Net Income Increased by 45.7% to $334
Million; Operating Return on Equity of 21.7% and Return on
Equity of 19.8%; Record Quarterly Net Investment Income of
$271 Million Driven by 59.3% Increase in the Core
Portfolio
W. R. Berkley Corporation (NYSE: WRB) today reported its
third quarter 2023 results.
Summary Financial Data
(Amounts in thousands, except per
share data)
Third Quarter
Nine Months
2023
2022
2023
2022
Gross premiums written
$
3,353,205
$
3,081,938
$
9,739,296
$
8,994,175
Net premiums written
2,848,459
2,577,274
8,234,799
7,576,163
Net income to common stockholders
333,586
228,879
984,020
998,839
Net income per diluted share
1.23
0.82
3.59
3.57
Operating income (1)
366,608
281,833
952,868
901,436
Operating income per diluted share
1.35
1.01
3.48
3.22
Return on equity (2)
19.8
%
13.8
%
19.4
%
20.0
%
Operating return on equity (1) (2)
21.7
%
16.9
%
18.8
%
18.1
%
(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 and operating return on equity represent
net income and operating income, respectively, expressed on an
annualized basis as a percentage of beginning of year common
stockholders’ equity.
Third quarter highlights included:
- Operating return on equity and return on equity of 21.7% and
19.8%, respectively.
- Record net investment income of $270.9 million driven by 59.3%
increase in the core portfolio.
- The current accident year combined ratio before catastrophe
losses of 2.3 loss ratio points was 87.9%.
- The reported combined ratio was 90.2%, including current
accident year catastrophe losses of $61.5 million.
- Record net premiums written grew 10.5% to $2.8 billion.
- Underwriting income and net income grew 34.7% and 45.7% to
$258.7 million and $333.6 million, respectively.
- Average rate increases excluding workers' compensation were
approximately 8.5%.
- Total capital returned to shareholders was $160.3 million,
consisting of $129.0 million of special dividends, $28.4 million of
regular dividends, and $2.9 million of share repurchases.
The Company commented:
Strong underwriting profits and record quarterly net investment
income drove the Company’s exceptional annualized operating return
on equity of 21.7% in the third quarter of 2023.
Net premiums written grew 10.5% in the quarter. Market segments,
territories and lines of business continue to move independently of
one another. Accordingly, we are expanding in areas that are likely
to provide attractive risk-adjusted profitability. Overall rate
increases excluding workers’ compensation remained strong at
8.5%.
The higher interest rate environment contributed to a meaningful
year-over-year increase in investment income. We anticipate this
trend will continue as we benefit from record operating cash flows
and reinvest at higher interest rates. Simultaneously, the short
duration and high quality of our fixed-maturity portfolio have
enabled us to grow book value even as interest rates have
risen.
Our focus on total risk-adjusted return, decentralized
operations, and entrepreneurial culture, coupled with effective
capital management, has enabled us to continue to create value for
our shareholders. We remain well positioned for continued success
and very optimistic about the remainder of 2023 and the foreseeable
future.
Webcast Conference Call
The Company will hold its quarterly conference call with
analysts and investors to discuss its earnings and other
information on October 23, 2023, at 5:00 p.m. eastern time. The
conference call will be webcast live on the Company's website at
https://ir.berkley.com/events-and-presentations/default.aspx.
