管理層發言
Ladies and gentlemen, thank you for joining us, and welcome to the W. R. Berkley Corporation First Quarter 2026 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, 2025, 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.
Alexandra, thank you very much, and good afternoon to all. Thank you for finding time in your calendars to join us. My colleagues and I appreciate your interest in the company. Joining me on this call we have Executive Chairman Bill Berkley, as well as our Group Chief Financial Officer, Rich Baio. We're going to follow a similar path to what we have used in the past: I'll offer a few more quick comments; then Rich will provide us a summary on the quarter. I will follow behind with a few additional thoughts, and then we will be pleased to take your questions in any direction you wish to take them. Before I hand it over to Rich, a couple of observations, perhaps stating the obvious. One is, let there be no confusion: this continues to be a very cyclical industry. As we've discussed in the past, the cycle is driven by two human emotions, greed and fear. And without a doubt, these days it would seem as though the fear is fading and the greed is fully percolating in many corners of the marketplace. One of the things we've discussed in recent quarters is where some of this competition is coming from. We've talked about MGAs and MGUs and delegated authority, a lot of capacity coming from a variety of sources, in particular the reinsurance market and Lloyd's as a marketplace providing delegated authority capacity. One thing we've taken note of over the past 90 days or so is a notable shift in the appetite of the standard market, in particular national carriers, who seem to be broadening their appetite and reaching a new level of competitive nature that we haven't seen in some number of years, though it tends to be focused in certain pockets. A couple of other comments on the marketplace, focusing on the reinsurance market for a moment. No surprise, property and property cat within the reinsurance space has been more and more competitive. We're not surprised directionally, but we have been taken aback a bit by the pace of change and how that level of competition has accelerated. In addition, the casualty or liability market within the reinsurance space never seemed to have gotten much of the bounce that we saw in the property market. Nevertheless, it remains very competitive. We remain concerned for the health of that marketplace over time, because with more competition in the property market there will, historically speaking, be more irrational behavior that will be plentiful in both the property cat market and the liability market. A couple of thoughts on the insurance marketplace, speaking of property and how it can turn into a marketplace that quickly erodes. We are definitely seeing that, particularly with cat-exposed property on the insurance side. General Liability and umbrella, I would suggest, are areas where rate is still available with good reason. Professional lines continue to be a mixed bag. D&O remains one that we are very focused on and seems to be continuing to flirt with the bottom. On the other hand, EPLI in certain jurisdictions is an area to be very cautious, and I would call out California, particularly Southern California, as one we are paying close attention to. Speaking of California as it relates to workers' compensation, we've talked about this in the past, and we remain convinced that California this time around is out in front of much of the broader workers' comp market. All eyes remain on the WCIRB and what is to come in the not-too-distant future. On a somewhat low note, auto continues to be an area of great concern. It's unclear to us that the marketplace has really wrapped its head around loss-cost trend and what actions need to be taken. Looking at the punchline before I hand it over to Rich: at the intersection of a cyclical industry and a focus on risk-adjusted return, we subscribe to the concept known as cycle management. The good news for us as we exercise cycle management is that the decoupling of product lines as to where they are in the cycle, combined with the breadth of our offering, allows us to be more resilient than many of our peers with a narrow offering. So why don't I pause there, and speaking of resilient, Rich, over to you please.
