W.R. Berkley (WRB) Down 5.3% Since Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for W.R. Berkley Corporation WRB. Shares have lost about 5.3% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 catalysts.
W.R. Berkley Earnings and Revenues Beat in Q3
W.R. Berkley’s third-quarter 2017 operating income of 36 cents per share beat the Zacks Consensus Estimate of 32 cents by 12.5%. But the bottom line plunged 59.1% year over year.
The company witnessed improved revenues largely owing to higher revenues from non-insurance business. Both Insurance as well as Reinsurance remained affected in the quarter. Expenses increased.
Including net realized gains of $1.02 per share, net income slumped 26.7% from the year-ago quarter to $1.26 per share.
Behind the Headlines
W.R. Berkley’s net premiums written for the quarter were $1.6 billion, down 2.2% year over year. Lower premiums written at both the Insurance and Reinsurance segments resulted in the downside.
Operating revenues came in at $1.8 billion, up 6.6% year over year, driven by higher revenues from non-insurance business. The top line surpassed the Zacks Consensus Estimate of $1.7 billion.
Investment income declined 2.2% year over year to $142.5 million.
Total expenses increased 6.9% to $1.8 billion, primarily due to higher loss and loss expenses plus rise in expenses from non-insurance businesses.
Catastrophe losses totaled $119 million in the quarter. Consolidated combined ratio (a measure of underwriting profitability) deteriorated 710 basis points (bps) year over year to 101.1%.
Segment Details
Net premiums written in the Insurance segment slipped 0.8% year over year to $1.4 billion in the quarter. This decrease was attributable to lower premiums written under other liability, short-tail lines and professional liability. Combined ratio in this segment deteriorated 240 bps year over year to 95.6%.
Net premiums written in the Reinsurance segment declined 15% year over year to $138.8 million due to substantially lower premiums written under property reinsurance. Combined ratio deteriorated 5340 bps to 104.4%.
Financial Update
W.R. Berkley exited the third quarter with total assets worth $24.3 billion, up 3.8% from the year-end 2016.
Book value per share rose 7.1% from the year-end 2016 to $44.60 as of Sep 30, 2017.
Cash flow from operations plunged 24.7% year over year to $279 million.
The company’s return on equity deteriorated 640 bps to 12.8%.
Share Repurchase Update
The company bought back 0.4 million shares in the quarter for $23.4 million.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.
VGM Scores
At this time, the stock has a subpar Growth Score of D, though it is lagging a bit on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
The company's stock is suitable solely for value based on our styles scores.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.
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