Net Premiums Written Grew 16.9% to a Quarterly Record of $2.6 Billion; Operating Income Increased 43.0%

W. R. Berkley Corporation (NYSE: WRB) today reported its second quarter 2022 results.

Summary Financial Data

 

(Amounts in thousands, except per share data)

 

Second Quarter

 

Six Months

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

 

 

 

 

 

 

 

 

Gross premiums written

$

3,052,401

 

 

$

2,661,236

 

 

$

5,912,237

 

 

$

5,145,948

 

Net premiums written

 

2,585,635

 

 

 

2,212,181

 

 

 

4,998,889

 

 

 

4,262,219

 

 

 

 

 

 

 

 

 

Net income to common stockholders

 

179,322

 

 

 

237,238

 

 

 

769,960

 

 

 

466,763

 

Net income per diluted share (2)

 

0.64

 

 

 

0.85

 

 

 

2.76

 

 

 

1.66

 

 

 

 

 

 

 

 

 

Operating income (1)

 

313,359

 

 

 

219,059

 

 

 

619,827

 

 

 

420,840

 

Operating income per diluted share (2)

 

1.12

 

 

 

0.78

 

 

 

2.22

 

 

 

1.50

 

 

 

 

 

 

 

 

 

Return on equity (3)

 

10.8

%

 

 

15.0

%

 

 

23.1

%

 

 

14.8

%

Operating return on equity (1) (3)

 

18.8

%

 

 

13.9

%

 

 

18.6

%

 

 

13.3

%

(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) The 2021 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on March 23, 2022.

(3) 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.

Second quarter highlights included:

  • Record gross and net premiums written grew 14.7% and 16.9% to $3.1 billion and $2.6 billion, respectively.
  • Underwriting income increased 32.6% to $268.2 million.
  • The current accident year combined ratio before catastrophe losses of 2.5 loss ratio points was 86.2%.
  • The reported combined ratio was 88.6%, including catastrophe losses of $57.9 million.
  • Net investment income for the core portfolio grew 29.7%.
  • Total capital returned to shareholders was $159.2 million, consisting of $132.7 million of special dividends and $26.5 million of regular dividends.
  • Operating return on equity of 18.8%.

The Company commented:

The Company reported excellent results for the second quarter of 2022, principally due to strong underwriting income, with an 88.6% combined ratio and an 18.8% annualized operating return on beginning stockholders’ equity. The short duration of our investment portfolio tempered the impact of rising interest rates on the value of the Company’s fixed-maturity securities and consequently its book value.

Net premiums written grew by nearly 17% as market conditions remained favorable for most lines of business. The majority of our businesses expanded, particularly in the E&S and specialty markets. After several years of compounding rate, most of our businesses are achieving or exceeding our target return on equity, and we are placing greater emphasis on exposure growth. In addition, this growth has driven further improvement in our expense ratio.

Core net investment income grew nearly 30% due primarily to higher yields. Our investment funds, which are reported on a one-quarter lag, performed well despite challenging equity markets in the first quarter of 2022. We expect investment income will benefit further as interest rates continue to move higher.

The Company is performing exceptionally well. Our results demonstrate how our strategy and execution translate into consistently superior long-term risk-adjusted returns and value creation. Our talented team is well-prepared and our underwriting and investment portfolios remain well-positioned for the uncertainties and challenges of today’s environment, including inflation. We continue to be optimistic about the remainder of 2022 and beyond.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on July 21, 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/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/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)

 

 

Second Quarter

 

Six Months

 

2022

 

2021

 

2022

 

2021

Revenues:

 

 

 

 

 

 

 

Net premiums written

$ 2,585,635

 

$ 2,212,181

 

$ 4,998,889

 

$ 4,262,219

Change in unearned premiums

(228,477)

 

(240,557)

 

(392,645)

 

(440,639)

Net premiums earned

2,357,158

 

1,971,624

 

4,606,244

 

3,821,580

Net investment income

171,574

 

168,187

 

345,086

 

326,764

Net investment (losses) gains:

 

 

 

 

 

 

 

Net realized and unrealized (losses) gains on investments

(163,935)

 

20,461

 

205,947

 

72,219

Change in allowance for credit losses on investments

(7,620)

 

3,603

 

(11,237)

 

(13,316)

Net investment (losses) gains

(171,555)

 

24,064

 

194,710

 

58,903

Revenues from non-insurance businesses

128,421

 

109,122

 

226,197

 

196,552

Insurance service fees

26,393

 

22,256

 

54,344

 

48,064

Other Income

896

 

833

 

1,716

 

1,092

Total Revenues

2,512,887

 

2,296,086

 

5,428,297

 

4,452,955

Expenses:

 

 

 

 

 

 

 

Loss and loss expenses

1,435,817

 

1,203,647

 

2,775,069

 

2,325,238

Other operating costs and expenses

699,819

 

647,705

 

1,413,718

 

1,263,973

Expenses from non-insurance businesses

122,966

 

106,698

 

217,822

 

192,989

Interest expense

31,723

 

38,096

 

66,693

 

