Third Quarter Net Income Increased 72.3% and Return on Equity of 16.6%

W. R. Berkley Corporation (NYSE: WRB) today reported its third quarter 2021 results.

Summary Financial Data

(Amounts in thousands, except per share data)

 

Third Quarter

 

Nine Months

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Gross premiums written

$

2,787,499

 

 

$

2,262,545

 

 

$

7,933,446

 

 

$

6,626,163

 

Net premiums written

2,325,138

 

 

1,879,316

 

 

6,587,357

 

 

5,464,980

 

 

 

 

 

 

 

 

 

Net income to common stockholders

261,297

 

 

151,678

 

 

728,060

 

 

218,520

 

Net income per diluted share

1.40

 

 

0.81

 

 

3.89

 

 

1.15

 

 

 

 

 

 

 

 

 

Operating income (1)

246,699

 

 

121,146

 

 

667,539

 

 

265,210

 

Operating income per diluted share

1.32

 

 

0.65

 

 

3.57

 

 

1.40

 

 

 

 

 

 

 

 

 

Return on equity (2)

16.6

%

 

10.0

%

 

15.4

%

 

4.8

%

(1) Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains (losses) and related expenses.

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

Third quarter highlights included:

  • Return on equity of 16.6%.
  • Net premiums written increased 23.7%.
  • The current accident year combined ratio before catastrophe losses of 3.5 loss ratio points was 86.9%.
  • The reported combined ratio was 90.4%, including catastrophe losses of $73.8 million.
  • Average rate increases excluding workers' compensation were approximately 10.1%.
  • Net investment income increased 26.1% to $179.9 million.
  • Operating income increased 103.6% to $246.7 million.
  • Total capital returned to shareholders was $115.8 million, consisting of $92.7 million of share repurchases and $23.1 million of dividends.

The Company commented:

The Company had another outstanding quarter with 24% growth in net premiums written, a combined ratio of 90.4%, and an annualized return on equity of 16.6%. These results were achieved in spite of significant industry catastrophe losses and low interest rates.

Overall rate increases remained robust in nearly all lines of business, and we expect this to continue for the foreseeable future. We see expanding opportunities to write business at attractive underwriting margins, given the strong commercial property and casualty pricing environment. The increasing focus that distribution partners and clients are placing on stable markets with balance sheet strength and expertise, particularly in specialty and E&S lines, is also contributing to growth.

Underwriting income increased 80% in the quarter. We expect that exposure growth and compounding rate achievement will contribute to additional underwriting profits as premiums are fully earned. While we maintain a high-quality short-duration fixed-maturity portfolio, investment income grew 26% in the quarter as investment funds delivered another strong performance.

The Company is performing well as we remain focused on our total risk-adjusted return strategy. Opportunities like the current environment are infrequent in the property casualty insurance market, and we are striving to make the most of it.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on October 21, 2021, 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 2021 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 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, including claims for cybersecurity-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing COVID-19 pandemic; the impact of climate change, which may alter the frequency and increase the 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 2019; 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 2021 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)

 

Third Quarter

 

Nine Months

 

2021

 

2020

 

2021

 

2020

Revenues:

 

 

 

 

 

 

 

Net premiums written

$

2,325,138

 

 

$

1,879,316

 

 

$

6,587,357

 

 

$

5,464,980

 

Change in unearned premiums

(244,120)

 

 

(130,395)

 

 

(684,759)

 

 

(347,727)

 

Net premium earned

2,081,018

 

 

1,748,921

 

 

5,902,598

 

 

5,117,253

 

Net investment income

179,851

 

 

142,650

 

 

506,615

 

 

402,844

 

Net investment gains (losses):

 

 

 

 

 

 

 

Net realized and unrealized gains (losses) on investments

17,187

 

 

(7,772)

 

 

89,407

 

 

(89,404)

 

Change in allowance for credit losses on investments

2,314

 

 

46,750

 

 

(11,003)

 

 

29,093

 

Net investment gains (losses)

19,501

 

 

38,978

 

 

78,404

 

 

(60,311)

 

Revenues from non-insurance businesses

120,374

 

 

87,495

 

 

316,927

 

 

256,966

 

Insurance service fees

21,467

 

 

21,635

 

 

69,531

 

 

67,256

 

Other Income

2,072

 

