Prepared remarks
Ladies and gentlemen, thank you for joining us, and welcome to the W.R. Berkley Corporation Third Quarter 2025 Earnings Call. This 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, believes, expects or estimates. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved. Please refer to our annual report on Form 10-K for the year ended December 31, 2024, and our other filings made with the SEC for a description of the business environment in which we operate and the important factors that may materially affect our results. W.R. Berkley Corporation is not under any obligation and expressly disclaims any such obligation to update or alter its forward-looking statements whether as a result of new information, future events or otherwise. I would now like to turn the call over to Mr. Rob Berkley. Please go ahead, sir.
Nicole, thank you very much. And let me echo your warm welcome to our Q3 call. So in addition to myself on this end of the phone, we also have Executive Chairman, William Berkley, as well as Chief Financial Officer, Rich Baio. We're going to follow our typical agenda where momentarily, I'll be handing it over to Rich. He's going to run through some highlights of the quarter. I may follow with a couple of sound bites of my own, and then you will have the 3 of us at your disposal to try and answer any questions or engage in any discussion that participants would like to engage in. But before I hand it over to Rich, let me just state the obvious. And that is – I think the past 90 days is just a continuation of clear evidence that the insurance industry is still a cyclical industry. And for whatever the reason may be, some would say, fear and greed. The industry continues to seemingly make an art out of self-sabotage when it comes to its own success. That having been said, we, as an organization, are not completely insulated from that, but we are able to mitigate that quite effectively because of how we focus on what parts of the market, particularly specialty and furthermore small accounts, which a lot of the challenge that continues to percolate and seems to be building momentum, again, we are somewhat protected from. So let me leave it there. I'm going to hand it over to Rich, who'll run through some thoughts, and then I will come back and offer a few more of my own. Rich, please?
Great. Thanks, Rob. Appreciate it. Good evening, everyone. Third quarter results were excellent with a return on beginning of year equity of 24.3%, reflecting an increase over the prior year's quarter of almost 40% and net income, $511 million or $1.28 per share. Operating income increased 12% over the same period to $440 million or $1.10 per share, with a return on beginning of year equity of 21%. Further growth in underwriting and investment income drove the strong performance, combined with net investment gains. Pretax quarterly underwriting income increased 8.2% to $287 million. Calendar year combined ratio was 90.9%, and the current accident year combined ratio ex cat was 88.4%. Cat losses represented 2.5 loss ratio points or $79 million compared with the prior year of 3.3 loss ratio points or $98 million. Current accident year loss ratio ex cat for the current quarter was 59.9%, reflecting an increase over the prior year attributable to business mix, however, comparable to the second quarter of 2025. Drilling down further, the Insurance segment's quarterly accident year loss ratio ex cat was relatively consistent with the first half of 2025 at 60.9%, bringing the accident year combined ratio before cat to 89.3%. Reinsurance and monoline access segments, accident year loss ratio ex cat was 52.6% with a strong accident year combined ratio before cats of 82.4%. Moving to our top line. Quarterly net premiums earned continue to benefit from written growth, reaching another record of more than $3.2 billion. Gross and net premiums written were $3.8 billion and $3.2 billion, respectively. Net premiums written grew in all lines of business in both segments. The comparable third quarter expense ratios were 28.5%. In addition to benefits from the growing net premiums earned on our expense ratio, several of our recent start-up operating units are gaining scale and contributing favorably to the expense ratio. Technology enhancements are also contributing to operational efficiencies. Our pretax quarterly net investment income grew to $351 million, driven by an increase in our core portfolio of 9.4%. As a reminder, 2024 did benefit from heightened Argentine inflation-linked income and excluding such income from both periods would increase the core portfolio growth to 14.6% quarter-over-quarter. Fixed maturity portfolio had a book yield of 4.8%. We do expect investment income from our fixed maturity portfolio to grow in the foreseeable future due to strong operating cash flow of almost $2.6 billion on a year-to-date basis and new money rates comfortably above the roll-off of existing securities. The duration of our fixed maturity portfolio, including cash and cash equivalents increased to 2.9 years in the third quarter while strengthening our AA- credit quality of our portfolio. Stockholders' equity reached a record of $9.8 billion, increasing 16.7% from the beginning of the year, driven by strong earnings an improvement of $428 million in our after-tax unrealized investment losses and currency translation losses as well as capital return of $362 million through ordinary and special dividends and share repurchases. As of September 30, our after-tax unrealized investment losses included in stockholder equity decreased to $177 million, and our financial leverage has improved to historic low levels of 22.5%. We've continued to generate significant capital. Company proactively refinanced its debt when interest rates were historically low, resulting in a low cost of capital and adding permanence to our capital structure with our nearest scheduled maturity in 2037. Our liquidity remains strong with almost $2.4 billion of cash and cash equivalents to invest. Book value per share before dividends and share repurchases grew 20.7% year-to-date and 5.8% on a quarter-to-date basis. Rob, with that, I'll turn it back to you.
