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W. R. Berkley Corporation Reports Fourth Quarter and Full Year Results

W. R. Berkley Corporation (NYSE: WRB) today reported fourth quarter growth in gross premiums written of 10.1% and full year 2019 return on equity of 12.5%.

Summary Financial Data

(Amounts in thousands, except per share data)

 

 

 

Fourth Quarter

 

Twelve Months

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

2,033,078

 

 

$

1,847,214

 

 

$

8,262,219

 

 

$

7,702,494

 

Net premiums written

 

1,660,528

 

 

1,519,571

 

 

6,863,499

 

 

6,433,227

 

 

 

 

 

 

 

 

 

 

Net income to common stockholders

 

119,306

 

 

132,357

 

 

681,944

 

 

640,749

 

Net income per diluted share (1)

 

0.62

 

 

0.69

 

 

3.52

 

 

3.33

 

 

 

 

 

 

 

 

 

 

Return on equity (2)

 

8.8

%

 

9.8

%

 

12.5

%

 

11.8

%

(1)

2018 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.

(2)

Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’ equity.

Full year highlights included:

  • Return on equity of 12.5%.
  • Total capital returned to shareholders was $326 million, including $308 million of ordinary and special dividends and $18 million of share repurchases.
  • Before dividends and share repurchases, book value per share grew 17.3%.

Fourth quarter highlights included:

  • Gross and net premiums written increased 10.1% and 9.3%, respectively.
  • Average rate increases excluding workers' compensation were approximately 9%.
  • Underwriting income increased 71.1% to $114.7 million.
  • The accident year combined ratio excluding catastrophe losses was 92.3%. The reported calendar year combined ratio was 93.3%, which is inclusive of 1.2 loss ratio points from catastrophes.
  • Total capital returned to shareholders was $176 million, including $158 million of ordinary and special dividends and $18 million of share repurchases.

The Company commented:

We were pleased to see further compelling evidence of an improving market in the fourth quarter of 2019. Rate increases accelerated, which is the natural progression in a hardening market, to approximately 9% excluding workers’ compensation. As rate increases remain robust, we expect continued opportunities to grow the top line.

Our objective remains the creation of book value for our shareholders through an appropriate risk-adjusted return on equity. We focus on our investment portfolio’s total return and consciously accept a degree of variability in our alternative investment performance. Although the fourth quarter was challenging for our alternative investments, it is our belief that they will continue to produce above-average long-term returns and remain a core part of our investment strategy.

Our book value per share grew at a rate of 17.3% for the full year, before the return of over $326 million to shareholders through special and ordinary dividends and share repurchases.

We believe the market is at a point where those companies that have appropriately managed their businesses through the cycle will be able to grow meaningfully in this improving pricing environment. As we look to 2020, we are confident that our Company is well positioned to continue to deliver superior value to our shareholders.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on January 28, 2020, 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 2020 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 alternative 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; natural and man-made catastrophic losses, including as a result of terrorist activities; the impact of climate change, which may increase the frequency and 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 2015 ("TRIPRA"), and TRIPRA's potential expiration; 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 2020 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)

 

 

 

Fourth Quarter

 

Twelve Months

 

 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

Net premiums written

 

$

1,660,528

 

 

$

1,519,571

 

 

$

6,863,499

 

 

$

6,433,227

 

Change in unearned premiums

 

56,253

 

 

99,988

 

 

(230,211

)

 

(61,722

)

Net premiums earned

 

1,716,781

 

 

1,619,559

 

 

6,633,288

 

 

6,371,505

 

Net investment income

 

137,334

 

 

159,816

 

 

645,614

 

 

674,235

 

Net realized and unrealized (losses) gains on investments

 

(22,988

)

 

19,746

 

 

120,703

 

 

160,175

 

Other than temporary impairments ("OTTI")

 

 

 

(5,687

)

 

 

 

(5,687

)

Revenues from non-insurance businesses

 

123,537

 

 

130,948

 

 

406,541

 

 

372,985

 

Insurance service fees

 

21,240

 

 

26,582

 

 

92,680

 

 

117,757

 

Other income

 

170

 

 

622

 

 

3,370

 

 

681

 

Total revenues

 

1,976,074

 

 

1,951,586

 

 

7,902,196

 

 

7,691,651

 

