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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211021006008/en/
Karen A. Horvath Vice President - External Financial
Communications (203) 629-3000
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