74,747

Total expenses

2,290,325

 

1,996,146

 

4,473,302

 

3,856,947

Income before income tax

222,562

 

299,940

 

954,995

 

596,008

Income tax expense

(43,095)

 

(62,262)

 

(182,499)

 

(126,614)

Net Income before noncontrolling interests

179,467

 

237,678

 

772,496

 

469,394

Noncontrolling interest

(145)

 

(440)

 

(2,536)

 

(2,631)

Net income to common stockholders

$ 179,322

 

$ 237,238

 

$ 769,960

 

$ 466,763

 

 

 

 

 

 

 

 

Net income per share (1):

 

 

 

 

 

 

 

Basic

$ 0.65

 

$ 0.85

 

$ 2.78

 

$ 1.68

Diluted

$ 0.64

 

$ 0.85

 

$ 2.76

 

$ 1.66

 

 

 

 

 

 

 

 

Average shares outstanding (1) (2):

 

 

 

 

 

 

 

Basic

276,815

 

277,733

 

276,794

 

277,763

Diluted

279,525

 

280,659

 

279,327

 

280,478

(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)

 

 

Second Quarter

 

Six Months

 

2022

 

2021

 

2022

 

2021

Insurance:

 

 

 

 

 

 

 

Gross premiums written

$ 2,771,665

 

$ 2,421,846

 

$ 5,256,464

 

$ 4,561,859

Net premiums written

2,326,125

 

1,994,212

 

4,399,416

 

3,734,036

Net premiums earned

2,070,157

 

1,727,202

 

4,032,991

 

3,332,181

Pre-tax income

347,461

 

291,290

 

729,873

 

548,399

Loss ratio

61.0 %

 

61.4 %

 

60.3 %

 

61.3 %

Expense ratio

27.7 %

 

28.5 %

 

27.9 %

 

28.9 %

GAAP Combined ratio

88.7 %

 

89.9 %

 

88.2 %

 

90.2 %

 

 

 

 

 

 

 

 

Reinsurance & Monoline Excess:

 

 

 

 

 

 

 

Gross premiums written

$ 280,736

 

$ 239,390

 

$ 655,773

 

$ 584,089

Net premiums written

259,510

 

217,969

 

599,473

 

528,183

Net premiums earned

287,001

 

244,422

 

573,253

 

489,399

Pre-tax income

92,177

 

74,794

 

149,805

 

143,443

Loss ratio

60.4 %

 

58.2 %

 

60.2 %

 

57.4 %

Expense ratio

27.4 %

 

30.4 %

 

28.4 %

 

30.6 %

GAAP Combined ratio

87.8 %

 

88.6 %

 

88.6 %

 

88.0 %

 

 

 

 

 

 

 

 

Corporate and Eliminations:

 

 

 

 

 

 

 

Net investment (losses) gains

$ (171,555)

 

$ 24,064

 

$ 194,710

 

$ 58,903

Interest expense

(31,723)

 

(38,096)

 

(66,693)

 

(74,747)

Other expenses

(13,798)

 

(52,112)

 

(52,700)

 

(79,990)

Pre-tax (loss) gain

(217,076)

 

(66,144)

 

75,317

 

(95,834)

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

Gross premiums written

$ 3,052,401

 

$ 2,661,236

 

$ 5,912,237

 

$ 5,145,948

Net premiums written

2,585,635

 

2,212,181

 

4,998,889

 

4,262,219

Net premiums earned

2,357,158

 

1,971,624

 

4,606,244

 

3,821,580

Pre-tax income

222,562

 

299,940

 

954,995

 

596,008

Loss ratio

60.9 %

 

61.0 %

 

60.2 %

 

60.8 %

Expense ratio

27.7 %

 

28.7 %

 

28.0 %

 

29.1 %

GAAP Combined ratio

88.6 %

 

89.7 %

 

88.2 %

 

89.9 %

(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)

 

 

Second Quarter

 

Six Months

 

2022

 

2021

 

2022

 

2021

Net premiums written:

 

 

 

 

 

 

 

Other liability

$ 878,120

 

$ 727,384

 

$ 1,708,187

 

$ 1,401,416

Short-tail lines (1)

484,849

 

391,778

 

878,767

 

716,830

Workers' compensation

330,721

 

315,638

 

634,141

 

602,362

Commercial automobile

335,451

 

279,204

 

614,978

 

527,771

Professional liability

296,984

 

280,208

 

563,343

 

485,657

Total Insurance

2,326,125

 

1,994,212

 

4,399,416

 

3,734,036

Casualty reinsurance

189,983

 

156,216

 

388,138

 

331,081

Monoline excess

24,228

 

23,664

 

116,764

 

109,172

Property reinsurance

45,299

 

38,089

 

94,571

 

87,930

Total Reinsurance & Monoline Excess

259,510

 

217,969

 

599,473

 

528,183

Total

$ 2,585,635

 

$ 2,212,181

 

$ 4,998,889

 

$ 4,262,219

 

 

 

 

 

 

 

 

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

 

 

 

 

Insurance

$ 39,891

 

$ 36,803

 

