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W. R. Berkley Corporation Reports Second Quarter Results

·15-min read

Second Quarter Net Premiums Written Grew 27.2% and Return on Equity of 15.0%

GREENWICH, Conn., July 22, 2021--(BUSINESS WIRE)--W. R. Berkley Corporation (NYSE: WRB) today reported its second quarter 2021 results.

Summary Financial Data

(Amounts in thousands, except per share data)

Second Quarter

Six Months

2021

2020

2021

2020

Gross premiums written

$

2,661,236

$

2,132,246

$

5,145,948

$

4,363,618

Net premiums written

2,212,181

1,739,818

4,262,219

3,585,664

Net income to common stockholders

237,238

71,260

466,763

66,842

Net income per diluted share

1.27

0.38

2.50

0.35

Operating income (1)

219,059

11,552

420,840

144,064

Operating income per diluted share

1.17

0.06

2.25

0.76

Return on equity (2)

15.0

%

4.7

%

14.8

%

2.2

%

(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.

Second quarter highlights included:

  • Net premiums written increased 27.2%.

  • The reported combined ratio was 89.7%. The current accident year combined ratio before catastrophe losses of 2.2 loss ratio points was 87.5%.

  • Return on equity of 15.0%.

  • Record quarterly underwriting income of $202.2 million.

  • Average rate increases excluding workers' compensation were approximately 9.7%.

  • Net investment income increased 96.9% to $168.2 million.

  • Total capital returned to shareholders was $112 million, consisting of $89 million of special dividends and $23 million of regular dividends.

The Company commented:

The Company reported outstanding results in the second quarter of 2021 with net premium growth in excess of 27%, a combined ratio of 89.7%, and an annualized return on equity of 15%.

Rate increases continued to outpace loss costs, further solidifying our current rate adequacy. As more products achieved or exceeded our target rate levels, our attention turned to exposure growth and business expansion. We expect this growth and rate achievement will contribute to additional underwriting profits as they are fully earned.

Our alternative investment portfolio also delivered strong performance, driven by investment funds and approximately $39 million of realized investment gains. We remain committed to a total return investment strategy and anticipate that it will continue to generate attractive returns for shareholders.

The combination of rate adequacy and an improving economy have created opportunities for profitable growth for the property casualty insurance market. Our structure, operating model and specialty product focus distinctly position us to outperform in such circumstances. We anticipate that these economic and market trends will continue to yield positive results for our Company for 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 July 22, 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)

Second Quarter

Six Months

2021

2020

2021

2020

Revenues:

Net premiums written

$

2,212,181

$

1,739,818

$

4,262,219

$

3,585,664

Change in unearned premiums

(240,557)

(62,903)

(440,639)

(217,331)

Net premium earned

1,971,624

1,676,915

3,821,580

3,368,333

Net investment income

168,187

85,431

326,764

260,194

Net investment gains (losses):

Net realized and unrealized gains (losses) on investments

20,461

61,653

72,219

(81,632)

Change in allowance for credit losses on investments

3,603

16,232

(13,316)

(17,657)

Net investment gains (losses)

24,064

77,885

58,903

(99,289)

Revenues from non-insurance businesses

109,122

75,742

196,552

169,471

Insurance service fees

22,256

19,870

48,064

45,621

Other Income

833

183

1,092

2,305

Total Revenues

2,296,086

1,936,026

4,452,955

3,746,635

Expenses:

Loss and loss expenses

1,203,647

1,135,126

2,325,238

2,242,379

Other operating costs and expenses

647,705

580,840

1,263,973

1,159,173

Expenses from non-insurance businesses

106,698

76,238

192,989

170,996

Interest expense

38,096

38,373

74,747

75,105

Total expenses

1,996,146

1,830,577

3,856,947

3,647,653

Income before income tax

299,940

105,449

596,008

98,982

Income tax expense

(62,262)

(33,793)

(126,614)

(30,852)

Net Income before noncontrolling interests

237,678

71,656

469,394

68,130

Noncontrolling interest

(440)

(396)

(2,631)

(1,288)

Net income to common stockholders

$

237,238

$

71,260

$

466,763

$

66,842

Net income per share:

Basic

$

1.28

$

0.38

$

2.52

$

0.36

Diluted

$

1.27

$

0.38

$

2.50

$

0.35

Average shares outstanding (1):

Basic

185,155

185,979

185,175

188,133

Diluted

187,106

187,862

186,985

190,078

(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)

Second Quarter

Six Months

2021

2020

2021

2020

Insurance:

Gross premiums written

$

2,421,846

$

1,917,702

$

4,561,859

$

3,859,511

Net premiums written

1,994,212

1,543,157

3,734,036

3,126,475

Net premiums earned

1,727,202

1,465,044

3,332,181

2,949,999

Pre-tax income

291,290

76,546

548,399

252,493

Loss ratio

61.4

%

67.0

%

61.3

%

66.1

%

Expense ratio

28.5

%

30.7

%

28.9

%

31.0

%

GAAP Combined ratio

89.9

%

97.7

%

90.2

%

97.1

%

Reinsurance & Monoline Excess:

Gross premiums written

$

239,390

$

214,544

$

584,089

$

504,107

Net premiums written

217,969

196,661

528,183

459,189

Net premiums earned

244,422

211,871

489,399

418,334

Pre-tax income

74,794

12,566

143,443

49,080

Loss ratio

58.2

%

72.2

%

57.4

%

70.3

%

Expense ratio

30.4

%

32.9

%

30.6

%

32.6

%

GAAP Combined ratio

88.6

%

105.1

%

88.0

%

102.9

%

Corporate and Eliminations:

Net investment gains (losses)

$

24,064

$

77,885

$

58,903

$

(99,289)

Interest expense

(38,096)