Thank you, Rich. I have a few quick observations that might lead to further discussion later. Starting with the market, it's clear that the reinsurance landscape, particularly in the property sector, has shifted. While there is still margin available, it is slowly eroding. We're starting to see more interest in the reinsurance market as we approach the 1/1 date, and we’ll have to monitor how that plays out. On the liability side, we're somewhat disappointed that reinsurers seem unhappy with the rate increases their clients are experiencing, while we believe there should be opportunities to push for higher rates. This situation ultimately benefits us as reinsurance buyers. Regarding insurance, it seems that larger companies are facing more competition, while smaller ones encounter less, which is advantageous for us. In property, competition appears most intense in shared and layered policies. The smaller admitted space and select areas of the homeowners market still present attractive opportunities. The landscape for professional liability is mixed; while D&O rates continue to decline slowly, the E&O market is inconsistent. One area showing potential is hospital professional liability. Workers' compensation remains highly competitive, particularly in California, where we’ve noted challenges that are starting to improve due to recent rate actions. As for general liability, it seems we are currently managing to keep pace with trends. The auto sector has been unpredictable; after seeing some positive signs earlier this year, the outlook has become more uncertain. Regarding our portfolio, we are lowering our exposure and increasing rates, although our overall growth rate is slower than our rate increases. In umbrella insurance, the smaller end of the market has been more favorable, and challenges in the umbrella line have been exacerbated by the auto sector trends. Our top line increased by 5.5%, with a comp rate of 7.6%. This shows our focus on rate adequacy, as we aim for good risk-adjusted returns instead of just issuing policies. We’ve experienced growth in the short-tail lines, particularly driven by our personal lines effort in Berkley One and our strong performance in accident and health. The growth in workers' comp is primarily from specialty areas rather than Main Street comp. The growth in property reinsurance is about positioning ourselves before conditions worsen. The excess line growth is mainly in excess comp, and we remain mindful of our loss and expense ratios. We continue to benefit from investments in automation, even as we occasionally adjust our expense ratios to focus on long-term gains. In the investment portfolio, we saw the duration extend to 2.9 years, with a good outlook for cash flow and portfolio size growth. The domestic book yield for the quarter was 4.6%, and the new money rate is around 5%, signaling more growth opportunities. Overall, it was a solid quarter not just because of favorable conditions, but due to our ongoing trajectory. The underwriting potential continues to grow, and we maintain our discipline to ensure profitability. Our investment portfolio also has further opportunities ahead. I'll pause there and would like to open the floor for questions.
Questions and answers
Your first question comes from Alex Scott with Barclays.
Think I got this unmuted correctly. So let me know if you can hear me, but.
Yes, we can hear you. We get stuff on mute at all the time. You're coming through a couple of times a day.
All right. I'll jump into it then. So I first wanted to ask you about how you're thinking about capital position of the company and just hearing a little bit more restraint in terms of what you're willing to grow into? But you're still getting some decent growth. What would your plans be for the additional capital flexibility that, that would give you? And what would the pecking order look like?