Expenses:

 

 

 

 

 

 

 

 

Losses and loss expenses

 

1,072,166

 

 

1,020,126

 

 

4,131,116

 

 

3,974,702

 

Other operating costs and expenses

 

601,121

 

 

601,992

 

 

2,362,082

 

 

2,383,221

 

Expenses from non-insurance businesses

 

122,527

 

 

126,252

 

 

402,669

 

 

364,449

 

Interest expense

 

33,496

 

 

40,577

 

 

153,409

 

 

157,185

 

Total expenses

 

1,829,310

 

 

1,788,947

 

 

7,049,276

 

 

6,879,557

 

Income before income taxes

 

146,764

 

 

162,639

 

 

852,920

 

 

812,094

 

Income tax expense

 

(26,970

)

 

(26,367

)

 

(168,935

)

 

(163,028

)

Net income before noncontrolling interests

 

119,794

 

 

136,272

 

 

683,985

 

 

649,066

 

Noncontrolling interests

 

(488

)

 

(3,915

)

 

(2,041

)

 

(8,317

)

Net income to common stockholders

 

$

119,306

 

 

$

132,357

 

 

$

681,944

 

 

$

640,749

 

 

 

 

 

 

 

 

 

 

Net income per share (1):

 

 

 

 

 

 

 

 

Basic

 

$

0.62

 

 

$

0.69

 

 

$

3.58

 

 

$

3.37

 

Diluted

 

$

0.62

 

 

$

0.69

 

 

$

3.52

 

 

$

3.33

 

 

 

 

 

 

 

 

 

 

Average shares outstanding (1) (2):

 

 

 

 

 

 

 

 

Basic

 

191,106

 

 

190,601

 

190,722

 

 

190,048

Diluted

 

193,280

 

 

192,611

 

193,521

 

 

192,395

(1)

2018 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.

(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) (2)

 

 

Fourth Quarter

 

Twelve Months

 

 

2019

 

2018

 

2019

 

2018

Insurance:

 

 

 

 

 

 

 

 

Gross premiums written

 

$

1,832,711

 

 

$

1,681,638

 

 

$

7,398,573

 

 

$

6,980,202

 

Net premiums written

 

1,484,932

 

 

1,371,886

 

 

6,086,009

 

 

5,791,905

 

Premiums earned

 

1,523,748

 

 

1,447,576

 

 

5,919,819

 

 

5,702,073

 

Pre-tax income

 

202,085

 

 

161,458

 

 

814,862

 

 

717,154

 

Loss ratio

 

62.6

%

 

63.2

%

 

62.4

%

 

62.5

%

Expense ratio

 

30.4

%

 

32.7

%

 

31.1

%

 

32.6

%

GAAP combined ratio

 

93.0

%

 

95.9

%

 

93.5

%

 

95.1

%

 

 

 

 

 

 

 

 

 

Reinsurance & Monoline Excess:

 

 

 

 

 

 

 

 

Gross premiums written

 

$

200,367

 

 

$

165,576

 

 

$

863,646

 

 

$

722,292

 

Net premiums written

 

175,596

 

 

147,685

 

 

777,490

 

 

641,322

 

Premiums earned

 

193,033

 

 

171,983

 

 

713,469

 

 

669,432

 

Pre-tax income

 

44,837

 

 

52,075

 

 

189,188

 

 

201,001

 

Loss ratio

 

61.1

%

 

61.4

%

 

61.5

%

 

61.0

%

Expense ratio

 

34.4

%

 

34.6

%

 

35.0

%

 

35.8

%

GAAP combined ratio

 

95.5

%

 

96.0

%

 

96.5

%

 

96.8

%

 

 

 

 

 

 

 

 

 

Corporate and Eliminations:

 

 

 

 

 

 

 

 

Net realized and unrealized (losses) gains on investments

 

$

(22,988

)

 

$

14,059

 

 

$

120,703

 

 

$

154,488

 

Interest expense

 

(33,496

)

 

(40,577

)

 

(153,409

)

 

(157,185

)

Other revenues and expenses

 

(43,674

)

 

(24,376

)

 

(118,424

)

 

(103,364

)

Pre-tax loss

 

(100,158

)

 

(50,894

)

 

(151,130

)

 

(106,061

)