(38,373)

(74,747)

(75,105)

Other revenues and expenses

(52,112)

(23,175)

(79,990)

(28,197)

Pre-tax (loss) income

(66,144)

16,337

(95,834)

(202,591)

Consolidated:

Gross premiums written

$

2,661,236

$

2,132,246

$

5,145,948

$

4,363,618

Net premiums written

2,212,181

1,739,818

4,262,219

3,585,664

Net premiums earned

1,971,624

1,676,915

3,821,580

3,368,333

Pre-tax income

299,940

105,449

596,008

98,982

Loss ratio

61.0

%

67.7

%

60.8

%

66.6

%

Expense ratio

28.7

%

31.0

%

29.1

%

31.2

%

GAAP Combined ratio

89.7

%

98.7

%

89.9

%

97.8

%

(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

2021

2020

2021

2020

Net premiums written:

Other liability

$

720,523

$

559,727

$

1,378,301

$

1,141,371

Short-tail lines (1)

391,778

323,164

716,830

631,053

Workers' compensation

315,638

273,036

602,362

600,322

Commercial automobile

279,204

213,063

527,771

418,490

Professional liability

287,069

174,167

508,772

335,239

Total Insurance

1,994,212

1,543,157

3,734,036

3,126,475

Casualty reinsurance

156,216

132,927

331,081

276,388

Monoline excess

23,664

19,571

109,172

94,838

Property reinsurance

38,089

44,163

87,930

87,963

Total Reinsurance & Monoline Excess

217,969

196,661

528,183

459,189

Total

$

2,212,181

$

1,739,818

$

4,262,219

$

3,585,664

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

Insurance

$

36,803

$

114,038

$

69,632

$

170,619

Reinsurance & Monoline Excess

7,162

31,822

10,162

54,015

Total

$

43,965

$

145,860

$

79,794

$

224,634

Net Investment income:

Core portfolio (2)

$

102,961

$

111,679

$

203,528

$

244,727

Investment funds

61,311

(57,552)

100,246

(16,975)

Arbitrage trading account

3,915

31,304

22,989

32,442

Total

$

168,187

$

85,431

$

326,764

$

260,194

Net realized and unrealized gains (losses) on investments:

Net realized gains (losses) on investments

$

38,700

$

(261)

$

114,793

$

10,921

Change in unrealized (losses) gains on equity securities

(18,239)

61,914

(42,574)

(92,553)

Total

$

20,461

$

61,653

$

72,219

$

(81,632)

Other operating costs and expenses:

Policy acquisition and insurance operating expenses

$

565,733

$

519,234

$

1,111,483

$

1,051,158

Insurance service expenses

21,789

20,423

42,575

42,995

Net foreign currency gains

(1,125)

(7,382)

(6,719)

(28,923)

Debt extinguishment costs

7,903

11,520

Other costs and expenses

53,405

48,565

105,114

93,943

Total

$

647,705

$

580,840

$

1,263,973

$

1,159,173

Cash flow from operations

$

384,819

$

427,282

$

695,809

$

579,851

Reconciliation of net income to operating income:

Net income

$

237,238

$

71,260

$

466,763

$

66,842

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

(23,271)

(77,785)

(56,573)

99,807

Income tax expense (benefit)

5,092

18,077

10,650

(22,585)

Operating income after-tax (3)

$

219,059

$

11,552

$

420,840

$

144,064

(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, 2021

December 31, 2020

Net invested assets (1)

$

22,315,029

$

21,370,503

Total assets

30,297,917

28,571,965

Reserves for losses and loss expenses

14,480,947

13,784,430

Senior notes and other debt

1,911,753

1,623,025

Subordinated debentures

1,007,293

1,102,309

Common stockholders' equity (2)

6,578,276

6,310,802

Common stock outstanding (3)

177,414

177,825

Book value per share (4)

37.08

35.49

Tangible book value per share (4)

35.83

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 June 30, 2021, reflected in common stockholders' equity are after-tax unrealized investment gains of $223 million and unrealized currency translation losses of $345 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 six months ended June 30, 2021, the Company repurchased 465,063 shares of its common stock for $30 million. During the three months ended June 30, 2021, 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) 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, 2021

(Amounts in thousands, except percentages)

Carrying Value

Percent of Total

Fixed maturity securities:

United States government and government agencies

$

502,625

2.3

%

State and municipal:

Special revenue

2,176,388

9.8

%

Local general obligation

452,710

2.0

%

State general obligation

451,588

2.0

%

Pre-refunded

248,137

1.1

%

Corporate backed

165,190

0.8

%

Total state and municipal

3,494,013

15.7

%

Mortgage-backed securities:

Agency

661,323

3.0

%

Commercial

143,586

0.6

%

Residential - Prime

117,488

0.5

%

Residential - Alt A

7,029

0.0

%

Total mortgage-backed securities

929,426

4.1

%

Asset-backed securities

4,317,863

19.4

%

Corporate:

Industrial

3,106,003

13.9

%

Financial

1,633,318

7.3

%

Utilities

423,848

1.9

%

Other

177,494

0.8

%

Total corporate

5,340,663

23.9

%

Foreign government

1,068,918

4.8

%

Total fixed maturity securities (1)

15,653,508

70.2

%

Equity securities available for sale:

Common stocks

449,500

2.0

%

Preferred stocks

193,493

0.9

%

Total equity securities available for sale

642,993

2.9

%

Cash and cash equivalents (2)

2,088,319

9.4

%

Real estate

1,811,263

8.1

%

Investment funds (3)

1,368,661

6.1

%

Arbitrage trading account

634,276

2.8

%

Loans receivable

116,009

0.5

%

Net invested assets

$

22,315,029

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/20210722005948/en/

Contacts

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

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