Great. Thanks, Rob. Good afternoon, everyone. The first quarter marked an excellent start to 2026 with record net investment income and strong underwriting profits contributing to a return on beginning-of-year stockholders' equity of 21.2%. Net income for the quarter was $515 million, or $1.31 per share, while record operating income was $514 million, or $1.30 per share. Other drivers benefiting the quarter compared with the prior year included lower catastrophe losses and an improved effective tax rate. Starting with underwriting performance, current accident year combined ratio, excluding cat losses, was 88.3%, and the calendar year combined ratio was 90.7%. The difference was current accident year cat losses of 2.4 loss ratio points, or $76 million, compared with the prior year of $111 million, or 3.7 loss ratio points. Unlike last year, which was heavily influenced by California wildfires in the first quarter, this year the industry experienced significant winter storm activity occurring in January and February. The current accident year loss ratio excluding cats for 2026 was 59.7% compared with 59.4% for the prior year, which reflects a shift in business mix as we look to maximize profitability. The insurance segment's current accident year loss ratio excluding cats increased 10 basis points to 60.9%, while the reinsurance and monoline access segment increased to 51.1%. The expense ratio of 28.6% is comparable to recent sequential quarters and reflects a small impact from the decline in net premiums earned from the reinsurance and monoline access segment. We continue to believe that the 2026 expense ratio will be comfortably below 30%, barring any material changes in the marketplace. On top-line production, despite heightened competition in certain pockets of the market, the insurance segment grew gross premiums written by 4.5% to $3.4 billion and net premiums written by 3.2% to $2.8 billion. As you can see from the supplemental information on Page 7 of the earnings release, net premiums written grew in all lines of business apart from workers' compensation. The reinsurance and monoline access segment reported net premiums written of $395 million, reflecting decreases in property and casualty lines of business. Net investment income increased 12.2% to a record $404 million, driven by growth in the core portfolio of 11.8% to $354 million and an increase in investment fund income of 46.3% to $40 million. As a reminder, we report the investment funds with a one-quarter lag and an average quarterly range for investment fund income is $10 million to $20 million. We expect that strong operating cash flow of $668 million in the current quarter should continue to contribute to the growth in that investment inflow. The duration of our fixed maturity portfolio, including cash and cash equivalents, increased during the quarter to 3.1 years, which remains below the average life of our insurance reserves. The credit quality of the investment portfolio continues to improve to a very strong AA-. The effective tax rate in the first quarter was lower than our normalized run rate of about 23%, which is usually attributable to higher taxes on foreign earnings and the ability to utilize foreign tax credits. In the current quarter we reflected a net nonrecurring tax benefit, reducing our effective tax rate from 22.8% to 16.3% as reported. We expect the remainder of 2026 will return to our normalized run rate. During the quarter, we repurchased approximately 4.5 million common shares amounting to $302 million and paid regular dividends of $34 million. Stockholders' equity increased to approximately $9.75 billion despite the significant capital management. In summary, another positive quarter with meaningful growth in earnings and a 21% plus return on beginning equity. Rob, I'll turn it back to you.
Thank you, Rich. A little disappointed that this isn't our new run rate on the tax front. I guess you have a whole quarter to figure that out. So let me just offer a couple of more quick sound bites and then we'll move on to Q&A. First off, you would have noted that rate came in reasonably healthy at 7.2% excluding competition — just another relevant data point. The renewal retention ratio continues to sit at around 80% and that ratio fluctuates between 78.5% and 81.5%. It doesn't move very much and I look at it as one barometer to really understand whether we are turning the book or not in our efforts to get rates. That's an encouraging sign from my perspective. Just another quick comment on the topic of rate. We touched on this briefly on our fourth-quarter call, and I think you'll see it come into more focus. We've taken a tremendous amount of rate not just over the past couple of quarters but over the past few years. There are many pockets of the organization where we're feeling very good about the margin. The need for rate may not be as strong going forward. So what's the punchline? We are actively rethinking the balance between rate and growth. Over the coming quarters you may see us take our foot slightly off the rate pedal and push harder on growth in particular lines where the margin is attractive and exposure growth is of more interest to us than rate. Rich talked about top-line overall growth. It was some pretty separate and distinct pieces and it maps back to cycle management. You saw we took a firm position, which given our prior comments shouldn't have surprised anyone. We've been transparent about our view on casualty or liability lines and the discipline we'll exercise there, and kudos to our colleagues who are actually putting that discipline into practice. The other side of the coin, as Rich pointed out, we are still finding opportunities to grow within the insurance space; it's a mixed bag. The note between gross versus net highlights that this is probably a moment when it is generally better to be a buyer