Record Quarterly Underwriting Income of $274
Million, Net Income Increased 157% to $591 Million and
Return on Equity of 35.5%
W. R. Berkley Corporation (NYSE: WRB) today reported its
first quarter 2022 results.
Summary Financial Data
(Amounts in thousands, except per
share data)
First Quarter
2022
2021
Gross premiums written
$ 2,859,837
$ 2,484,712
Net premiums written
2,413,254
2,050,038
Net income to common stockholders
590,638
229,525
Net income per diluted share (1)
2.12
0.82
Operating income (2)
306,921
201,780
Operating income per diluted share (1)
1.10
0.72
Return on equity (3)
35.5 %
14.5 %
(1) The 2021 per share amounts were restated for comparative
purposes to reflect the 3-for-2 common stock split effected on
March 23, 2022.
(2) 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.
(3) Return on equity represents net income expressed on an
annualized basis as a percentage of beginning of year common
stockholders’ equity.
First quarter highlights included:
- Return on equity of 35.5%.
- Record quarterly underwriting income and net income of $274.4
million and $590.6 million, respectively.
- Net premiums written increased nearly 18% to a quarterly record
of $2.4 billion.
- The current accident year combined ratio before catastrophe
losses of 1.3 loss ratio points was 86.5%.
- The reported combined ratio was 87.8%, including catastrophe
losses of $28.8 million.
- Record quarterly net investment gain of $366.3 million, mainly
due to real estate investment sales.
- Book value per share grew 3.5% before dividends, benefitting
from our decision to maintain a short investment duration.
The Company commented:
The Company reported exceptional results for the first quarter
of 2022, due to another quarter of record underwriting results and
continued strong investment income, including significant realized
gains from the sale of investments. We reported a 35.5% return on
beginning stockholders’ equity. Book value per share before
dividends grew 3.5%, benefitting from our decision to maintain a
short investment duration, notwithstanding the impact of rising
interest rates.
Net premiums written grew by nearly 18% as the majority of our
businesses expanded, particularly in the E&S and specialty
markets. Rate increases remained above expected loss cost trends
for the majority of our lines of business. Rate and exposure growth
improved our loss and expense ratios.
As we previously announced, the Company realized a pretax gain
on the sale of a real estate investment in London of more than $300
million before transaction expenses and the impact of foreign
currency. Net investment income grew more than 9% as investment
funds continued to outperform and fixed-maturity income benefited
from higher yields. We expect the latter trend to accelerate as
interest rates move higher.
We remain focused on our total risk-adjusted return strategy and
expect relative market stability in most parts of our business. Our
underwriting and investment portfolios remain well-positioned for
the inflationary environment. The Company is performing
exceptionally well and we continue to be optimistic about our
opportunities going forward.
Webcast Conference Call
The Company will hold its quarterly conference call with
analysts and investors to discuss its earnings and other
information on April 25, 2022, 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-andpresentations/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/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 2022 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 2022 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)
First Quarter
2022
2021
Revenues:
Net premiums written
$ 2,413,254
$ 2,050,038
Change in unearned premiums
(164,167)
(200,082)
Net premium earned
2,249,087
1,849,956
Net investment income
173,512
158,577
Net investment gains:
Net realized and unrealized gains on
investments
369,882
51,759
Change in allowance for credit losses on
investments
(3,617)
(16,920)
Net investment gains
366,265
34,839
Revenues from non-insurance businesses
97,776
87,430
Insurance service fees
27,951
25,808
Other Income
818
259
Total Revenues
2,915,409
2,156,869
Expenses:
Loss and loss expenses
1,339,252
1,121,592
Other operating costs and expenses
713,899
616,268
Expenses from non-insurance businesses
94,855
86,290
Interest expense
34,970
36,651
Total expenses
2,182,976
1,860,801
Income before income tax
732,433
296,068
Income tax expense
(139,403)
(64,352)
Net Income before noncontrolling
interests
593,030
231,716
Noncontrolling interest
(2,392)
(2,191)
Net income to common stockholders
$ 590,638
$ 229,525
Net income per share (1):
Basic
$ 2.13
$ 0.83
Diluted
$ 2.12
$ 0.82
Average shares outstanding (1) (2):
Basic
276,772
277,793
Diluted
279,157
280,245
(1) The 2021 per share amounts were restated for comparative
purposes to reflect the 3-for-2 common stock split effected on
March 23, 2022.