 

140

 

 

3,163

 

 

2,446

 

Total Revenues

2,424,283

 

 

2,039,819

 

 

6,877,238

 

 

5,786,454

 

Expenses:

 

 

 

 

 

 

 

Loss and loss expenses

1,298,392

 

 

1,114,632

 

 

3,623,630

 

 

3,357,011

 

Other operating costs and expenses

643,045

 

 

593,969

 

 

1,907,020

 

 

1,753,142

 

Expenses from non-insurance businesses

115,465

 

 

85,036

 

 

308,453

 

 

256,032

 

Interest expense

35,100

 

 

39,768

 

 

109,846

 

 

114,874

 

Total expenses

2,092,002

 

 

1,833,405

 

 

5,948,949

 

 

5,481,059

 

Income before income tax

332,281

 

 

206,414

 

 

928,289

 

 

305,395

 

Income tax expense

(64,963)

 

 

(54,048)

 

 

(191,577)

 

 

(84,900)

 

Net Income before noncontrolling interests

267,318

 

 

152,366

 

 

736,712

 

 

220,495

 

Noncontrolling interest

(6,021)

 

 

(688)

 

 

(8,652)

 

 

(1,975)

 

Net income to common stockholders

$

261,297

 

 

$

151,678

 

 

$

728,060

 

 

$

218,520

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.41

 

 

$

0.82

 

 

$

3.93

 

 

$

1.17

 

Diluted

$

1.40

 

 

$

0.81

 

 

$

3.89

 

 

$

1.15

 

 

 

 

 

 

 

 

 

Average shares outstanding (1):

 

 

 

 

 

 

 

Basic

185,031

 

 

185,765

 

 

185,127

 

 

187,338

 

Diluted

186,742

 

 

187,717

 

 

187,060

 

 

189,515

 

(1) 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)

 

Third Quarter

 

Nine Months

 

2021

 

2020

 

2021

 

2020

Insurance:

 

 

 

 

 

 

 

Gross premiums written

$

2,446,758

 

 

$

1,981,816

 

 

$

7,008,617

 

 

$

5,841,328

 

Net premiums written

2,007,194

 

 

1,628,316

 

 

5,741,229

 

 

4,754,791

 

Net premiums earned

1,819,071

 

 

1,531,093

 

 

5,151,253

 

 

4,481,092

 

Pre-tax income

314,000

 

 

178,971

 

 

862,399

 

 

431,464

 

Loss ratio

61.4

%

 

64.4

%

 

61.4

%

 

65.5

%

Expense ratio

27.9

%

 

29.7

%

 

28.5

%

 

30.6

%

GAAP Combined ratio

89.3

%

 

94.1

%

 

89.9

%

 

96.1

%

 

 

 

 

 

 

 

 

Reinsurance & Monoline Excess:

 

 

 

 

 

 

 

Gross premiums written

$

340,740

 

 

$

280,729

 

 

$

924,829

 

 

$

784,835

 

Net premiums written

317,945

 

 

251,000

 

 

846,128

 

 

710,189

 

Net premiums earned

261,947

 

 

217,828

 

 

751,345

 

 

636,161

 

Pre-tax income

52,742

 

 

61,532

 

 

196,185

 

 

110,611

 

Loss ratio

69.3

%

 

59.1

%

 

61.5

%

 

66.5

%

Expense ratio

29.1

%

 

31.2

%

 

30.1

%

 

32.1

%

GAAP Combined ratio

98.4

%

 

90.3

%

 

91.6

%

 

98.6

%

 

 

 

 

 

 

 

 

Corporate and Eliminations:

 

 

 

 

 

 

 

Net investment gains (losses)

$

19,501

 

 

$

38,978

 

 

$

78,404

 

 

$

(60,311)

 

Interest expense

(35,100)

 

 

(39,768)

 

 

(109,846)

 

 

(114,874)

 

Other revenues and expenses

(18,862)

 

 

(33,299)

 

 

(98,853)

 

 

(61,495)

 

Pre-tax loss

(34,461)

 

 

(34,089)

 

 

(130,295)

 

 

(236,680)

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

Gross premiums written

$

2,787,499

 

 

$

2,262,545

 

 

$

7,933,446

 

 

$

6,626,163

 

Net premiums written

2,325,138

 

 

1,879,316

 

 

6,587,357

 

 

5,464,980

 

Net premiums earned

2,081,018

 

 

1,748,921

 

 

5,902,598

 

 

5,117,253

 

Pre-tax income

332,281

 

 

206,414

 

 

928,289

 

 

305,395

 

Loss ratio

62.4

%

 

63.7

%

 

61.4

%

 

65.6

%

Expense ratio

28.0

%

 

30.0

%

 

28.7

%

 

30.8

%

GAAP Combined ratio

90.4

%

 

93.7

%

 

90.1

%

 

96.4

%

(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.