of reinsurance than a seller of reinsurance, hence the delta between gross and net. I do think there is a reasonable chance we will see a bit more growth in the insurance space as the year unfolds, and we are revisiting this balance between growth and rate. Pivoting quickly to the loss ratio: in a nutshell, it was winter storms. We had more exposure to that than some. That said, we think it is still a good trade. On the expense ratio, I share Rich's view that we'll keep it below 30. The movement in the reinsurance and excess segment primarily resulted from a reduction in premium on the reinsurance front. Switching to the investment portfolio: Rich flagged the strength of quality with a very strong AA- rating. A couple of other points to flag are that the book yield on the portfolio is about 4.7% and new money rate is 5% plus, so there's room for improvement. In addition, duration is at 3.1 years and the average life of our loss reserves is a hair inside of 4 years. The punchline is that the quality is high, there's opportunity with the book yield moving up, and we have flexibility to push duration out, which is a plus. Even excluding growth in the portfolio due to the strength of cash flow, there is meaningful upside depending on whether you include cash — $28 billion — or back out cash — $25.5 billion — and because of the new money rate and our duration flexibility. On flexibility and capital: I know it's not something we spend a lot of time on these calls, but our financial leverage is about 22.6% now, which is an all-time low in my experience. I think it's important to note that for a couple of reasons. One, when you look at the returns we're generating, we're generating them with a much higher level of capital or equity in the business. Two, we do not expect 22.6% to keep going down; this is a comfortable place and we have room if an opportunity presents itself. What does that mean? If you look at this business that's earning between $1.75 billion and $2 billion a year and consider our leverage ratios, we are generating capital significantly more quickly than we can consume it, and we will have significant amounts of capital to return to shareholders for the foreseeable future. Even as we return capital, we still have tremendous flexibility to take advantage of unforeseen opportunities. I flagged this because of the repurchases in the quarter and special dividends we've paid as we recognize the earnings power of the business and growth opportunities before us. We will likely have large amounts of capital to continue returning to shareholders in ways we believe are effective and efficient. We talk about repurchases occasionally and special dividends, but I wanted to put these data points out there. We can discuss more in the Q&A if people wish. So why don't we take a pause there, Alexandra, and open it up for questions.
分析師問答
Your first question comes from the line of Elyse Greenspan with Wells Fargo. In the quarter and the special dividends we've paid, as we recognize the earnings power of the business and the growth opportunities before us, we will likely have large amounts of capital to continue returning to shareholders in ways we believe are effective and efficient. We talk about repurchases occasionally and special dividends, but I wanted to put these data points out there. We can discuss more in the Q&A if people wish. So why don't we take a pause there, Alexandra, and open it up for questions.
My first question, I'm trying to square away your comments. You started off by citing greed and fear in the market and then mentioned standard market carriers and national carriers broadening their appetite and the market getting more competitive. But then you ended by saying there may be opportunities to take a bit less price and show better growth. Can you help me reconcile those opening comments with the view that you might let up on price in some areas?
Thank you for the question, Elyse. Perhaps I wasn't as clear in my opening comments. I think overall the market is more competitive today than it was yesterday, but there are still pockets with good opportunity. A lot of those pockets tend to be more casualty-related. We, as an organization, have a bent toward casualty rather than shorter-tail lines, particularly property where competition is most pronounced. So yes, the market overall is a bit more competitive, but there are still pockets in which we are a meaningful participant that offer opportunity.
Okay. As we triangulate that in terms of premium growth, I'm more focused on the insurance segment — it improved slightly this quarter. On the last quarter's call you suggested growth in January might have been within range of 7%, and it seems like things slowed in February and March. How are you thinking about the level and timing of pickup in growth? Do you expect more growth in Q2?
You're correct there's a lag in how this shows up. To answer your question, we actually saw the top line improve as we moved through the quarter rather than the other way around. January was not our best month. We are hopeful we will do better in Q2, but I can't promise that today. Often we're quoting 90 days out, sometimes 60 days, sometimes longer. As we identify pockets where we're willing to trade a bit less rate for more growth, it takes time for that to convert into binders or written premium. How it will play out, I can't promise; we'll have to see how it unfolds. I'm sharing the dialogue within our clubhouse, but I can't promise a specific growth number for Q2.
Your next question comes from the line of Rob Cox with Goldman Sachs.
First question on property: you and others have said the property dynamics are repeating themselves. Where do you think property is from a price adequacy perspective, whether it's ROE or another metric, and how would you bifurcate across insurance, reinsurance, and maybe by geography?
