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W.R. Berkley (WRB) Misses Q2 EPS by 20c

July 21, 2020 4:12 PM EDT

W.R. Berkley (NYSE: WRB) reported Q2 EPS of $0.06, $0.20 worse than the analyst estimate of $0.26.

Second quarter highlights included:

  • Average rate increases excluding workers' compensation were approximately 13.0%.
  • The accident year combined ratio before catastrophe losses was 90.2%. The reported combined ratio was 98.7%.
  • Catastrophes added 8.7 loss ratio points to the reported combined ratio, including 5.1 loss ratio points for COVID-19 related losses.
  • Book value per share grew 7.7%, before dividends and share repurchases.
  • Total capital returned to stockholders was $117 million, including $96 million of share repurchases and $21 million of ordinary dividends.
  • Cash and liquid investments of more than $1.5 billion at the holding company.

The Company commented:

The second quarter of 2020 was most notably characterized by the COVID-19 pandemic and its impact on the U.S. and global economies. As previously announced, the Company incurred $85 million of net COVID-19 related losses during the period. The losses reflect newly available information and legal and regulatory developments that arose during the quarter. The total represents our best estimate of ultimate losses based on currently available information. Total catastrophe losses also included $20 million for losses related to civil unrest and $40 million primarily attributable to severe weather-related events in the U.S. Notwithstanding, inclusive of all these events, the Company reported a 98.7% combined ratio.

In spite of the current challenges, positive rate momentum persisted. The primary impetus for this continued momentum is the growing industry concern over the low interest rate environment and social inflation, which has shown no signs of abating. We believe that the current environment has heightened risk awareness and further reinforced this trend. Average rate increases excluding workers' compensation in the second quarter of 2020 of approximately 13% mitigated the top-line impact of the shrinking economy. Consequently, gross premiums written grew despite the current economic environment. While re-opening the global economy is unlikely to be a smooth process, we anticipate that it will have a meaningful favorable impact on our future growth.

Net investment income was adversely impacted by a $58 million loss from investment funds, which are reported on a one-quarter lag. The loss was driven by the first quarter downturn in the financial markets resulting from the COVID-19 related economic shutdown. We continue to manage our portfolio for total return in light of low interest rates and maintain a conservative fixed-maturity portfolio with an average rating of AA- and a duration of 2.4 years. Given the uncertainty in the financial markets and the economy, we have taken a defensive position to enhance our liquidity by investing in high-quality shorter-term assets, including cash and cash equivalents.

The first half of 2020 has been highly unusual in many regards. Our Company has performed relatively well and our people have demonstrated tremendous resiliency. Much remains unknown as we move into the second half of the year, yet often the best opportunities for the market to correct itself and provide an appropriate risk-adjusted return arise from periods of the greatest uncertainty. We see this as one of those moments, and we are well positioned to realize these opportunities as the economy improves.

For earnings history and earnings-related data on W.R. Berkley (WRB) click here.



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