Upgrade to SI Premium - Free Trial

W. R. Berkley Corporation Reports Second Quarter Results

July 23, 2019 4:10 PM

Net Income Increased 20% to $217 Million; Return on Equity of 15.9%

GREENWICH, Conn.--(BUSINESS WIRE)-- W. R. Berkley Corporation (NYSE: WRB) today reported net income for the second quarter of 2019 of $217 million, or $1.12 per share.

Summary Financial Data

(Amounts in thousands, except per share data)

Second Quarter

Six Months

2019

2018

2019

2018

Gross premiums written

$

2,089,861

$

1,948,074

$

4,136,090

$

3,927,495

Net premiums written

1,743,464

1,624,104

3,453,065

3,289,442

Net income to common stockholders

216,709

180,075

397,431

346,472

Net income per diluted share (1)

1.12

0.93

2.06

1.80

Return on equity (2)

15.9

%

13.3

%

14.6

%

12.8

%

(1) 2018 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.

(2) Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’ equity.

Second quarter highlights included:

The Company commented:

We are very pleased with our 15.9% annualized after-tax return on equity in the second quarter of 2019.

The underwriting environment continues to improve with rate increases in all lines of business except workers’ compensation. We remain focused on businesses that have the highest potential risk-adjusted returns. We see increasing signs of rate firming on both domestic and international business, which should provide even greater opportunities for further growth.

Overall investment income grew nearly 23% as steady income from the core portfolio was enhanced by better-than-average investment fund performance. We have generally maintained the quality and duration of our fixed-maturity portfolio as the current interest rate environment has been somewhat volatile and difficult to predict. In addition, we recorded $74 million of net realized and unrealized pre-tax gains on investments.

Our second quarter results demonstrated the growing momentum in our economic model. The pursuit of rate adequacy is taking hold in much of the commercial lines (re)insurance market, and we anticipate that these market conditions will persist for the foreseeable future. We remain focused on our risk-adjusted total return strategy as we deliver on our commitment to create long-term shareholder value.

(1) Net realized and unrealized pre-tax gains on investments before performance-based compensation costs were $74 million.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on July 23, 2019, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at https://ir.berkley.com/news-and-events/events-and-presentations/default.aspx. Please log on at least ten minutes early to register and download and install any necessary software. A replay of the webcast will be available on the Company's website approximately two hours after the end of the conference call. Additional financial information can be found on the Company's website at https://ir.berkley.com/investor-relations/financial-information/annual-reports/default.aspx.

About W. R. Berkley Corporation

Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property casualty business: Insurance and Reinsurance & Monoline Excess.

Forward Looking Information

This is a “Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2019 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition, including new alternative entrants to the industry; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, including real estate, merger arbitrage, energy related and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts; natural and man-made catastrophic losses, including as a result of terrorist activities; the impact of climate change, which may increase the frequency and severity of catastrophe events; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response, on our results and financial condition; foreign currency and political risks (including those associated with the United Kingdom's withdrawal from the European Union, or "Brexit") relating to our international operations; our ability to attract and retain key personnel and qualified employees; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2015; the ability or willingness of our reinsurers to pay reinsurance recoverables owed to us; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; potential difficulties with technology and/or cyber security issues; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties could cause our actual results for the year 2019 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Consolidated Financial Summary

(Amounts in thousands, except per share data)

Second Quarter

Six Months

2019

2018

2019

2018

Revenues:

Net premiums written

$

1,743,464

$

1,624,104

$

3,453,065

$

3,289,442

Change in unearned premiums

(96,623

)

(43,051

)

(213,368

)

(140,981

)

Net premiums earned

1,646,841

1,581,053

3,239,697

3,148,461

Net investment income

188,333

153,777

346,587

328,295

Net realized and unrealized gains on investments

73,574

69,631

142,226

118,095

Revenues from non-insurance businesses

89,297

76,698

181,124

146,869

Insurance service fees

22,446

29,719

47,759

60,393

Other income

2,893

38

3,013

50

Total revenues

2,023,384

1,910,916

3,960,406

3,802,163

Expenses:

Losses and loss expenses

1,028,830

973,636

2,017,479

1,936,856

Other operating costs and expenses

591,828

593,142

1,179,916

1,203,581

Expenses from non-insurance businesses

88,272

75,191

178,397

144,734

Interest expense

40,718

39,705

81,439

76,760

Total expenses

1,749,648

1,681,674

3,457,231

3,361,931

Income before income taxes

273,736

229,242

503,175

440,232

Income tax expense

(56,309

)

(48,464

)

(104,134

)

(91,881

)

Net income before noncontrolling interests

217,427

180,778

399,041

348,351

Noncontrolling interests

(718

)

(703

)

(1,610

)

(1,879

)

Net income to common stockholders

$

216,709

$

180,075

$

397,431

$

346,472

Net income per share (1):

Basic

$

1.14

$

0.95

$

2.09

$

1.83

Diluted

$

1.12

$

0.93

$

2.06

$

1.80

Average shares outstanding (1) (2):

Basic

190,512

189,776

190,456

189,669

Diluted

193,059

192,509

192,804

192,284

(1) 2018 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.