Please log on early to register. 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/quarterly-results/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 2023 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 cyber security-related risks; natural and
man-made catastrophic losses, including as a result of terrorist
activities; the ongoing effects of the COVID-19 pandemic, or other
epidemics and pandemics; 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 to
such conditions, on our results and financial condition; foreign
currency and political risks 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; cyber security breaches of our information
technology systems and the information technology systems of our
vendors and other third parties, or related processes and systems;
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 2023 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
2023
2022
2023
2022
Revenues:
Net premiums written
$
2,848,459
$
2,577,274
$
8,234,799
$
7,576,163
Change in unearned premiums
(206,545
)
(135,313
)
(548,726
)
(527,958
)
Net premiums earned
2,641,914
2,441,961
7,686,073
7,048,205
Net investment income
270,944
202,816
739,494
547,902
Net investment (losses) gains:
Net realized and unrealized (losses) gains
on investments
(40,855
)
(66,282
)
50,403
139,664
Change in allowance for credit losses on
investments
(1,571
)
(1,128
)
(11,164
)
(12,365
)
Net investment (losses) gains
(42,426
)
(67,410
)
39,239
127,299
Revenues from non-insurance businesses
137,116
119,013
375,225
345,210
Insurance service fees
22,962
27,940
81,290
82,284
Other Income
128
80
235
1,797
Total Revenues
3,030,638
2,724,400
8,921,556
8,152,697
Expenses:
Loss and loss expenses
1,636,193
1,564,578
4,744,602
4,339,646
Other operating costs and expenses
808,669
725,537
2,457,925
2,139,256
Expenses from non-insurance businesses
133,939
116,240
370,244
334,062
Interest expense
31,888
31,780
95,580
98,473
Total expenses
2,610,689
2,438,135
7,668,351
6,911,437
Income before income tax
419,949
286,265
1,253,205
1,241,260
Income tax expense
(86,519
)
(55,791
)
(268,322
)
(238,290
)
Net Income before noncontrolling
interests
333,430
230,474
984,883
1,002,970
Noncontrolling interest
156
(1,595
)
(863
)
(4,131
)
Net income to common stockholders
$
333,586
$
228,879
$
984,020
$
998,839
Net income per share:
Basic
$
1.24
$
0.83
$
3.62
$
3.61
Diluted
$
1.23
$
0.82
$
3.59
$
3.57
Average shares outstanding (1):
Basic
269,191
277,192
271,656
276,928
Diluted
271,439
279,642
274,146
279,644
(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
2023
2022
2023
2022
Insurance:
Gross premiums written
$
2,990,869
$
2,719,824
$
8,659,128
$
7,976,288
Net premiums written
2,508,740
2,237,608
7,246,773
6,637,024
Net premiums earned
2,319,435
2,129,014
6,747,704
6,162,005
Pre-tax income
415,279
322,312
1,153,742
1,052,185
Loss ratio
62.6
%
63.2
%
62.8
%
61.3
%
Expense ratio
28.4
%
28.0
%
28.4
%
27.9
%
GAAP Combined ratio
91.0
%
91.2
%
91.2
%
89.2
%
Reinsurance & Monoline
Excess:
Gross premiums written
$
362,336
$
362,114
$
1,080,168
$
1,017,887
Net premiums written
339,719
339,666
988,026
939,139
Net premiums earned
322,479
312,947
938,369
886,200
Pre-tax income
106,072
59,561
313,290
209,366
Loss ratio
56.8
%
70.2
%
53.7
%
63.7
%
Expense ratio
27.8
%
28.4
%
28.7
%
28.4
%
GAAP Combined ratio
84.6
%
98.6
%
82.4
%
92.1
%
Corporate and Eliminations:
Net investment (losses) gains
$
(42,426
)
$
(67,410
)
$
39,239
$
127,299
Interest expense
(31,888
)
(31,780
)
(95,580
)
(98,473
)
Other expenses
(27,088
)
3,582
(157,486
)
(49,117
)
Pre-tax loss
(101,402
)
(95,608
)
(213,827
)
(20,291
)
Consolidated:
Gross premiums written
$
3,353,205
$
3,081,938
$
9,739,296
$
8,994,175
Net premiums written
2,848,459
2,577,274
8,234,799
7,576,163
Net premiums earned
2,641,914
2,441,961
7,686,073
7,048,205
Pre-tax income
419,949
286,265
1,253,205
1,241,260
Loss ratio
61.9
%
64.1
%
61.7
%
61.6
%
Expense ratio
28.3
%
28.0
%
28.4
%
28.0
%
GAAP Combined ratio
90.2
%
92.1
%
90.1
%
89.6
%
(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
2023
2022
2023
2022
Net premiums written:
Other liability
$
979,025
$
861,551
$
2,869,297
$
2,569,737
Short-tail lines (1)
553,447
439,630
1,572,609
1,318,398
Commercial automobile
388,132
333,935
1,045,651
948,913
Workers' compensation
302,701
306,593
937,855
940,734
Professional liability
285,435
295,899
821,361
859,242
Total Insurance
2,508,740
2,237,608
7,246,773
6,637,024
Casualty reinsurance
