It has been about a month since the last earnings report for W.R. Berkley (WRB). Shares have added about 7.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.
W.R. Berkley Q3 Earnings, Revenues Beat, Rise Y/Y
W.R. Berkley Corporation’s third-quarter 2022 operating income of $1.01 per share beat the Zacks Consensus Estimate of 82 cents by 23.2%. The bottom line improved 14.8% year over year.
The insurer benefited from higher premiums, driven by strong rate increases in nearly all lines of business, exposure growth and an improvement in the expense ratio.
Behind the Headlines
W.R. Berkley’s net premiums written were a record $2.6 billion, up 10.8% year over year, as market conditions remained favorable for most lines of business.
Operating revenues came in at $2.8 billion, up 16.7% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line beat the consensus estimate by 2.7%
Core net investment income increased 51% year over year, benefiting from higher yields.
Total expenses increased 16.5% to $2.4 billion, primarily due to higher losses and loss expenses, other operating costs and expenses, and expenses from non-insurance businesses.
The loss ratio deteriorated 170 basis points (bps) to 64.1 while the expense ratio remained flat year over year at 28.
Catastrophe losses of $57.9 million in the quarter widened from about $44 million incurred in the year-ago quarter.
Pre-tax underwriting income was $192.1 million. The consolidated combined ratio (a measure of underwriting profitability) was 92.1, down 170 bps year over year.
Net premiums written at the Insurance segment increased 11.5% year over year to $2.2 billion in the quarter, primarily due to higher premiums from other liability, short-tail lines, workers' compensation, commercial automobile, and professional liability. The combined ratio deteriorated 190 bps to 91.2.
Net premiums written in the Reinsurance & Monoline Excess segment increased 6.8% year over year to $339.7 million on higher premiums at casualty reinsurance, property reinsurance and monoline excess. The combined ratio deteriorated 20 bps to 98.6.
W.R. Berkley exited the third quarter with total assets worth $33.1 billion, up 3.2% from year-end 2021. Debt decreased 13% from 2021 end to $2.8 billion.
Book value per share decreased 4.8% from 2021 end to $23.88 as of Sep 30, 2022.
Cash flow from operations was $767.6 million in the third quarter of 2022, down 7.4% year over year.
Operating return on equity expanded 130 bps to 16.9%.
WRB repurchased shares worth $6.6 million in the quarter.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, W.R. Berkley has a nice Growth Score of B, though it is lagging a lot on the Momentum Score 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
W.R. Berkley belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Progressive (PGR), has gained 6.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Progressive reported revenues of $13 billion in the last reported quarter, representing a year-over-year change of +9.9%. EPS of $0.49 for the same period compares with $0.14 a year ago.
Progressive is expected to post earnings of $1.47 per share for the current quarter, representing a year-over-year change of +40%. Over the last 30 days, the Zacks Consensus Estimate has changed -5.5%.
Progressive has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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