(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)
First Quarter
2022
2021
Insurance:
Gross premiums written
$ 2,484,799
$ 2,140,013
Net premiums written
2,073,291
1,739,824
Net premiums earned
1,962,835
1,604,979
Pre-tax income
382,412
257,109
Loss ratio
59.5 %
61.3 %
Expense ratio
28.1 %
29.3 %
GAAP Combined ratio
87.6 %
90.6 %
Reinsurance & Monoline
Excess:
Gross premiums written
$ 375,038
$ 344,699
Net premiums written
339,963
310,214
Net premiums earned
286,252
244,977
Pre-tax income
57,628
68,649
Loss ratio
59.9 %
56.5 %
Expense ratio
29.5 %
30.9 %
GAAP Combined ratio
89.4 %
87.4 %
Corporate and Eliminations:
Net investment gains
$ 366,265
$ 34,839
Interest expense
(34,970)
(36,651)
Other revenues and expenses
(38,902)
(27,878)
Pre-tax gain (loss)
292,393
(29,690)
Consolidated:
Gross premiums written
$ 2,859,837
$ 2,484,712
Net premiums written
2,413,254
2,050,038
Net premiums earned
2,249,087
1,849,956
Pre-tax income
732,433
296,068
Loss ratio
59.5 %
60.6 %
Expense ratio
28.3 %
29.5 %
GAAP Combined ratio
87.8 %
90.1 %
(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)
First Quarter
2022
2021
Net premiums written:
Other liability
$ 836,040
$ 676,796
Short-tail lines (1)
393,918
325,051
Workers' compensation
303,420
286,724
Commercial automobile
279,528
248,567
Professional liability
260,385
202,686
Total Insurance
2,073,291
1,739,824
Casualty reinsurance
198,155
174,864
Monoline excess
92,536
85,509
Property reinsurance
49,272
49,841
Total Reinsurance & Monoline
Excess
339,963
310,214
Total
$ 2,413,254
$ 2,050,038
Current accident year losses from
catastrophes (including COVID-19 related losses):
Insurance
$ 10,767
$ 32,829
Reinsurance & Monoline Excess
18,064
3,000
Total
$ 28,831
$ 35,829
Net Investment income:
Core portfolio (2)
$ 112,312
$ 100,568
Investment funds
52,013
38,935
Arbitrage trading account
9,187
19,074
Total
$ 173,512
$ 158,577
Net realized and unrealized gains on
investments:
Net realized gains on investments
$ 276,669
$ 76,094
Change in unrealized gains (losses) on
equity securities
93,213
(24,335)
Total
$ 369,882
$ 51,759
Other operating costs and
expenses:
Policy acquisition and insurance operating
expenses
$ 635,453
$ 545,750
Insurance service expenses
22,466
20,786
Net foreign currency gains
(4,168)
(5,594)
Debt extinguishment costs
—
3,617
Other costs and expenses
60,148
51,709
Total
$ 713,899
$ 616,268
Cash flow from operations
$ 477,682
$ 310,990
Reconciliation of net income to
operating income:
Net income
$ 590,638
$ 229,525
Pre-tax investment gains, net of related
expenses
(361,034)
(33,302)
Income tax expense
77,317
5,557
Operating income after-tax (3)
$ 306,921
$ 201,780
(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)
March 31, 2022
December 31, 2021
Net invested assets (1)
$ 23,658,053
$ 23,705,508
Total assets
32,250,954
32,047,876
Reserves for losses and loss expenses
15,722,889
15,390,888
Senior notes and other debt
1,834,155
2,259,416
Subordinated debentures
1,007,832
1,007,652
Common stockholders' equity (2)
6,864,503
6,653,011
Common stock outstanding (3) (4)
265,186
265,171
Book value per share (4) (5)
25.89
25.09
Tangible book value per share (4) (5)
24.92
24.27
(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 March 31, 2022, reflected in common stockholders'
equity are after-tax unrealized investment losses of $333 million
and unrealized currency translation losses of $316 million. As of
December 31, 2021, after-tax unrealized investment gains were $91
million and unrealized currency translation losses were $373
million.
(3) During the three months ended March 31, 2022, 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) The 2021 per share amounts were restated for comparative
purposes to reflect the 3-for-2 common stock split effected on
March 23, 2022.
(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
March 31, 2022
(Amounts in thousands, except
percentages)
Carrying Value
Percent of Total
Fixed maturity securities:
United States government and government
agencies
$ 818,848
3.5 %
State and municipal:
Special revenue
1,935,528
8.2 %
State general obligation
424,590
1.8 %
Local general obligation
416,167
1.8 %
Pre-refunded
177,371
0.8 %
Corporate backed
172,005
0.7 %
Total state and municipal
3,125,661
13.3 %
Mortgage-backed securities:
Agency
874,067
3.7 %
Commercial
263,501
1.1 %
Residential - Prime
246,852
1.0 %
Residential - Alt A
4,771
0.0 %
Total mortgage-backed securities
1,389,191
5.8 %
Asset-backed securities
4,257,421
18.0 %
Corporate:
Industrial
3,270,804
13.8 %
Financial
1,706,732
7.2 %
Utilities
409,726
1.7 %
Other
201,245
0.9 %
Total corporate
5,588,507
23.6 %
Foreign government
1,246,568
5.3 %
Total fixed maturity securities (1)
16,426,196
69.5 %
Equity securities available for
sale:
Common stocks
883,317
3.7 %
Preferred stocks
243,174
1.0 %
Total equity securities available for
sale
1,126,491
4.7 %
Cash and cash equivalents (2)
1,980,346
8.4 %
Investment funds (3)
1,544,856
6.5 %
Real estate
1,276,157
5.4 %
Arbitrage trading account
1,188,910
5.0 %
Loans receivable
115,097
0.5 %
Net invested assets
$ 23,658,053
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.
(3) Investment funds are net of related liabilities of $0.8
million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220425005663/en/
Karen A. Horvath Vice President - External Financial
Communications (203) 629-3000
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