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W.R. Berkley (WRB) Up 2.9% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for W.R. Berkley (WRB). Shares have added about 2.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is W.R. Berkley due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

W.R. Berkley Q1 Earnings & Revenues Beat Estimates

W.R. Berkley Corporation’s first-quarter 2019 operating income of 94 cents per share beat the Zacks Consensus Estimate of 61 cents by 54.1%. Also, the bottom line improved 40.3% year over year.

The company witnessed steady net premium growth on the back of rate improvement. It noted that rate increases outpaced loss cost trend in many lines of business.

Behind the Headlines

W.R. Berkley’s net premiums written for the quarter under review were $1.7 billion, up 2.7% year over year. Higher premiums written at both the Insurance and Reinsurance & Monoline Excess segments contributed to this upside.

Operating revenues came in at $1.9 billion, up 5.4% year over year, mainly owing to higher net premiums earned. Also, the top line beat the consensus estimate by 3.7%.

Investment income declined 9.2% year over year to $158.3 million.

Total expenses escalated 1.6% to $1.7 billion, primarily on higher losses and loss expenses, costs from non-insurance businesses plus interest expenses.

Catastrophe loss totaled $12.7 million in the quarter, wider than $7.4 million loss incurred in year-ago quarter. Consolidated combined ratio (a measure of underwriting profitability) was 94.3%, improving 30 basis points (bps) year over year.

Segment Details

Net premiums written at the Insurance segment grew 1.6% year over year to $1.5 billion in the quarter, driven by higher premiums at workers' compensation and other liability. Combined ratio deteriorated 20 bps to 94%.

Net premiums written in the Reinsurance & Monoline Excess segment increased 10.5% year over year to $212.2 million on higher casualty reinsurance premium. Combined ratio improved 450 bps to 96.8%.

Financial Update

W.R. Berkley exited the first quarter with total assets worth $25.6 billion, up 2.8% from year-end 2018.

Book value per share improved 5.9% to $31.47 on Mar 31, 2019, from prior-quarter end.

Cash flow from operations totaled $78.3 million in the quarter against cash outflow of $20 million a year ago.

The company’s return on equity expanded 100 bps to 13.3%.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, W.R. Berkley has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise W.R. Berkley has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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