That's a big question. I think there is still margin in a lot of places, but it has fallen off quickly. It's fallen off most quickly in the reinsurance marketplace, which led the way up and now is leading the way down. It then waterfalls into cat-exposed or E&S property. The admitted or standard risk property market overall saw the least sea change; that part got the least bounce. The reinsurance market led the way up and is leading the way down.
Helpful. Follow-up on professional lines: you said pricing is trying to bottom and it looked like your strongest growth since Q1 2022 in professional lines this quarter. I don't think much of that was pricing; it seems like exposure grew. Do you anticipate further opportunities in professional lines and can you provide any color on the quarter?
Professional is a broad category. My earlier comments were focused on the U.S. market, where I'll call out two areas of pause: public D&O and certain components of the EPLI market. Much of the growth you saw in professional came from outside the United States. As for where the best opportunities are, we won't unpack that publicly.
Your next question comes from the line of Alex Scott with Barclays.
On reinsurance: I know you mentioned it's generally better to be a buyer than a seller at the moment. What's your temperature on reinsurance for the full year? Also, looking at growth numbers for the quarter, is there anything unusual, like restatement premiums, that we should consider to understand the run rate?
Nothing unusual in the reinsurance numbers. I think the results reflect current market conditions: a more competitive market and cedents struggling to get top-line growth, which in some cases leads them to increase their net retention. That may feel good in the short run; we'll see how it works out longer term.
Makes sense. On casualty reserves: you provided triangles with the 4Q results, but can you comment on other liability reserve trends, such as earlier years releasing on shorter-tail casualty versus some building on longer-tail? Help us get comfortable with what we see.
That's a bigger conversation than fits here. We have put a fair amount of information in our supplements. Some of our folks have reached out to help piece it together with analysts. If you'd like to continue offline, we're happy to help you piece together the public information, but there's a limit to what we can discuss on a public call.
Your next question comes from the line of Andrew Kligerman with TD Cowen.
On capital management: where is the appetite — buybacks, one-time special dividends, or growth? You repurchased $302 million in the quarter, a lot compared to 2024 when the stock price was lower and earnings similar. Where do you do a big dividend like you did in prior years, and where should leverage be? You said 22.6% is very low — where would you like it to level out? Why the big buyback this quarter and what's the appetite for buybacks versus dividends?
Thanks, Andrew. On 22.6%, I didn't suggest we want it to go lower or higher; I suggested we don't expect it to go much lower and that it's a comfortable place. It depends on circumstances at any given time and how we position the business for today and tomorrow. Regarding growth, we expect to grow but likely not at the elevated rates seen several years ago due to market conditions. With returns flirting with $2 billion of net income, we are generating capital faster than we can consume it, so we need to decide how to return capital to shareholders. The levers we use — special dividends, repurchases, or other mechanisms — are things we consider every day and we think about what's in the best interest of shareholders. Valuation at the moment and growth opportunities factor into our decisions. I don't have a specific roadmap to share, but we'll continue to be transparent on a quarterly basis.
On gross versus net written premium: net was 3.2% versus gross 4.5%. Any read-through on why net was materially lower?
It's a combination of business mix and opportunities to buy reinsurance on terms we believe to be attractive.
Prior-year development: anything unusual in casualty lines, plus or minus?
Nothing particularly exciting. If you want a deeper dive, we'll share what we can offline and more detail will be available in the 10-Q.
Your next question comes from the line of Michael Zaremski with BMO Capital Markets.
Pivoting to social inflationary lines: would you paint a broad brush on how Berkley views loss trend in GL, umbrella, and commercial auto? Some peers have been truing up their loss picks higher. Can you add color?
If you're asking for our trend assumptions by product line, we generally don't publish those. We constantly look at our data, industry data, and other data sets, traditional and nontraditional, and apply judgment. We are focused on making sure our picks are appropriate and are responding from rate, terms, and conditions perspectives. Jurisdiction or territory also plays a key role in selection. I realize that's not a completely satisfying answer, but we don't disclose loss-trend assumptions by product line publicly. I can assure you we are focused on it and responding in what we believe is a timely manner.
On debt-to-cap, when would you increase leverage? Are there circumstances where you flex up leverage when you're bullish on the marketplace?