So a couple of comments. If you were to take the rating agency models, I don't know if it's all of them, but certainly several of them. And you ran us through their sausage maker, it would tell you that we have significant headroom to the tune of 10 digits as far as excess capital. So loads of flexibility there. In addition to that, as you pointed out in your own words, we are generating capital more quickly than we are able to consume it. Obviously, as we've discussed in the past, we want to make sure we've got plenty of wiggle room that having been said, we're also equally conscious of the fact that the capital does not belong to us. It belongs to the shareholders. And to the extent that we are not able to utilize it effectively, we should be thinking about returning it to the shareholders. We have multiple tools to do that. And so we have not been shy about utilizing them. Rich flagged the balance sheet, in particular, the capital structure. So not in a rush to do anything as far as the debt or related securities, and that would really leave us with 2 options that being dividends and repurchase. And again, we are open and regularly thinking about that question. So let me pause there. That was probably a lot of babble without specific answer that you're looking for, but I'm probably not going to be able to give you a specific answer. But this so happens that my boss is here, and he spends a lot of time thinking about capital and excess capital, particularly as our by a wide margin, largest shareholder.
So we spent a lot of our time thinking about it. There'll be opportune times to buy back stock. We've been a very effective utilizer of that tool, and we've bought back a lot of stock over the years. But it's because we're not impatient; we wait until the opportunity comes. We continue to do that. In the meantime, we feel that special dividend is a way to let the shareholders know we work for them. That opportunity to buy back shares can come at any time. We'll keep plenty of powder available so we can seize those opportunities. We don't think it's there right at the moment.
Got it. Thanks for the question, Alex. Nicole, was there another question out there?
Your next question comes from the line of Tracy Benguigui with Wolfe Research.
Tracy, are you there?
Hello. Can you hear me now?
We can hear you now, Tracy. Sorry for the confusion with the new platform. Okay. I'm sure it was a brilliant question. I ask all my best ones when I'm stuck on mute, too.
That's okay. I want to go back to your comments about your excess capital position. It's my observation that this is an industry-wide phenomenon. Are you worried that the industry is sitting on too much capital and your competitors are so used to growth coming off a hard market, it's going to be hard for them to take their foot off the pedal. I'm just curious to your thoughts like what catalyst can you envision that could turn pricing around given the supply-demand equation?
Well, maybe a couple of comments there. So we took ex comp, and we back out comp because presumably, that's sort of keeping up through weight inflation. But we took 7.6 points of rate in the quarter. So as far as our ability to keep getting rate and keeping up with trend, we feel pretty good about that. That having been said, as far as excess capital, some of our peers have a lot of excess capital; some of them don't. We're really just focused on what we're doing, and we're focused on our value proposition to the marketplace every day. And if at some point, it means that we have irrational competitors that drive parts of the market to unattractive places as we've demonstrated in the past, so be it will shrink the business. As I, in a clumsy way, was trying to allude to in my comments earlier, given the breadth of our offering or how many different parts of the market we participate in and how the marketplace has decoupled as far as where product lines are in the cycle, that positions us as an organization to be more resilient when it comes to growth. But look, when the day is all done, people may become more aggressive. Seeing some version of the movie in the past, and you and others have seen how we respond. As I suggested earlier, we're focused on making good risk-adjusted returns. If we can't do it, so be it, we'll let the business shrink.
Got it. And I want to go back to your auto comments. Since your growth was flattish, can you just unpack how much exposure you're reducing balanced by the pricing you're seeing there?
I don't think we break out that detail. I will double check with Karen. And if we do provide that to the world, then I can assure you she will follow up with you tomorrow. But what I can say is I wouldn't have made the comment I made earlier if it was just rounding. It's meaningful. And we're just seemingly, there are some market participants, particularly those with delegated authority that don't seem to get where loss costs are. But that end in tears eventually, and we will have an opportunity.
Your next question comes from the line of Elyse Greenspan with Wells Fargo.
Okay. Perfect. My first question, I guess, is just on Mitsui Sumitomo. I know we have not seen a regulatory filing hit indicating that they've hit a 5%...
Yes. I noticed that too...
In the company. Do they have to file when they hit 5%? Is there any update? I know you guys are...