(2) Basic shares outstanding consist of the weighted average number of common shares outstanding during the period (including shares held in a grantor trust). Diluted shares outstanding consist of the weighted average number of basic and common equivalent shares outstanding during the period.

Business Segment Operating Results

(Amounts in thousands, except ratios) (1) (2)

Second Quarter

Six Months

2019

2018

2019

2018

Insurance:

Gross premiums written

$

1,905,367

$

1,798,074

$

3,715,850

$

3,558,247

Net premiums written

1,574,585

1,491,432

3,071,964

2,964,676

Premiums earned

1,475,184

1,415,579

2,902,218

2,806,868

Pre-tax income

225,871

163,181

410,387

362,109

Loss ratio

62.9

%

62.4

%

62.5

%

61.7

%

Expense ratio

30.9

%

32.9

%

31.4

%

32.9

%

GAAP combined ratio

93.8

%

95.3

%

93.9

%

94.6

%

Reinsurance & Monoline Excess:

Gross premiums written

$

184,494

$

150,000

$

420,240

$

369,248

Net premiums written

168,879

132,672

381,101

324,766

Premiums earned

171,657

165,474

337,479

341,593

Pre-tax income

52,635

56,174

97,490

100,866

Loss ratio

59.2

%

54.6

%

60.0

%

60.3

%

Expense ratio

36.0

%

36.8

%

36.0

%

36.2

%

GAAP combined ratio

95.2

%

91.4

%

96.0

%

96.5

%

Corporate and Eliminations:

Net realized and unrealized gains on investments

$

73,574

$

69,631

$

142,226

$

118,095

Interest expense

(40,718

)

(39,705

)

(81,439

)

(76,760

)

Other revenues and expenses

(37,626

)

(20,039

)

(65,489

)

(64,078

)

Pre-tax (loss) income

(4,770

)

9,887

(4,702

)

(22,743

)

Consolidated:

Gross premiums written

$

2,089,861

$

1,948,074

$

4,136,090

$

3,927,495

Net premiums written

1,743,464

1,624,104

3,453,065

3,289,442

Premiums earned

1,646,841

1,581,053

3,239,697

3,148,461

Pre-tax income

273,736

229,242

503,175

440,232

Loss ratio

62.4

%

61.6

%

62.2

%

61.5

%

Expense ratio

31.5

%

33.3

%

31.9

%

33.3

%

GAAP combined ratio

93.9

%

94.9

%

94.1

%

94.8

%

(1) Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. GAAP combined ratio is the sum of the loss ratio and the expense ratio.

(2) Commencing with the first quarter of 2019, the Company renamed the Reinsurance segment to Reinsurance & Monoline Excess, and reclassified the monoline excess business from the Insurance segment. The reclassified business includes operations that solely retains risk on an excess basis. Reclassifications have been made to the Company's 2018 financial information to conform with this presentation.

Supplemental Information

(Amounts in thousands)

Second Quarter

Six Months

2019

2018

2019

2018

Net premiums written:

Other liability

$

546,861

$

504,315

$

1,053,811

$

973,155

Workers' compensation

340,430

355,006

694,617

704,547

Short-tail lines (1)

337,611

312,221

616,447

603,248

Commercial automobile

198,728

185,804

411,683

400,449

Professional liability

150,955

134,086

295,406

283,277

Total Insurance

1,574,585

1,491,432

3,071,964

2,964,676

Casualty reinsurance

106,690

80,306

211,206

162,641

Monoline excess

23,929

22,094

91,721

91,902

Property reinsurance

38,260

30,272

78,174

70,223

Total Reinsurance & Monoline Excess

168,879

132,672

381,101

324,766

Total

$

1,743,464

$

1,624,104

$

3,453,065

$

3,289,442

Losses from catastrophes:

Insurance

$

25,446

$

12,929

$

38,064

$

20,060

Reinsurance & Monoline Excess

57

627

99

884

Total

$

25,503

$

13,556

$

38,163

$

20,944

Net investment income:

