W. R. Berkley Corporation Reports Second Quarter Results

Business Wire

Mon, Jul 22, 2024, 1:10 PM 17 min read

Summary Financial Data
(Amounts in thousands, except per share data)

	Second Quarter						Six Months
	2024			2023			2024			2023

Gross premiums written	$	3,717,772		$	3,336,773		$	7,080,528		$	6,386,091
Net premiums written		3,126,779			2,811,515			5,978,070			5,386,339

Net income to common stockholders		371,909			356,308			814,380			650,434
Net income per diluted share (1)		0.92			0.87			2.01			1.58

Operating income (2)		418,114			310,862			841,344			586,531
Operating income per diluted share (1)		1.04			0.76			2.08			1.42

Return on equity (3)		20.0	%		21.1	%		21.8	%		19.3	%
Operating return on equity (2) (3)		22.4	%		18.4	%		22.6	%		17.4	%

(1)		The 2024 per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on July 10, 2024, and the 2023 per share amounts were restated for comparative purposes to reflect such common stock split.
(2)		Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains (losses) and related expenses.
(3)		Return on equity and operating return on equity represent net income and operating income, respectively, expressed on an annualized basis as a percentage of beginning of year common stockholders’ equity.

Second quarter highlights included:

Return on equity and operating return on equity of 20.0% and 22.4%, respectively.
Net investment income grew 51.8% to a record $372.1 million.
Record net premiums written grew 11.2% to $3.1 billion.
The current accident year combined ratio before catastrophe losses of 3.2 loss ratio points was 88.0%, and the reported combined ratio was 91.1%.
Average rate increase excluding workers' compensation were approximately 8.3%.
Book value per share grew 4.7%, before dividends and share repurchases.
Total capital returned to shareholders was $381.3 million, consisting of $223.8 million of share repurchases, $127.0 million of special dividends and $30.5 million of regular dividends.
Operating cash flow increased 24.4% to $881.3 million.

The Company commented:

Continued strong underwriting and investment income drove our 20.0% annualized return on beginning of year common stockholders’ equity in the second quarter.

Market conditions remained favorable in many areas of our business, fueling growth in net premiums written of 11.2%. Our combined ratio was 91.1% inclusive of 3.2 loss ratio points of catastrophe losses.

Net investment income increased 51.8% over the prior year second quarter, driven by an increase in fixed-maturity income from a growing portfolio with higher yields. We anticipate that the Company’s new money rate will remain higher than the current yield of our fixed-maturity securities for the foreseeable future. Coupled with our increasing investment portfolio from continuing record cash flow, we remain well-positioned for further investment income growth.

Our decentralized structure and consistent focus on long-term risk-adjusted return allow us to effectively operate in a rapidly-changing environment. We continue to believe that expertise matters in both underwriting and investing. The Company expects to continue to deliver outstanding returns to our shareholders for the remainder of 2024 and beyond.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on July 22, 2024, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at https://ir.berkley.com/events-and-presentations/default.aspx. Please log on early to register. A replay of the webcast will be available on the Company's website approximately two hours after the end of the conference call. Additional financial information can be found on the Company's website at https://ir.berkley.com/investor-relations/financial-information/quarterly-results/default.aspx.

About W. R. Berkley Corporation

Founded in 1967, W. R. Berkley Corporation is an insurance holding company that is among the largest commercial lines writers in the United States and operates worldwide in two segments of the property casualty business: Insurance and Reinsurance & Monoline Excess.

Forward Looking Information

This is a "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein, including statements related to our outlook for the industry and for our performance for the year 2024 and beyond, are based upon the Company’s historical performance and on current plans, estimates and expectations. The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans, estimates or expectations contemplated by us will be achieved. They are subject to various risks and uncertainties, including but not limited to: the cyclical nature of the property casualty industry; the impact of significant competition, including new entrants to the industry; the long-tail and potentially volatile nature of the insurance and reinsurance business; product demand and pricing; claims development and the process of estimating reserves; investment risks, including those of our portfolio of fixed maturity securities and investments in equity securities, including investments in financial institutions, municipal bonds, mortgage-backed securities, loans receivable, investment funds, including real estate, merger arbitrage, energy related and private equity investments; the effects of emerging claim and coverage issues; the uncertain nature of damage theories and loss amounts, including claims for cyber security-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing effects of the COVID-19 pandemic, or other epidemics and pandemics; the impact of climate change, which may alter the frequency and increase the severity of catastrophe events; general economic and market activities, including inflation, interest rates, and volatility in the credit and capital markets; the impact of the conditions in the financial markets and the global economy, and the potential effect of legislative, regulatory, accounting or other initiatives taken in response to such conditions, on our results and financial condition; foreign currency and political risks relating to our international operations; our ability to attract and retain key personnel and qualified employees; continued availability of capital and financing; the success of our new ventures or acquisitions and the availability of other opportunities; the availability of reinsurance; our retention under the Terrorism Risk Insurance Program Reauthorization Act of 2019; the ability or willingness of our reinsurers to pay reinsurance recoverables owed to us; other legislative and regulatory developments, including those related to business practices in the insurance industry; credit risk related to our policyholders, independent agents and brokers; changes in the ratings assigned to us or our insurance company subsidiaries by rating agencies; the availability of dividends from our insurance company subsidiaries; cyber security breaches of our information technology systems and the information technology systems of our vendors and other third parties, or related processes and systems; the effectiveness of our controls to ensure compliance with guidelines, policies and legal and regulatory standards; and other risks detailed from time to time in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties could cause our actual results for the year 2024 and beyond to differ materially from those expressed in any forward-looking statement we make. Any projections of growth in our revenues would not necessarily result in commensurate levels of earnings. Forward-looking statements speak only as of the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.