My understanding is yes. I am not an SEC attorney, so full disclosure. That having been said, my understanding is they get to 5%, they need to file and every X amount of shares that they buy beyond that, they will have to do follow-on filings. I do not believe there is any reason for them not to have to comply with what everyone else does. But as we also mentioned in the past, in an effort to ensure that we are not handicapped in our ability to participate in the market, we have no information beyond what you have as far as where they stand in their process.
And then my second question, you guys saw kind of stable rate price in the quarter. Growth slowed, right, mostly due to commercial auto, a little bit of their liability. It feels like that's a trade-off, right, Rob, you guys are willing to make. I know last quarter, you said we're kind of in this 8% to 10% growth world. This was a little bit lighter. So does it feel like we're in a little bit lighter growth world as you guys look to keep as much price in the portfolio as you can?
So from my perspective, the answer is, Elyse, that we have major parts of the marketplace that are in some period of transition. Some are eroding and will likely erode further. Some are healthy and others are somewhere between the bookends, perhaps going through some stage of fits and starts in our opinion is you will likely see it needing to firm from here, commercial auto being an example of that. It's these periods of time of transition which makes it really, really hard to predict what the opportunity will be over the next 90 days. So once upon a time, we tried to give guidance because we were trying to be helpful. I'm not sure if that proved to be the case or not, but that was the intent around what the growth opportunity is. I do believe that there's still opportunity for us to grow and grow at a healthy rate from here. But as you pointed out, thank you for flagging. We are not going to compromise our underwriting and particularly rate integrity in order to juice the top line. And that sort of highlights what we've talked about on occasion in the past. That's because we have a sense of ownership, obligation and responsibility to the capital we manage. We get rewarded our colleagues throughout the organization get rewarded not monetarily, but emotionally based on delivering good risk-adjusted returns coming out of the underwriting in part. As opposed to an MGU where you know what, it's just about how many widgets you can roll off the assembly line today.
Your next question comes from the line of Rob Cox with Goldman Sachs.
For my first question, I wanted to ask about the catastrophe losses in the insurance segment. It seems to align with the average catastrophe loss ratio we've observed over the past couple of years, while some competitors are reporting lower catastrophe losses. I know you mentioned SCS. Is there a specific geography or significant loss to highlight, or is this simply due to the recent growth in short-tail lines?
I would tell you that it's two things. One is a bit of frequency with very modest severity. And number two, as you pointed out, the property market, in particular, has been performing well. So we leaned into it because we appreciate the risk-adjusted returns that were available. As a result, we took on a bit more exposure. But I would caution you not to read too deeply into it.
Okay. Great. That makes sense. And just a follow-up on homeowners. It sounds like there's still some opportunity there. Can you talk about how Berkley One has performed compared to your expectations and where you're growing? Is it in states with more cat exposure, less cat exposure? Any context would help.
I believe Berkley One has proven to be a significant success. It was created from the ground up by a small team, and today it is comfortably exceeding a $0.5 billion business and growing healthily. We are not focusing on California or anything like that. We have specific states we're targeting and we are just deepening our presence there. This is not about exploring every possible market; we are concentrating on areas where our colleagues see opportunities and where we know we can deliver consistent value. The growth is not because we are moving towards California, as we do not engage in that market.
Your next question comes from the line of Ryan Tunis with Cantor.
I guess just a question on the casualty side, just low single-digit growth in other liability. Less than I expect. I'm just curious, are you starting to see more competition in some of those lines? Or is there something else that's kind of causing that decel?
I think there's a couple of things. One, we have a view on rate. Is there a bit of competition? Yes, there's a bit of competition, but it's also how we're pivoting the portfolio at this moment in time.
Got it. And then I guess I was a little bit surprised that Berkley One and A&H could move the needle that much in short tail lines. Could you just give us some idea? But then again, I don't know how big those lines are. So could you give us some idea of how much of that short tail lines line item is noncommercial property, if that makes sense?
I don't have a specific number at the moment. If it's all right with you, Ryan, I can ask Rich or Karen to follow up with you. I don't have the information readily available, and I want to avoid providing any inaccurate details, but it's clearly significant, which is why I mentioned it earlier. Thank you for your question.