Yes. When we see opportunity in the market, we are happy to flex leverage up in the short run. That said, we're comfortable where we are today, and we have the ability to flex up if the opportunity presents itself.
Your next question comes from the line of Bob Huang with Morgan Stanley.
On capital allocation: you talked about willingness to grow your business and clearly have capital. How should we think about the balance between growing inorganically versus buybacks and dividends? Are there lines where M&A makes sense for you?
We get many calls from investment bankers. Most M&A in this industry, if buyers could do it over again, many would not. I would never say never, and we look at things from time to time, but we tend to err on the side of being cautious and disciplined. We're comfortable with the organic growth model and patient because of our philosophy around risk and return. You never know what tomorrow brings, but there's a reason we haven't been historically active on that front.
On growth: you talked about the market being in a greedy environment. As you pivot to growth, are there areas where the market is too greedy and should be avoided, or areas where it's too cautious and represents opportunity? A little more breakdown would be helpful.
Overall the market is more competitive than a year or two ago, but there remain pockets, particularly in liability, where attractive margins exist. It's not as broad as it once was, but still present. Because of the breadth of our offering, we can find attractive margins and may take our foot off the rate pedal in those niches. We saw colleagues pivoting more throughout the quarter, which is why January growth was less relative to March. Often we're quoting 90 days out, so it takes time for pivots to convert into written premium. For Q2, I can't promise anything; I'm sharing the internal narrative and how we're adjusting our approach.
Your next question comes from the line of Tracy Benguigui with Wolfe Research.
Since casualty reinsurance never got the same bounce as property reinsurance, is this business now rate adequate or approaching rate inadequacy?
We've raised concerns for several quarters about the casualty reinsurance marketplace and ceding commissions. If we're writing business, we believe it's an acceptable margin. That said, our casualty portfolio within reinsurance was down considerably in the quarter. That is primarily because the book is shrinking rather than because we're charging less for the same exposure. I can only speak to what our colleagues are doing.
You mentioned potential upside from net investment income and noted pockets like casualty where you might prioritize growth over rate. Are you taking more of a total-return approach when setting combined targets for underwriters, perhaps putting more weight on net investment income to allow growth?
No. We have a view on loss ratios and do not subscribe to cash-flow underwriting. We are conscious of the investment contribution, but we are not willing to throw underwriting discipline out the window because of current interest rates. Each component of our economic model must stand on its own two feet and justify the capital it uses.
Your next question comes from the line of Mark Hughes with Truist Securities.
You mentioned large standard carriers are ramping up appetite and competition. Is that largely on the casualty side? Is it influencing the balance between E&S and the standard market? Any color would be interesting.
They are active on the property side, and to the extent it's on casualty, it's in pockets that are okay but not great. Ironically, they're not always going after the best risks; they're pursuing marginal opportunities and, in some cases, pricing aggressively — 30% off in situations where 10% off would have sufficed. As we often say here, you can write long-tail business cheap, but that can lead to poor outcomes in a couple of years.
If you're successful in generating better growth in Q2, could that meaningfully affect loss picks? Could picks be a bit higher if you're not pushing as much on rate?
I don't think that would necessarily lead to materially higher loss picks in my view. There are pockets where we've been focused on rate and we think we have room; time will tell how picks move. We'll monitor it closely.
Your next question comes from the line of David Motemaden with Evercore ISI.
Can you elaborate on which broad areas you might let up on price to accelerate growth — are those short tail, casualty, professional lines? Any more color without getting too granular?
We haven't put that level of detail out yet. We may consider adding something in the 10-Q that could be helpful, but at this stage we haven't issued specific guidance on which broad areas we will emphasize growth over rate.
Growth in short-tail lines continues to tick along at roughly 5% — that surprised me given pricing pressure on commercial property. How should we think about the durability of that growth?
You're focusing on commercial lines; broaden the lens to include our Accident & Health business and our private client business, which also contribute to growth.
On reserve duration: you said about four years average life for reserves. Claims durations feel like they're extending. Philosophically, do you think claim payment patterns are stabilizing now?
We think the industry got a bit flat-footed with inflation and social inflation and a process of catch-up occurred. The picture was clouded by COVID, and at this stage the industry and we have adapted to the new reality of claims and the legal environment. We feel reasonably comfortable with how things are trending.
