A month has gone by since the last earnings report for W.R. Berkley (WRB). Shares have added about 1.8% 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 Q4 Earnings Meet Estimates, Improve Y/Y
W.R. Berkley Corporation’s fourth-quarter 2019 operating income of 72 cents per share came in line with the Zacks Consensus Estimate. The bottom line improved 18% year over year on higher premiums written.
Behind the Headlines
W.R. Berkley’s net premiums written were $1.6 billion, up 9.3% year over year. Higher premiums written at both the Insurance and Reinsurance & Monoline Excess segments contributed to this upside.
Operating revenues of $1.8 billion were up 3.8% year over year, mainly owing to higher net premiums earned. However, the same missed the consensus estimate by 5.8%.
Investment income decreased 14.1% year over year to $137.3 million due to weak performance of investment funds compared with strong returns in the year-ago quarter.
Total expenses inched up 2.3% to $1.8 billion, primarily on higher losses and loss expenses.
Catastrophe loss totaled $20.4 million in the quarter, reflecting a 55% plunge year over year. Consolidated combined ratio (a measure of underwriting profitability) was 93.3%, contracting 260 basis points year over year.
Net premiums written at the Insurance segment grew 8.2% year over year to $1.5 billion in the quarter. Combined ratio contracted 290 bps year over year to 93%.
Net premiums written in the Reinsurance & Monoline Excess segment increased 18.9% year over year to $175.6 million. Combined ratio contracted 50 bps year over year to 95.5%.
W.R. Berkley exited the fourth quarter with total assets worth $26.6 billion, up 7% from the 2018-end figure.
Book value per share improved 11.4% from the level at 2018 end to $33.12 as of Dec 31, 2019.
Cash flow from operations totaled $348.7 million in the quarter, up 25.6% year over year.
The company’s return on equity contracted 100 bps year over year to 8.8%.
Share Repurchase Update
In the quarter under review, the company returned $158 million of ordinary and special dividends to its shareholders and bought back shares worth $18 million.
For 2019, return on equity was 12.5%. The company’s total shareholder value addition came in at $326 million in the form of share buybacks and ordinary and special dividends.
Net premiums written for the year increased 6.7% year over year to $6.8 billion.
Total revenues for 2019 summed $7.9 billion, up 2.7% year over year.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
At this time, W.R. Berkley has a nice Growth Score of B, a grade with the same score on the momentum front. 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.
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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