Your next question comes from the line of Brian Meredith with UBS.
I have two questions. First, big picture. I remember Bill mentioning that one of his biggest regrets from the last hard market was pulling back too early when there was still a healthy margin in the business. Is that a discussion happening right now? How are you approaching this?
So Brian, it's funny. I recall that comment from the Chairman usually about 7:45 every morning, at least 5 days a week. So I'm going to yield the floor to him.
I think it's important to evaluate your business and consider how much margin you have if your prices are expected to decline further. You also need to assess where your current outcomes are leading, especially since we've experienced several years of significant price increases. In this business, we often don't know the ultimate margin for years after writing the business. In this case, we had an estimated margin of around 86%, indicating we had more margin than reported, and we may have reduced it too early. There are two factors to consider: first, are you being overly pessimistic about your margin because you haven’t accurately accounted for price increases? Second, how are prices changing and what is the status of the loss ratio? The challenges we face now differ from those in 1986 due to increased litigation and more lawyers incentivized to pursue cases, making decision-making more complex. However, I believe there are still growth opportunities available, and we don't need to retreat at this time. Although we haven't reached that point yet, it will eventually come, potentially more rapidly than before due to various factors. When those losses occur, they could happen suddenly.
Brian, thanks for the question and highlighting the genetic flaw that runs through the family. Did you have a second question?
Yes. My second question, Rob, I know you chat a little bit about the first quarter and you didn't see much on...
Brian, are you there?
Yes, I'm still here. Can you hear me?
Yes. Please go ahead.
Okay, good. Question on tariffs. Are you seeing anything yet in your loss picks?
We are preparing for it, but we're not seeing anything particularly consequential yet. But we are certainly preparing for it in all the product lines, as you'd expect, that are more exposed, highlighting, obviously, property and APD.
Your next question comes from the line of Andrew Kligerman with TD Cowen.
Okay. First question is around loss development. It looks like really net nothing. But wondering if you could talk about if you had some releases in one area, some adverse in another area? Any color on that you could share would be appreciated.
It was basically incremental between the two segments. To your point, it was almost at push. And as you can appreciate, there's a lot of moving pieces that's where it ultimately ended up coming out to. But as far as additional detail, I don't know if we publish it, it will be in our Q, I guess, Andrew. So we don't have it all in front of us right now.
Anything off top of mind in casualty that stuck out? Was there adverse there or...
I don't have the numbers in front of me. I think we're but as I suggested earlier, we're paying close attention to the auto liability line and we're mindful of what that could mean for the umbrella line.
Got it. And then just, Rob, just your commentary throughout this call. I'm just trying to put numbers around it a little bit. First quarter market seemed very different, and you rightly thought you could grow double digit this year. Last quarter, you were thinking maybe 8 to 12. Should I be thinking we've kind of migrated more into the kind of mid-single-digit zone just given what you said about rates, et cetera?
It could very well be the case, Andrew. What I was trying to express earlier is that there are many elements in the broader marketplace that are currently in some state of change, and we will adapt to that. So is it possible that we could grow 4% next quarter? Yes. Is it possible that we could grow 10% next quarter? Yes, absolutely. I can't convey the level of confidence I'd prefer to, just because of my earlier comment regarding significant portions of the marketplace being in notable flux, with some areas improving and others eroding.
That's very fair. If I could just sneak a quick one in. When you talk about Berkeley's business being at the small end of the spectrum type accounts. Any way to size that? I know you even brought a team in from I think they were at Hamilton or Kinsale in the small end. Like any way to size the small end of the spectrum at W.R. Berkley in the...
So obviously, some of the business we write can be quantified by limits. This gives a sense of the scale of the accounts we write. While it's not the only measure, if you examine the policies we underwrite, particularly in areas like workers' compensation, there are statutory exposures that prevent us from placing limits on them. If we exclude those areas with statutory limits, such as workers' comp, and consider what remains in terms of limits profile, I was informed by a colleague earlier today that approximately 85% to 90% of our policies have a limit of $2.5 million or less. I hope that provides you with some helpful context.
Definitely. Thanks a lot.