Consolidated Financial Summary
(Amounts in thousands, except per share data)

	Second Quarter						Six Months
	2024			2023			2024			2023
Revenues:
Net premiums written	$	3,126,779		$	2,811,515		$	5,978,070		$	5,386,339
Change in unearned premiums		(280,364	)		(258,788	)		(367,308	)		(342,180	)
Net premiums earned		2,846,415			2,552,727			5,610,762			5,044,159
Net investment income		372,129			245,152			691,967			468,551
Net investment (losses) gains:
Net realized and unrealized (losses) gains on investments		(60,306	)		68,647			(48,803	)		91,258
Change in allowance for credit losses on investments		1,794			(9,993	)		16,070			(9,594	)
Net investment (losses) gains		(58,512	)		58,654			(32,733	)		81,664
Revenues from non-insurance businesses		125,705			113,910			246,696			238,110
Insurance service fees		27,597			25,471			52,917			58,328
Other income		698			—			1,196			106
Total Revenues		3,314,032			2,995,914			6,570,805			5,890,918
Expenses:
Loss and loss expenses		1,780,596			1,569,654			3,444,374			3,108,409
Other operating costs and expenses		892,935			823,682			1,761,524			1,649,255
Expenses from non-insurance businesses		121,120			113,538			239,727			236,306
Interest expense		31,708			31,856			63,436			63,692
Total expenses		2,826,359			2,538,730			5,509,061			5,057,662
Income before income tax		487,673			457,184			1,061,744			833,256
Income tax expense		(115,788	)		(101,460	)		(247,824	)		(181,803	)
Net Income before noncontrolling interests		371,885			355,724			813,920			651,453
Noncontrolling interest		24			584			460			(1,019	)
Net income to common stockholders	$	371,909		$	356,308		$	814,380		$	650,434

Net income per share (1):
Basic	$	0.93		$	0.88		$	2.03		$	1.59
Diluted	$	0.92		$	0.87		$	2.01		$	1.58

Average shares outstanding (1) (2):
Basic		400,273			406,296			401,295			409,364
Diluted		403,737			409,643			404,679			412,819

(1)		The 2024 per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on July 10, 2024, and the 2023 per share amounts were restated for comparative purposes to reflect such common stock split.
(2)		Basic shares outstanding consist of the weighted average number of common shares outstanding during the period (including shares held in a grantor trust). Diluted shares outstanding consist of the weighted average number of basic and common equivalent shares outstanding during the period.

Business Segment Operating Results
(Amounts in thousands, except ratios) (1) (2)

	Second Quarter						Six Months
	2024			2023			2024			2023
Insurance:
Gross premiums written	$	3,360,850		$	2,994,059		$	6,281,900		$	5,620,406
Net premiums written		2,810,448			2,505,856			5,256,163			4,691,277
Net premiums earned		2,484,569			2,215,186			4,883,338			4,358,110
Pre-tax income		490,053			386,350			968,202			738,977
Loss ratio		64.0	%		63.1	%		62.9	%		62.8	%
Expense ratio		28.4	%		27.8	%		28.4	%		28.3	%
GAAP Combined ratio		92.4	%		90.9	%		91.3	%		91.1	%

Reinsurance & Monoline Excess:
Gross premiums written	$	356,922		$	342,714		$	798,628		$	765,685
Net premiums written		316,331			305,659			721,907			695,062
Net premiums earned		361,846			337,541			727,424			686,049
Pre-tax income		124,449			105,420			252,074			206,704
Loss ratio		52.8	%		51.2	%		51.3	%		53.9	%
Expense ratio		29.0	%		30.1	%		29.4	%		30.1	%
GAAP Combined ratio		81.8	%		81.3	%		80.7	%		84.0	%