Core portfolio (2)

$

134,294

$

132,728

$

270,552

$

261,701

Investment funds

46,840

12,716

58,251

53,070

Arbitrage trading account

7,199

8,333

17,784

13,524

Total

$

188,333

$

153,777

$

346,587

$

328,295

Net realized and unrealized gains on investments:

Net realized gains on investment sales

$

4,156

$

124,283

$

30,730

$

266,952

Change in unrealized gains on equity securities

69,418

(54,652

)

111,496

(148,857

)

Total

$

73,574

$

69,631

$

142,226

$

118,095

Other operating costs and expenses:

Policy acquisition and insurance operating expenses

$

518,160

$

526,862

$

1,031,951

$

1,047,093

Insurance service expenses

25,386

30,990

51,343

63,702

Net foreign currency losses (gains)

470

(18,251

)

(6,494

)

(4,767

)

Other costs and expenses

47,812

53,541

103,116

97,553

Total

$

591,828

$

593,142

$

1,179,916

$

1,203,581

Cash flow from operations

$

324,316

$

139,397

$

402,646

$

119,362

(1) Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.

(2) Core portfolio includes fixed maturity securities, equity securities, cash and cash equivalents, real estate and loans receivable.

Selected Balance Sheet Information

(Amounts in thousands, except per share data)

June 30,
2019

December 31,
2018

Net invested assets (1)

$

19,707,264

$

18,828,321

Total assets

26,487,903

24,895,977

Reserves for losses and loss expenses

12,320,278

11,966,448

Senior notes and other debt

1,873,799

1,882,028

Subordinated debentures

907,866

907,491

Common stockholders’ equity (2)

5,976,760

5,437,851

Common stock outstanding (3) (4)

183,168

182,994

Book value per share (4) (5)

32.63

29.72

Tangible book value per share (4) (5)

31.36

28.42

(1) Net invested assets include investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases, net of related liabilities.

(2) As of June 30, 2019, reflected in common stockholders' equity are after-tax unrealized investment gains of $153 million and unrealized currency translation losses of $414 million. As of December 31, 2018, after-tax unrealized investment losses were $91 million and unrealized currency translation losses were $419 million.

(3) During the three and six months ended June 30, 2019, the Company did not repurchase any shares of its common stock. The number of shares of common stock outstanding excludes shares held in a grantor trust.

(4) December 31, 2018 shares outstanding and per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.

(5) Book value per share is total common stockholders’ equity divided by the number of common shares outstanding. Tangible book value per share is total common stockholders’ equity excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding.

Investment Portfolio

June 30, 2019

(Amounts in thousands)

Carrying
Value

Percent
of Total

Fixed maturity securities:

United States government and government agencies

$

777,070

3.9

%

State and municipal:

Special revenue

2,402,349

12.2

%

Local general obligation

464,109

2.4

%

State general obligation

381,719

1.9

%

Pre-refunded

324,068

1.6

%

Corporate backed

244,745

1.2

%

Total state and municipal

3,816,990

19.3

%

Mortgage-backed securities:

Agency

902,565

4.6

%

Residential - Prime

335,938

1.7

%

Commercial

309,781

1.6

%

Residential - Alt A

36,962

0.2

%

Total mortgage-backed securities

1,585,246

8.1

%

Asset-backed securities

2,701,785

13.7

%

Corporate:

Industrial

2,230,207

11.3

%

Financial

1,453,723

7.4

%

Utilities

324,322

1.7

%

Other

28,033

0.1

%

Total corporate

4,036,285

20.5

%

Foreign government

815,424

4.1

%

Total fixed maturity securities (1)

13,732,800

69.7

%

Equity securities available for sale:

Preferred stocks

276,362

1.4

%

Common stocks

140,226

0.7

%

Total equity securities available for sale

416,588

2.1

%

Real estate

2,067,544

10.5

%

Cash and cash equivalents (2)

1,461,956

7.4

%

Investment funds (3)

1,400,237

7.1

%

Arbitrage trading account

533,442

2.7

%

Loans receivable

94,697

0.5

%

Net invested assets

$

19,707,264

100.0

%

(1) Total fixed maturity securities had an average rating of AA- and an average duration of 2.6 years, including cash and cash equivalents.

(2) Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.

(3) Investment funds are net of related liabilities of $1.3 million.

Karen A. Horvath

Vice President - External

Financial Communications

(203) 629-3000

Source: W. R. Berkley Corporation

Categories

Press Releases

Next Articles