183,211
195,642
572,102
583,780
Monoline excess
83,217
75,959
212,839
192,723
Property reinsurance
73,291
68,065
203,085
162,636
Total Reinsurance & Monoline
Excess
339,719
339,666
988,026
939,139
Total
$
2,848,459
$
2,577,274
$
8,234,799
$
7,576,163
Current accident year losses from
catastrophes (including COVID-19 related losses):
Insurance
$
46,160
$
51,144
$
139,409
$
101,802
Reinsurance & Monoline Excess
15,369
42,999
23,536
79,063
Total
$
61,529
$
94,143
$
162,945
$
180,865
Net Investment income:
Core portfolio (2)
$
248,618
$
156,077
$
680,883
$
401,975
Investment funds
4,450
36,045
5,443
121,919
Arbitrage trading account
17,876
10,694
53,168
24,008
Total
$
270,944
$
202,816
$
739,494
$
547,902
Net realized and unrealized (losses)
gains on investments:
Net realized (losses) gains on
investments
$
(21,796
)
$
(15,898
)
$
4,798
$
228,365
Change in unrealized (losses) gains on
equity securities
(19,059
)
(50,384
)
45,605
(88,701
)
Total
$
(40,855
)
$
(66,282
)
$
50,403
$
139,664
Other operating costs and
expenses:
Policy acquisition and insurance operating
expenses
$
747,007
$
685,325
$
2,183,517
$
1,974,676
Insurance service expenses
21,225
24,991
70,336
71,348
Net foreign currency gains
(22,498
)
(41,065
)
(1,777
)
(85,060
)
Other costs and expenses
62,935
56,286
205,849
178,292
Total
$
808,669
$
725,537
$
2,457,925
$
2,139,256
Cash flow from operations
$
1,077,093
$
767,649
$
2,231,162
$
1,773,303
Reconciliation of net income to
operating income:
Net income
$
333,586
$
228,879
$
984,020
$
998,839
Pre-tax investment losses (gains), net of
related expenses
42,426
67,410
(39,170
)
(122,930
)
Income tax (benefit) expense
(9,404
)
(14,456
)
8,018
25,527
Operating income after-tax (3)
$
366,608
$
281,833
$
952,868
$
901,436
(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, 2023
December 31, 2022
Net invested assets (1)
$
26,126,604
$
24,545,672
Total assets
36,111,348
33,815,103
Reserves for losses and loss expenses
18,273,310
17,011,223
Senior notes and other debt
1,828,046
1,828,823
Subordinated debentures
1,008,910
1,008,371
Common stockholders' equity (2)
6,915,579
6,748,332
Common stock outstanding (3)
258,044
264,546
Book value per share (4)
26.80
25.51
Tangible book value per share (4)
25.91
24.58
(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, 2023, reflected in common stockholders'
equity are after-tax unrealized investment losses of $944 million
and unrealized currency translation losses of $379 million. As of
December 31, 2022, after-tax unrealized investment losses were $893
million and unrealized currency translation losses were $372
million.
(3) During the nine months ended September 30, 2023, the Company
repurchased 7,146,975 shares of its common stock for $430.5
million. During the three months ended September 30, 2023, the
Company repurchased 48,016 shares of its common stock for $2.9
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, 2023
(Amounts in thousands, except
percentages)
Carrying Value
Percent of Total
Fixed maturity securities:
United States government and government
agencies
$
1,467,199
5.6
%
State and municipal:
Special revenue
1,646,921
6.3
%
State general obligation
405,969
1.6
%
Local general obligation
385,340
1.5
%
Corporate backed
179,973
0.7
%
Pre-refunded
102,594
0.3
%
Total state and municipal
2,720,797
10.4
%
Mortgage-backed securities:
Agency
1,250,357
4.8
%
Commercial
629,512
2.4
%
Residential - Prime
196,519
0.8
%
Residential - Alt A
2,937
0.0
%
Total mortgage-backed securities
2,079,325
8.0
%
Asset-backed securities
4,087,458
15.6
%
Corporate:
Industrial
3,344,567
12.8
%
Financial
2,679,247
10.3
%
Utilities
643,277
2.5
%
Other
581,723
2.2
%
Total corporate
7,248,814
27.8
%
Foreign government
1,431,712
5.5
%
Total fixed maturity securities (1)
19,035,305
72.9
%
Equity securities available for
sale:
Common stocks
961,433
3.7
%
Preferred stocks
220,628
0.8
%
Total equity securities available for
sale
1,182,061
4.5
%
Cash and cash equivalents (2)
2,035,399
7.8
%
Investment funds
1,600,495
6.1
%
Real estate
1,270,545
4.9
%
Arbitrage trading account
825,049
3.1
%
Loans receivable
177,750
0.7
%
Net invested assets
$
26,126,604
100.0
%
(1) Total fixed maturity securities had an average rating of AA-
and an average duration of 2.4 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231023169554/en/
Karen A. Horvath Vice President - External Financial
Communications (203) 629-3000
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