Your next question comes from the line of Joshua Shanker with Bank of America.
On the decline in the reinsurance book: trying to understand the composition. Sometimes it's participation in syndicates, sometimes one-off deals. Your program business is in the reinsurance bucket and MGAs compete there. As the business is leaving, are you walking away, being competed away, and what exactly are you losing?
The lion's share of what we're losing is treaty reinsurance business, primarily because of our view on appropriate pricing. These tend to be subscription markets or treaties with multiple participants. In some cases someone else is coming with capital or the cedent is keeping the business because they're willing to accept worse economics to bolster top line. Regarding MGAs, delegated authority models have not subsided; we continue to see activity there. On alternatives and private credit, we do participate in certain alternative spaces but do not participate in private credit. Given public fixed income yields today, we don't feel much need to look beyond that.
Your next question comes from the line of Katie Sakys with Autonomous Research.
How do you describe your approach to managing commercial auto exposures today versus your comments last quarter on shrinking exposures? With your frank description of the auto liability market, what gives you confidence in the premium growth you still show without adverse selection?
To be clear, the growth we are showing is premium growth, not exposure growth. The rate we are taking far exceeds the growth rate. Exposure is shrinking while rate is increasing, so the premium growth you saw includes rate and then some.
Any updates on Berkley Embedded? Have any products gone live, and how are you thinking about channel conflict with traditional distribution partners?
Berkley Embedded is off to a great start. They have one product offering live in the consumer space. The type of business we're pursuing through that channel is not something we'd access in our traditional ways today, so channel conflict is limited. Historically, carrier and distribution swim lanes were more defined and now those lines are blurring. We're committed to traditional distribution, but we also must meet insureds where they wish to be met.
Your next question comes from the line of Andrew Andersen with Jefferies.
On workers' comp: growth has been lighter the last few quarters. Can that pick up again, or is there a binding constraint such as price or medical trend uncertainty?
We've had a somewhat defensive posture in much of the comp market that we participate in. We're looking forward to that market firming, and when it does we expect to expand, hopefully dramatically.
On standard or national carriers taking back business: is this more normal ebb and flow, or are they going deeper into E&S historically served by that channel?
I don't think they will derail the E&S marketplace today or tomorrow, but we see them more present with a broader appetite. At times they appear to misclassify risks to get to the rates they entertain. It's more pronounced in some shorter-tail lines and less visible in some liability lines.
Your next question comes from the line of Meyer Shields with Keefe, Bruyette & Woods.
Last quarter and this quarter you talked about collectively taking the foot off the gas on pricing in some lines. Should we think of that as a top-down directive or is that bubbling up from underwriters?
We're not a top-down organization in that sense. We pay attention and ask questions, and we bring aggregated group and other data to our colleagues, but pricing and underwriting decisions are driven by the business leaders running the operations. That's part of our philosophy.
Does Berkley have exposure to the Middle East conflict in Lloyd's or reinsurance business?
Nothing of consequence. We're not a big player in the war space; we're a modest player in certain marine markets and active users of war exclusions.
There is one final question. This comes from the line of Brian Meredith with UBS.
In your growth thoughts for the year, is any of that related to incubator-type businesses transitioning into the segments, like Berkley Edge? How is Berkley Edge doing so far?
Some of the new ventures are off to a good start, but relative to the overall group size, in the short run they are unlikely to move the needle by themselves. Their contributions will be meaningful over time but will come with contributions from many parts of the organization. Berkley Edge is up and running and off to a good start. To set expectations, they began from a standing start, but we're pleased with their progress and think it's an outstanding group bringing value to distribution, customers, and capital.
There are no further questions at this time. I will now turn the call back to Mr. Rob Berkley for closing remarks.
Alexandra, thank you very much for your assistance this evening. Thank you to all who tuned in and for your interest in the company and your questions. As I hope people would have gathered, this was a very solid quarter and perhaps equally if not more exciting is how well positioned the business is to continue to grow, prosper, and generate value for stakeholders. We look forward to speaking with you over the summer. Thank you very much. Have a good evening.
This concludes today's call. Thank you for attending. You may now disconnect.