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WR Berkley just released results. I like listening to their conference call to get an update on where the US P/C insurance market is at. WRB is a traditional insurer focussed on the US market. Here are my key take-aways: 1.) the hard market continues with no signs of ending any time soon. 2.) P/C insurer returns - for some companies like WRB - are very good. ‘Record setting financial results.” 3.) The outlook is even better. Sceptics continue to question how this can be possible. The simple answer is lots of insurers are not experiencing ‘record setting financial results’. Some lines, like auto, were beyond terrible for years. Investments - the current book yield on fixed maturity holdings is about 4.7%. - new money yield is over 5% - average duration is 2.4 years, about the same as last quarter. WRB would like to extend duration WRB missed out on extending duration when rates peaked out in October of 2023. It is exceptionally difficult to time the market. This just further highlights the exceptional job the team at Fairfax has done with their fixed income portfolio over the past 2.5 years - extending the average duration from 1.6 years to 3.1 years in 2023 is a big, big deal. We will get clarity on all the puts and takes when Fairfax reports Q4 results (and more when they release the AR). It looks to me like WRB got caught ‘thumb sucking’ in Q4 when rates spiked. Returning money to shareholders WRB returned more than $1 billion to shareholders in 2023: dividends, special dividend and buybacks. Well done. Importantly, this is capital that is leaving the P/C insurance industry. Other - Rate increase in Q4 = 8% and still exceeding loss cost trend. Q4 of 2022, rate increase was 6.9%. Yes, rate was up modestly YOY. - Top-line growth of 12% in Q4: seeing nothing today to suggest growth rate is slowing in Q1. - Interest rate outlook: stay the same or maybe higher. See pressure on inflation in coming years driven by high government spending (supported by both Biden and Trump) and limited ability to raise taxes. - ‘Alternative investments’ opportunities not compelling today given what is available in fixed income today (on a risk adjusted basis).

At a 51B GBP Market cap yesterday, if you took out $16B ITC stake, you're paying 35B GBP for the company. Management has publicly committed to 40B FCF over next 5 years. So, you get your money back in 4.375 years, that is 22.8% FCF yield. Even if you assume US menthol ban happens, you get your money back in 5 years for a 20% FCF yield, instead of 4.375 years. Few companies like this where management also has some direct control over pricing and margins. I might still change weighting, and get out and in at different times. Also, took a small stake in WBA last week, where management currently doesn't have much control over re-imbursement rates, but revenues keep going up over years, and owner-led management is now building a business that will have some control over loss rates with primary care, adherence & specialty pharmacy that insurers would be willing to pay for.