduction Act of 2022, a 1% excise tax is imposed on common share repurchase activity, net of common share issuances, and is included in the cost of treasury stock acquired.

Previous wording

Premiums. Gross premiums written were $3,363 million in 2024, an increase of 10% from $3,049 million in 2023. The increase was due to a $295 million increase in the Insurance segment and a $19 million increase in the Reinsurance & Monoline Excess segment. Approximately 81% of premiums expiring in 2024 were renewed, and 79% of premiums expiring in 2023 were renewed.

Current wording

Premiums. Gross premiums written were $3,718 million in 2024, an increase of 11% from $3,337 million in 2023. The increase was due to a $367 million increase in the Insurance segment and a $14 million increase in the Reinsurance & Monoline Excess segment. Approximately 80% of premiums expiring in 2024 and 2023 were renewed.

Previous wording

Net investment income increased 43% to $320 million in 2024 from $223 million in 2023 due primarily to a $140 million increase in income from fixed maturity securities mainly driven by higher interest rates, a larger fixed maturity securities portfolio and our Argentine inflation-linked securities (see below for further discussion), and a $1 million reduction in investment expenses, partially offset by a $32 million decrease in income from investment funds primarily due to transportation funds and financial services funds, a $10 million decrease in real estate and a $2 million decrease in equity securities. The Company expects investment income to benefit as it continues to invest maturing securities at the current higher rates. The Company maintained the shortened duration of its fixed maturity security portfolio, with a small increase in average duration from 2.4 to 2.5 years, thereby reducing the potential impact of mark-to-market on the portfolio and positioning the Company to react quickly to changes in the current interest rate environment. Average invested assets, at cost (including cash and cash equivalents), were $27.9 billion in 2024 up 8.7% from $25.7 billion in 2023.

Current wording

Net investment income increased 52% to $372 million in 2024 from $245 million in 2023 due primarily to an $106 million increase in income from fixed maturity securities mainly driven by higher interest rates, a larger fixed maturity securities portfolio and our Argentine inflation-linked securities which is not expected to continue at this level (see below for further discussion) and a $27 million increase in income from investment funds primarily due to transportation funds and real estate funds, partially offset by a $3 million decrease in equity securities, a $2 million decrease in real estate and a $1 million increase in investment expenses. The Company expects investment income to benefit as it continues to invest maturing securities at the current higher rates. The Company maintained the shortened duration of its fixed maturity security portfolio, with a small increase in average duration from 2.4 to 2.5 years, thereby reducing the potential impact of mark-to-market on the portfolio and positioning the Company to react quickly to changes in the current interest rate environment. Average invested assets, at cost (including cash and cash equivalents), were $28.5 billion in 2024 and $26.0 billion in 2023.

Previous wording

Insurance Service Fees. The Company earns fees from an insurance distribution business (part of which was sold in June 2023), a third-party administrator and as a servicing carrier of workers' compensation assigned risk plans for certain states.

Current wording

Insurance Service Fees. The Company earns fees from an insurance distribution business, a third-party administrator and as a servicing carrier of workers' compensation assigned risk plans for certain states. Insurance service fees increased to $28 million in 2024 from $25 million in 2023.

Previous wording

Net Realized and Unrealized Gains on Investments. The Company buys and sells securities and other investment assets on a regular basis in order to maximize its total return on investments. Decisions to sell securities and other investment assets are based on management’s view of the underlying fundamentals of specific investments as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions. Net realized and unrealized gains on investments were $12 million in 2024 compared with $23 million in 2023. The gains of $12 million in 2024 reflected an increase in unrealized gains on equity securities of $26 million partially offset by net realized losses on investments of $14 million. The gains of $23 million in 2023 reflected an increase in unrealized gains on equity securities of $43 million partially offset by net realized losses on investments of $20 million.

Current wording

Net Realized and Unrealized (Losses) Gains on Investments. The Company buys and sells securities and other investment assets on a regular basis in order to maximize its total return on investments. Decisions to sell securities and other investment assets are based on management’s view of the underlying fundamentals of specific investments as well as management’s expectations regarding interest rates, credit spreads, currency values and general economic conditions. Net realized and unrealized losses on investments were $60 million in 2024 compared with net gains of $69 million in 2023. The losses of $60 million in 2024 reflected an increase in unrealized losses on equity securities of $66 million, partially offset by net realized gains on investments of $6 million.The gains of $69 million in 2023 reflected net realized gains on investments of $48 million (primarily a pre-tax net realized gain of $88 million on the sale of the property and casualty insurance services division of Breckenridge IS, Inc., partially offset by an impairment of $51 million recognized on a real estate investment) and an increase in unrealized gains on equity securities of $21 million.