Thank you. Andrew, just one other comment. Even though it's smaller account size, it tends to be very specialized in nature. So I would encourage you not to confuse size with commodity.
Your next question comes from the line of Mark Hughes with Truist.
A quick follow-up on the other liability. You said you were pivoting the portfolio. I wonder if you could expand on that point? Is there something you're seeing in the loss development trends perhaps that makes you want to pivot around other liability?
There are countless different variables, and it could include just appetite based on the general exposure. It can be based on state and it certainly can be based on attachment point. So those would be a couple of examples or variables that can lead to the pivot.
I think you mentioned that commercial auto has been quite volatile recently. When you observe this shift, it's likely to continue depending on the factors influencing it. Is there something that...
Yes. I would not read too deeply into 1 quarter, would be my comment. Thanks for the question.
Your next question comes from the line of David Motemaden with Evercore ISI. Please go ahead.
Okay. Great. Just had another follow-up just on the other liability line. You had mentioned there are some pockets of competition picking up there. I was wondering if you could elaborate. Is that more primary casualty? Is it more excess or umbrella E&S more large account admitted? Any order of color on that would be helpful.
There are certain exposures that we've examined and given how we see the legal environment, we've adjusted our appetite. And that comes through both in the exposure itself as well as, in some cases, how we think about attachment point and certainly how we think about jurisdiction of exposure.
Got it. Okay. So that sounds like across both primary GL and umbrella sounds like sort of a book-wide comment. Is that correct?
Correct. And those changes are well underway. And I don't think that you should assume that this is necessarily a perfect indicator for what to expect going forward because a lot of that change has been affected.
Got it. Okay. That's helpful. And then maybe just on workers' comp, and you sort of mentioned it a little bit in your prepared remarks. But pretty good growth this quarter also this year to date as well. Could you remind me how much of the book is that you guys would say specialty or high hazard versus how much of it is Main Street just so I can sort of think about the moving pieces underneath that 9% growth this quarter?
What I would like to do, if it's alright with you, David, is to ensure that we provide that detail. If it is possible, Karen, I will follow up with you first thing tomorrow. I just want to make sure I stay within the established guidelines.
Your next question comes from the line of Michael Zaremski with BMO.
My first question is broad, focusing on the E&S market specifically. At least the data points we see is the deceleration of the increased competitiveness and the growth in the E&S market, you mentioned it to in your prepared remarks, is coming more so from the pricing side of the growth equation, whereas policies in force are continuing to grow at a double-digit pace. I'm just curious from your perspective, is that if to the extent pricing continues to moderate, should we would it be normal for the policy growth to also kind of start moving back into the primary market? Or are you seeing any trends there? Because it feels like the policy growth is really what's supporting ultimately a lot of the still healthy growth in D&S?
So a couple of things there. One, I think when we talk about E&S, one needs to draw the distinction between the property line and other, other being professional and certainly casualty. Long story short, a lot of the growth that we have seen over the past couple of years within E&S has been disproportionately driven by property. We've shared the observation in the past that when the property market gets hard, oftentimes, it tends to spike and then it comes back down at somewhat of a precipitous rate. As opposed to the liability market when it starts to harden, it tends to oftentimes be a bit more of a gradual sense and it has more staying power. We, as an organization within the commercial lines, particularly specialty and more specifically, E&S, we are much more of a liability player than we are a property player. So did we cash a bit on the property wave? Yes. But that having been said, the lion's share of our E&S participation on a net basis happens to be the liability lines. So when I think about this market unfolding, and I think we've expressed this view in the past, I think property has barring the unforeseen event, and it would have to be very unforeseen. I think the bloom is off the roads. I think you're seeing the retro market starting to erode that will waterfall down into the property cat market. And certainly, you're going to see that had continued pressure on E&S property. We, as an organization, will be impacted by that, but it will be far less than our peers because of our weighting towards the liability line. I think social inflation continues to be an issue. And you are going to see the opportunity within the E&S space become more and more weighted towards the liability lines, particularly casualty; I think professional is a bit of a mixed bag.