$ 50,658

 

$ 69,632

Reinsurance & Monoline Excess

18,000

 

7,162

 

36,065

 

10,162

Total

$ 57,891

 

$ 43,965

 

$ 86,723

 

$ 79,794

 

 

 

 

 

 

 

 

Net Investment income:

 

 

 

 

 

 

 

Core portfolio (2)

$ 133,587

 

$ 102,961

 

$ 245,899

 

$ 203,528

Investment funds

33,861

 

61,311

 

85,874

 

100,246

Arbitrage trading account

4,126

 

3,915

 

13,313

 

22,989

Total

$ 171,574

 

$ 168,187

 

$ 345,086

 

$ 326,764

 

 

 

 

 

 

 

 

Net realized and unrealized (losses) gains on investments:

 

 

 

 

 

 

 

Net realized (losses) gains on investments

$ (32,405)

 

$ 38,700

 

$ 244,264

 

$ 114,793

Change in unrealized losses on equity securities

(131,530)

 

(18,239)

 

(38,317)

 

(42,574)

Total

$ (163,935)

 

$ 20,461

 

$ 205,947

 

$ 72,219

 

 

 

 

 

 

 

 

Other operating costs and expenses:

 

 

 

 

 

 

 

Policy acquisition and insurance operating expenses

$ 653,093

 

$ 565,733

 

$ 1,288,547

 

$ 1,111,483

Insurance service expenses

23,890

 

21,789

 

46,356

 

42,575

Net foreign currency gains

(39,827)

 

(1,125)

 

(43,995)

 

(6,719)

Debt extinguishment costs

 

7,903

 

 

11,520

Other costs and expenses

62,663

 

53,405

 

122,810

 

105,114

Total

$ 699,819

 

$ 647,705

 

$ 1,413,718

 

$ 1,263,973

 

 

 

 

 

 

 

 

Cash flow from operations

$ 527,971

 

$ 384,819

 

$ 1,005,653

 

$ 695,809

 

 

 

 

 

 

 

 

Reconciliation of net income to operating income:

 

 

 

 

 

 

 

Net income

$ 179,322

 

$ 237,238

 

$ 769,960

 

$ 466,763

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

171,555

 

(23,271)

 

(190,056)

 

(56,573)

Income tax (benefit) expense

(37,518)

 

5,092

 

39,923

 

10,650

Operating income after-tax (3)

$ 313,359

 

$ 219,059

 

$ 619,827

 

$ 420,840

(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)

 

 

June 30, 2022

 

December 31, 2021

 

 

 

 

Net invested assets (1)

$ 23,545,192

 

$ 23,705,508

Total assets

32,692,447

 

32,047,876

Reserves for losses and loss expenses

16,145,821

 

15,390,888

Senior notes and other debt

1,832,273

 

2,259,416

Subordinated debentures

1,008,011

 

1,007,652

Common stockholders' equity (2)

6,514,485

 

6,653,011

Common stock outstanding (3) (4)

265,273

 

265,171

Book value per share (4) (5)

24.56

 

25.09

Tangible book value per share (4) (5)

23.60

 

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 June 30, 2022, reflected in common stockholders' equity are after-tax unrealized investment losses of $670 million and unrealized currency translation losses of $360 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 six months ended June 30, 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

June 30, 2022

(Amounts in thousands, except percentages)

 

Carrying Value

 

Percent of Total

Fixed maturity securities:

 

 

 

United States government and government agencies

$ 720,914

 

3.1 %

State and municipal:

 

 

 

Special revenue

1,867,636

 

7.9 %

Local general obligation

416,940

 

1.8 %

State general obligation

414,939

 

1.7 %

Pre-refunded

203,899

 

0.9 %

Corporate backed

160,208

 

0.7 %

Total state and municipal

3,063,622

 

13.0 %

Mortgage-backed securities:

 

 

 

Agency

821,398

 

3.5 %

Commercial

405,597

 

1.7 %

Residential - Prime

250,052

 

1.1 %

Residential - Alt A

4,207

 

0.0 %

Total mortgage-backed securities

1,481,254

 

6.3 %

Asset-backed securities

4,292,488

 

18.2 %

Corporate:

 

 

 

Industrial

3,215,637

 

13.7 %

Financial

1,811,661

 

7.7 %

Utilities

422,101

 

1.8 %

Other

239,726

 

1.0 %

Total corporate

5,689,125

 

24.2 %

Foreign government

1,604,111

 

6.8 %

Total fixed maturity securities (1)

16,851,514

 

71.6 %

Equity securities available for sale:

 

 

 

Common stocks

932,672

 

4.0 %

Preferred stocks

222,654

 

0.9 %

Total equity securities available for sale

1,155,326

 

4.9 %

Investment funds (3)

1,701,478

 

7.2 %

Real estate

1,304,094

 

5.5 %

Cash and cash equivalents (2)

1,277,294

 

5.4 %

Arbitrage trading account

1,142,003

 

4.9 %

Loans receivable

113,483

 

0.5 %

Net invested assets

$ 23,545,192

 

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.

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

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