Supplemental Information

(Amounts in thousands)

 

Third Quarter

 

Nine Months

 

2021

 

2020

 

2021

 

2020

Net premiums written:

 

 

 

 

 

 

 

Other liability

$

760,515

 

 

$

606,967

 

 

$

2,138,816

 

 

$

1,748,338

 

Short-tail lines (1)

373,427

 

 

343,888

 

 

1,090,257

 

 

974,941

 

Workers' compensation

277,490

 

 

257,629

 

 

879,852

 

 

857,951

 

Commercial automobile

295,132

 

 

230,352

 

 

822,903

 

 

648,842

 

Professional liability

300,629

 

 

189,480

 

 

809,401

 

 

524,719

 

Total Insurance

2,007,194

 

 

1,628,316

 

 

5,741,229

 

 

4,754,791

 

Casualty reinsurance

194,253

 

 

142,847

 

 

525,333

 

 

419,235

 

Monoline excess

75,504

 

 

59,267

 

 

184,676

 

 

154,105

 

Property reinsurance

48,189

 

 

48,886

 

 

136,118

 

 

136,849

 

Total Reinsurance & Monoline Excess

317,945

 

 

251,000

 

 

846,128

 

 

710,189

 

Total

$

2,325,138

 

 

$

1,879,316

 

 

$

6,587,357

 

 

$

5,464,980

 

 

 

 

 

 

 

 

 

Current accident year losses from catastrophes (including COVID-19 related losses):

 

 

 

 

Insurance

$

39,230

 

 

$

74,038

 

 

$

108,863

 

 

$

244,657

 

Reinsurance & Monoline Excess

34,560

 

 

(1,282)

 

 

44,722

 

 

52,733

 

Total

$

73,790

 

 

$

72,756

 

 

$

153,585

 

 

$

297,390

 

 

 

 

 

 

 

 

 

Net Investment income:

 

 

 

 

 

 

 

Core portfolio (2)

$

103,372

 

 

$

104,872

 

 

$

306,901

 

 

$

349,598

 

Investment funds

69,292

 

 

18,235

 

 

169,538

 

 

1,260

 

Arbitrage trading account

7,187

 

 

19,543

 

 

30,176

 

 

51,986

 

Total

$

179,851

 

 

$

142,650

 

 

$

506,615

 

 

$

402,844

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses) on investments:

 

 

 

 

 

 

 

Net realized gains (losses) on investments

$

36,431

 

 

$

(38,466)

 

 

$

151,225

 

 

$

(27,545)

 

Change in unrealized (losses) gains on equity securities

(19,244)

 

 

30,694

 

 

(61,818)

 

 

(61,859)

 

Total

$

17,187

 

 

$

(7,772)

 

 

$

89,407

 

 

$

(89,404)

 

 

 

 

 

 

 

 

 

Other operating costs and expenses:

 

 

 

 

 

 

 

Policy acquisition and insurance operating expenses

$

583,065

 

 

$

523,349

 

 

$

1,694,548

 

 

$

1,574,507

 

Insurance service expenses

21,243

 

 

21,034

 

 

63,817

 

 

64,029

 

Net foreign currency (gains) losses

(12,497)

 

 

5,078

 

 

(19,216)

 

 

(23,845)

 

Debt extinguishment costs

 

 

 

 

11,521

 

 

 

Other costs and expenses

51,234

 

 

44,508

 

 

156,350

 

 

138,451

 

Total

$

643,045

 

 

$

593,969

 

 

$

1,907,020

 

 

$

1,753,142

 

 

 

 

 

 

 

 

 

Cash flow from operations

$

828,585

 

 

$

557,094

 

 

$

1,524,394

 

 

$

1,136,945

 

 

 

 

 

 

 

 

 

Reconciliation of net income to operating income:

 

 

 

 

 

 

 

Net income

$

261,297

 

 

$

151,678

 

 

$

728,060

 

 

$

218,520

 

Pre-tax investment (gains) losses, net of related expenses

(18,820)

 

 

(39,497)

 

 

(75,393)

 

 

60,311

 

Income tax expense (benefit)

4,222

 

 

8,965

 

 

14,872

 

 

(13,621)

 

Operating income after-tax (3)

$

246,699

 

 

$

121,146

 

 

$

667,539

 

 

$

265,210

 

(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.