Okay. That's helpful. And my follow-up, Rob, is back to the earlier comments on the rating agency capital models and their sausage maker throwing out perhaps a 10-digit excess capital number. So in my words, maybe we'll make it $1 billion to buy that by our shareholders' equity. That's, whatever, 10%. Is that 10% a much higher level than historically? And do we care about the agency capital model to manage to different models?
The answer is we care about everything, but we don't run the business for the rating agencies. We are conscious of those data points. The math you did, I'm not going to comment on whether that's right or wrong. I just was trying to articulate the point that we have a lot of cushion, and we will figure out how to deal with the surplus and what we believe is the most sensible and economic way to return excess to the owners that it belongs to. So I think if you look at our capital ratios over an extended period of time there is no moment in time that I recall that we, from a ratio perspective have had the amount of headroom that we have today.
Your next question comes from the line of Andrew Andersen with Jefferies.
Just looking at the investment portfolio. I think I heard you say 4.6% on the domestic yield book, so maybe some pressure on the Argentina side. Maybe if you could just comment on the...
Argentina has come off a little bit from the peak. If you throw Argentina and there it brings up to 4.8%. What we were really trying to articulate is the lion's share of the portfolio is no surprise domestic, highly rated bonds, call it strong AA-. And again, the duration sitting at the 2.9. And really, again, the highlight that we were trying to flag was if you compare 4.6% to 5%, there's opportunity for improvement from here.
Okay. Great. Looking at the expense ratio and corporate expenses at the consolidated level, it appears that those numbers are lower than they were in the first half of the year. So I guess we are still pushing...
The expense ratio is what?
I just look at the expense ratio and then looking at the corporate expense, and it looks like that's a little bit lower relative to where first half. So I guess are you pushing some expenses into the segment? And where are we with that?
Rich is just not paying on the holding company anymore.
It's a couple of things. It's one, as you pointed out, we have had some of our start-up operating units move out of our corporate expenses, they've got scale and move into the underwriting expenses. And the second item is with regards to in the first half of the year. You might remember, we had also paid a special dividend and for accounting purposes, the vested but mandatorily deferred RSUs, the dividends on that wind up getting characterized as compensation expense. That's the driver.
As far as the first piece goes, those businesses that Rich referred to that once they get to a certain maturity, we move them out they are moved out, but they are dilutive to the expense ratio. So hopefully, they will continue to scale, and that will get some relief there.
Your next question comes from the line of Josh Shanker with Bank of America.
So as I'm listening to the 2Q conference call, commentaries from some brokers, from your peers, there was a commentary that the E&S property markets were very, very weak, and that contributed to the weakness. But that stay tuned for 3Q, which is a low property quarter, everything is rosy in the other lines of business, and so we won't see that same headwind. And then when you began your prepared remarks with the word self-sabotage, I got very, very concerned...
Okay. Why did it upset you?
I mean the self-sabotage sounds like an extreme thing. I mean we're all guilty of it from time to time, but hopefully in modest amounts. What is the takeaway, I guess, on pricing right now compared to 3 months ago? Is it along the same track? Or did you see a real step-down, I guess, compared to 3 months ago.
What segment of the market are we discussing? I just want to ensure I'm following along.
Book relative to the marketplace. When you read your book...
Our overall book remained essentially flat. There are numerous factors at play, but concerning the rate increase, we were at 7.6%, similar to our previous level. We didn't reach that figure in the same manner, but overall, it's in a comparable position. Currently, the segments of the market experiencing the most pressure are in property catastrophe, which will likely not be fully evident until January 1. However, we are observing pressure in E&S property too. While we aren't a major player in that area, we are a modest participant and can see how it impacts the market. Our rates are where they are because we engage modestly in the sector facing the most pressure right now. This doesn't mean we're entirely insulated, as previously noted, but we do offer a diverse range of services and have only a small presence in that challenging area.
And there's different ways to compete for business. And in this environment, are you seeing carriers offer to increase commissions to distributors in order to get a larger share of their business?
I think that Chapter 2. We're still in Chapter 1. That's the long book. Thanks, Josh.
Your next question comes from the line of Meyer Shields with Keefe Bruyette.