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

Gross premiums written

 

$

2,033,078

 

 

$

1,847,214

 

 

$

8,262,219

 

 

$

7,702,494

 

Net premiums written

 

1,660,528

 

 

1,519,571

 

 

6,863,499

 

 

6,433,227

 

Premiums earned

 

1,716,781

 

 

1,619,559

 

 

6,633,288

 

 

6,371,505

 

Pre-tax income

 

146,764

 

 

162,639

 

 

852,920

 

 

812,094

 

Loss ratio

 

62.4

%

 

63.0

%

 

62.3

%

 

62.4

%

Expense ratio

 

30.9

%

 

32.9

%

 

31.5

%

 

32.9

%

GAAP combined ratio

 

93.3

%

 

95.9

%

 

93.8

%

 

95.3

%

(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.

(2)

Commencing with the first quarter of 2019, the Company renamed the Reinsurance segment to Reinsurance & Monoline Excess, and reclassified the monoline excess business from the Insurance segment. The reclassified business includes operations that solely retains risk on an excess basis. Reclassifications have been made to the Company's 2018 financial information to conform with this presentation.

Supplemental Information

(Amounts in thousands)

 

 

 

Fourth Quarter

 

Twelve Months

 

 

2019

 

2018

 

2019

 

2018

Net premiums written:

 

 

 

 

 

 

 

 

Other liability

 

$

537,674

 

 

$

480,761

 

 

$

2,145,287

 

 

$

1,951,906

 

Workers' compensation

 

282,840

 

 

292,909

 

 

1,280,573

 

 

1,319,453

 

Short-tail lines (1)

 

319,423

 

 

289,806

 

 

1,254,180

 

 

1,198,571

 

Commercial automobile

 

188,459

 

 

169,792

 

 

796,993

 

 

759,714

 

Professional liability

 

156,536

 

 

138,618

 

 

608,976

 

 

562,261

 

Total Insurance

 

1,484,932

 

 

1,371,886

 

 

6,086,009

 

 

5,791,905

 

Casualty reinsurance

 

116,698

 

 

97,336

 

 

460,239

 

 

350,282

 

Monoline excess

 

21,225

 

 

19,605

 

 

162,796

 

 

160,956

 

Property reinsurance

 

37,673

 

 

30,744

 

 

154,455

 

 

130,084

 

Total Reinsurance & Monoline Excess

 

175,596

 

 

147,685

 

 

777,490

 

 

641,322

 

Total

 

$

1,660,528

 

 

$

1,519,571

 

 

$

6,863,499

 

 

$

6,433,227

 

 

 

 

 

 

 

 

 

 

Losses from catastrophes:

 

 

 

 

 

 

 

 

Insurance

 

$

14,744

 

 

$

26,367

 

 

$

68,187

 

 

$

75,778

 

Reinsurance & Monoline Excess

 

5,736

 

 

19,156

 

 

21,914

 

 

29,691

 

Total

 

$

20,480

 

 

$

45,523

 

 

$

90,101

 

 

$

105,469

 

 

 

 

 

 

 

 

 

 

Net investment income:

 

 

 

 

 

 

 

 

Core portfolio (2)

 

$

137,022

 

 

$

137,541

 

 

$

541,834

 

 

$

536,730

 

Investment funds

 

(8,090

)

 

15,274

 

 

69,194

 

 

109,349

 

Arbitrage trading account

 

8,402

 

 

7,001

 

 

34,586

 

 

28,156

 

Total

 

$

137,334

 

 

$

159,816

 

 

$

645,614

 

 

$

674,235

 

 

 

 

 

 

 

 

 

 

Net realized and unrealized (losses) gains on investments:

 

 

 

 

 

 

 

 

Net realized gains on investment sales

 

$

7,442

 

 

$

59,789

 

 

$

35,411

 

 

$

480,588

 

Change in unrealized (losses) gains on equity securities

 

(30,430

)

 

(40,043

)

 

85,292

 

 

(320,413

)

Total

 

$

(22,988

)

 

$

19,746

 

 

$

120,703

 

 

$

160,175

 

 

 

 

 

 

 

 

 

 

Other operating costs and expenses:

 

 

 

 

 

 

 

 

Policy acquisition and insurance operating expenses

 

$

529,951

 

 