(3) Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains (losses). Net investment gains (losses) are computed net of related expenses, including performance-based compensatory costs associated with realized investment gains. Management believes this measurement provides a useful indicator of trends in the Company’s underlying operations.

Selected Balance Sheet Information

(Amounts in thousands, except per share data)

 

September 30, 2021

 

December 31, 2020

 

 

 

 

Net invested assets (1)

$

23,292,268

 

 

$

21,370,503

 

Total assets

31,544,288

 

 

28,571,965

 

Reserves for losses and loss expenses

14,919,576

 

 

13,784,430

 

Senior notes and other debt

2,258,646

 

 

1,623,025

 

Subordinated debentures

1,007,472

 

 

1,102,309

 

Common stockholders' equity (2)

6,648,441

 

 

6,310,802

 

Common stock outstanding (3)

176,639

 

 

177,825

 

Book value per share (4)

37.64

 

 

35.49

 

Tangible book value per share (4)

36.39

 

 

34.22

 

(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 September 30, 2021, reflected in common stockholders' equity are after-tax unrealized investment gains of $187 million and unrealized currency translation losses of $378 million. As of December 31, 2020, after-tax unrealized investment gains were $290 million and unrealized currency translation losses were $352 million.

(3) During the nine months ended September 30, 2021, the Company repurchased 1,752,619 shares of its common stock for $122 million. During the three months ended September 30, 2021, the Company repurchased 1,287,556 shares of its common stock for $93 million. The number of shares of common stock outstanding excludes shares held in a grantor trust.

(4) 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

September 30, 2021

(Amounts in thousands, except percentages)

 

Carrying Value

 

Percent of Total

Fixed maturity securities:

 

 

 

United States government and government agencies

$

518,333

 

 

2.2

%

State and municipal:

 

 

 

Special revenue

2,110,271

 

 

9.1

%

State general obligation

447,320

 

 

1.9

%

Local general obligation

431,522

 

 

1.9

%

Pre-refunded

230,840

 

 

1.0

%

Corporate backed

177,916

 

 

0.7

%

Total state and municipal

3,397,869

 

 

14.6

%

Mortgage-backed securities:

 

 

 

Agency

681,798

 

 

2.9

%

Residential - Prime

159,826

 

 

0.7

%

Commercial

130,637

 

 

0.6

%

Residential - Alt A

6,326

 

 

0.0

%

Total mortgage-backed securities

978,587

 

 

4.2

%

Asset-backed securities

4,655,555

 

 

20.0

%

Corporate:

 

 

 

Industrial

3,132,362

 

 

13.5

%

Financial

1,699,840

 

 

7.3

%

Utilities

418,853

 

 

1.8

%

Other

173,009

 

 

0.7

%

Total corporate

5,424,064

 

 

23.3

%

Foreign government

1,098,727

 

 

4.7

%

Total fixed maturity securities (1)

16,073,135

 

 

69.0

%

Equity securities available for sale:

 

 

 

Common stocks

609,939

 

 

2.6

%

Preferred stocks

208,799

 

 

0.9

%

Total equity securities available for sale

818,738

 

 

3.5

%

Cash and cash equivalents (2)

2,182,020

 

 

9.4

%

Real estate

1,842,400

 

 

7.9

%

Investment funds (3)

1,400,140

 

 

6.0

%

Arbitrage trading account

860,339

 

 

3.7

%

Loans receivable

115,496

 

 

0.5

%

Net invested assets

$

23,292,268

 

 

100.0

%

(1) Total fixed maturity securities had an average rating of AA- and an average duration of 2.3 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 $0.8 million.

Karen A. Horvath Vice President - External Financial Communications (203) 629-3000

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