Great. So a couple of quick questions. One, going back to the pivoting comment. You mentioned the legal environment. Has your overall view of casualty loss trends changed over the past 3 to 6 months?
No.
And then I know the numbers are small, but I'm looking at most interest rates sort of declining in the quarter and an extending duration. And I'm wondering what is it that you're seeing that makes now the right time for that duration extension?
Well, I think just to frame it, we went from 2.8 to 2.9 and there's a little bit of rounding in there. So I would encourage you not to read too deeply into it. Obviously, we try to be opportunistic at any moment in time as far as putting the money out. That luxury of opportunism is not as comfortable as it was in the past. As short-term rates are coming down. So that will put more pressure on the organization to put might to work. But again, going from 2.8 to 2.9, I would caution you not to read too deeply into it. Now I'd like to go back to the first question for a moment, if I may. So our general view around loss cost trend in the environment is consistent. But our view about particular niches within the marketplace, we are constantly examining and reexamining, and that can instruct our appetite at a more granular level. It's not all on or all off.
Comes from the line of Bob Jian Huang with Morgan Stanley.
This is just more of a follow-up. Previously, you talked about that because the varying lines of business are decoupling from a pricing perspective, you can essentially turn on and turn off growth. Can you maybe help us to understand how quickly you can turn that growth, say, the 4% or the 10% you're referring to earlier. Just maybe help us understand the mechanics that you visit just simply just saying, okay, we're going to stop doing business here. I'm trying to understand how you're thinking about growth and managing the ability to go in and out of the market?
Ultimately, it comes down to market conditions, and we consistently operate within the marketplace at levels, terms, and conditions that we consider suitable. The market may shift away from us or, as we discussed, we may adjust our approach to some of the other liabilities. It's not that we completely disengage from the market, but we have our own perspectives on rates, attachment, and terms, which may not align with what the market finds acceptable. The market may find other participants willing to take on certain risks. Therefore, we don’t abandon the market; rather, our risk appetite and approach can change based on the data and insights we gather. We are capable of making these adjustments quickly, relying on our colleagues who have the expertise in various niches to determine how and when to pivot.
Okay. That's very helpful. Very last one. In terms of the market competition, you kind of talked about a decent amount of businesses in the smaller market side of it. Now if we do go into a more challenging macroeconomic environment, are you perhaps concerned about small and medium enterprise tend to be more exposed to macroeconomic conditions. So consequently, that could potentially play into your core market? Like just curious how you think about that?
So the answer is no, while we're conscious of it and certainly the health and well-being of our clients is a priority for us. If you use COVID as a data point, actually, we were able to navigate through that, and we're pleased with how our clients fared and our ability to continue to support them.
Your final question comes from the line of Wes Carmichael, with Autonomous Research.
Great. I have one question for you, Rob, regarding your comments about property and property catastrophe reinsurance. You mentioned the expected routing of the apple. I’m interested in your perspective because there seems to be a lot of discussion suggesting that property is still adequately priced. Do you believe we are actually at a point where changes could begin on January 1st, or will that take longer?
I think it depends on the market conditions as we approach January 1st. Everyone needs to evaluate how much margin they believe exists in the business. Clearly, interest rates have increased significantly, and attachment points have changed considerably. Although we noticed some softening about nine months ago, the expectation is that, based on performance, there will likely be further softening as we head into the new year. We'll need to observe how competitive the market becomes. We have an understanding of the margins in the business and the point at which we may adjust our strategy from offensive to defensive. This is simply a characteristic of a cyclical business. Thank you for your question. Nicole, is there anyone else, or have we addressed everything?
We've covered it. There are no further questions at this time. I will now turn the call back to Mr. Rob Berkley for closing remarks.
Okay. Nicole, thank you very much for your assistance and hosting. Thank you all to the participants for your interest in the organization. And hopefully, it's quite evident we had a very strong quarter. But equally, if not more importantly, the table is set for a good balance of the year, and in all likelihood, a very strong 2026. So again, thank you for dialing in, and we look forward to speaking with you in about 90 days. Bye-bye.
This concludes today's call. Thank you for attending. You may now disconnect.