$

532,408

 

 

$

2,090,301

 

 

$

2,098,881

 

Insurance service expenses

 

23,804

 

 

27,387

 

 

101,317

 

 

118,357

 

Net foreign currency gains

 

(1,631

)

 

(5,033

)

 

(30,715

)

 

(27,067

)

Other costs and expenses

 

48,997

 

 

47,230

 

 

201,179

 

 

193,050

 

Total

 

$

601,121

 

 

$

601,992

 

 

$

2,362,082

 

 

$

2,383,221

 

 

 

 

 

 

 

 

 

 

Cash flow from operations

 

$

348,749

 

 

$

277,675

 

 

$

1,143,793

 

 

$

620,199

 

(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.

Selected Balance Sheet Information

(Amounts in thousands, except per share data)

 

 

December 31,
2019

 

December 31,
2018

 

 

 

 

Net invested assets (1)

$

19,856,776

 

 

$

18,828,321

 

Total assets

26,643,428

 

 

24,895,977

 

Reserves for losses and loss expenses

12,583,249

 

 

11,966,448

 

Senior notes and other debt

1,427,575

 

 

1,882,028

 

Subordinated debentures

1,198,704

 

 

907,491

 

Common stockholders’ equity (2)

6,074,939

 

 

5,437,851

 

Common stock outstanding (3) (4)

183,412

 

 

182,994

 

Book value per share (4) (5)

33.12

 

 

29.72

 

Tangible book value per share (4) (5)

31.87

 

 

28.42

 

(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 December 31, 2019, reflected in common stockholders' equity are after-tax unrealized investment gains of $125 million and unrealized currency translation losses of $382 million. As of December 31, 2018, after-tax unrealized investment losses were $91 million and unrealized currency translation losses were $419 million.

(3)

During the three and twelve months ended December 31, 2019, the Company repurchased 269,072 shares of its common stock for $18.2 million. The number of shares of common stock outstanding excludes shares held in a grantor trust.

(4)

December 31, 2018 shares outstanding and per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.

(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

December 31, 2019

(Amounts in thousands)

 

 

 

Carrying
Value

 

Percent
of Total

Fixed maturity securities:

 

 

 

 

United States government and government agencies

 

$

786,931

 

 

4.0

%

State and municipal:

 

 

 

 

Special revenue

 

2,422,700

 

 

12.2

%

Local general obligation

 

469,855

 

 

2.4

%

State general obligation

 

421,704

 

 

2.1

%

Pre-refunded

 

390,126

 

 

2.0

%

Corporate backed

 

261,559

 

 

1.3

%

Total state and municipal

 

3,965,944

 

 

19.9

%

Mortgage-backed securities:

 

 

 

 

Agency

 

859,043

 

 

4.3

%

Residential - Prime

 

432,418

 

 

2.2

%

Commercial

 

309,374

 

 

1.6

%

Residential - Alt A

 

33,130

 

 

0.2

%

Total mortgage-backed securities

 

1,633,965

 

 

8.3

%

Asset-backed securities

 

2,790,630

 

 

14.1

%

Corporate:

 

 

 

 

Industrial

 

2,329,173

 

 

11.7

%

Financial

 

1,481,152

 

 

7.5

%

Utilities

 

340,641

 

 

1.8

%

Other

 

5,449

 

 

%

Total corporate

 

4,156,415

 

 

20.9

%

Foreign government

 

847,076

 

 

4.3

%

Total fixed maturity securities (1)

 

14,180,961

 

 

71.4

%

Equity securities available for sale:

 

 

 

 

Preferred stocks

 

313,815

 

 

1.6

%

Common stocks

 

166,805

 

 

0.8

%

Total equity securities available for sale

 

480,620

 

 

2.4

%

Real estate

 

2,105,950

 

 

10.6

%

Cash and cash equivalents (2)

 

1,383,995

 

 

7.0

%

Investment funds (3)

 

1,212,642

 

 

6.1

%

Arbitrage trading account

 

400,809

 

 

2.0

%

Loans receivable

 

91,799

 

 

0.5

%

Net invested assets

 

$

19,856,776

 

 

100.0

%

(1)

Total fixed maturity securities had an average rating of AA- and an average duration of 2.8 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 $0.9 million.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200128005796/en/

Contacts

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