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W.R. Berkley (WRB) Q2 Earnings Beat Estimates, Revenues Miss

Zacks Equity Research

W.R. Berkley Corporation’s WRB second-quarter 2019 operating income of 82 cents per share beat the Zacks Consensus Estimate of 64 cents by 28.1%. Also, the bottom line improved 26.2% year over year on higher pre-tax underwriting profits and net investment income.

Behind the Headlines

W.R. Berkley’s net premiums written for the quarter under review were $1.7 billion, up 7.3% 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 and investment income. However, the top line missed the consensus estimate by 3%.

Investment income increased 22.5% year over year to $188.3 million, driven by better-than-average investment fund performance.

Total expenses increased 4% to $1.7 billion, primarily on higher losses and loss expenses, costs from non-insurance businesses plus interest expenses.

Catastrophe loss totaled $25.5 million in the quarter, reflecting an increase of 88.1% year over year. Consolidated combined ratio (a measure of underwriting profitability) was 93.9%, up 100 basis points (bps) year over year.

W.R. Berkley Corporation Price, Consensus and EPS Surprise

W.R. Berkley Corporation Price, Consensus and EPS Surprise

W.R. Berkley Corporation price-consensus-eps-surprise-chart | W.R. Berkley Corporation Quote

Segment Details

Net premiums written at the Insurance segment grew 5.6% year over year to $1.6 billion in the quarter, driven by higher premiums at commercial automobile, professional liability, other liability and short-tail lines. Combined ratio improved 150 bps to 93.8%.

Net premiums written in the Reinsurance & Monoline Excess segment increased 27.3% year over year to $168.9 million on higher casualty reinsurance, monoline excess and property reinsurance premium. Combined ratio deteriorated 380 bps to 95.2%.

Financial Update

W.R. Berkley exited the second quarter with total assets worth $26.5 billion, up 6.4% from year-end 2018.

Book value per share improved 10.3% from 2018 end to $31.36 as of Jun 30, 2019.

Cash flow from operations totaled $324.3 million in the first half of 2019, up 132.7% year over year.

The company’s return on equity expanded 260 bps to 15.9%.

The company returned $112 million to shareholders in the reported quarter, including $92 million of special dividends.

Zacks Rank

W.R. Berkley currently carries a Zacks Rank #3 (Hold).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported second-quarter results so far, The Progressive Corporation PGR and RLI Corp. RLI beat the respective Zacks Consensus Estimate for earnings. However, The Travelers Companies, Inc. TRV missed the same.

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