Corporate and Eliminations:
Net investment (losses) gains	$	(58,512	)	$	58,654		$	(32,733	)	$	81,664
Interest expense		(31,708	)		(31,856	)		(63,436	)		(63,692	)
Other expenses		(36,609	)		(61,384	)		(62,363	)		(130,397	)
Pre-tax loss		(126,829	)		(34,586	)		(158,532	)		(112,425	)

Consolidated:
Gross premiums written	$	3,717,772		$	3,336,773		$	7,080,528		$	6,386,091
Net premiums written		3,126,779			2,811,515			5,978,070			5,386,339
Net premiums earned		2,846,415			2,552,727			5,610,762			5,044,159
Pre-tax income		487,673			457,184			1,061,744			833,256
Loss ratio		62.6	%		61.5	%		61.4	%		61.6	%
Expense ratio		28.5	%		28.1	%		28.6	%		28.5	%
GAAP Combined ratio		91.1	%		89.6	%		90.0	%		90.1	%

(1)		Loss ratio is losses and loss expenses incurred expressed as a percentage of premiums earned. Expense ratio is underwriting expenses expressed as a percentage of premiums earned. GAAP combined ratio is the sum of the loss ratio and the expense ratio.
(2)		Commencing with the first quarter of 2024, the Company reclassified a program management business from the Insurance segment to the Reinsurance & Monoline Excess segment. The reclassified business is a program management business offering support on a nationwide basis for commercial casualty and property program administrators. Reclassifications have been made to the Company's 2023 financial information to conform with this presentation.

Supplemental Information
(Amounts in thousands)

	Second Quarter						Six Months
	2024			2023			2024			2023
Net premiums written:
Other liability	$	1,131,676		$	987,687		$	2,147,291		$	1,888,978
Short-tail lines (1)		643,101			558,123			1,175,442			984,777
Auto		408,178			352,584			756,760			646,442
Workers' compensation		332,432			325,170			637,064			635,154
Professional liability		295,061			282,292			539,606			535,926
Total Insurance		2,810,448			2,505,856			5,256,163			4,691,277
Casualty (2)		188,117			189,970			378,136			401,261
Property (2)		102,158			90,585			200,820			164,179
Monoline excess		26,056			25,104			142,951			129,622
Total Reinsurance & Monoline Excess		316,331			305,659			721,907			695,062
Total	$	3,126,779		$	2,811,515		$	5,978,070		$	5,386,339

Current accident year losses from catastrophes:
Insurance	$	86,632		$	48,007		$	114,082		$	93,249
Reinsurance & Monoline Excess		3,047			5,540			6,103			8,167
Total	$	89,679		$	53,547		$	120,185		$	101,416

Net Investment income:
Core portfolio (3)	$	329,971		$	229,302		$	661,147		$	432,265
Investment funds		25,476			(1,187	)		(3,873	)		993
Arbitrage trading account		16,682			17,037			34,693			35,293
Total	$	372,129		$	245,152		$	691,967		$	468,551

Net realized and unrealized (losses) gains on investments:
Net realized gains (losses) on investments	$	6,411		$	47,387		$	(7,898	)	$	26,594
Change in unrealized (losses) gains on equity securities		(66,717	)		21,260			(40,905	)		64,664
Total	$	(60,306	)	$	68,647		$	(48,803	)	$	91,258

Other operating costs and expenses:
Policy acquisition and insurance operating expenses	$	811,997		$	718,234		$	1,603,529		$	1,436,510
Insurance service expenses		23,084			23,931			44,523			49,111
Net foreign currency (gains) losses		(10,118	)		11,226			(23,295	)		20,721
Other costs and expenses		67,972			70,291			136,767			142,913
Total	$	892,935		$	823,682		$	1,761,524		$	1,649,255

Cash flow from operations	$	881,330		$	708,745		$	1,627,565		$	1,154,069

Reconciliation of net income to operating income:
Net income	$	371,909		$	356,308		$	814,380		$	650,434
Pre-tax investment losses (gains), net of related expenses		58,631			(57,862	)		32,733			(81,250	)
Income tax (benefit) expense		(12,426	)		12,416			(5,769	)		17,347
Operating income after-tax (4)	$	418,114		$	310,862		$	841,344		$	586,531

(1)		Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery, high net worth homeowners and other lines.
(2)		Includes reinsurance casualty and property and certain program management business.
(3)		Core portfolio includes fixed maturity securities, equity securities, cash and cash equivalents, real estate and loans receivable.
(4)		Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains (losses). Net investment gains (losses) are computed net of related expenses, including performance-based compensatory costs associated with realized investment gains. Management believes this measurement provides a useful indicator of trends in the Company’s underlying operations.

Selected Balance Sheet Information
(Amounts in thousands, except per share data)

	June 30, 2024		December 31, 2023

Net invested assets (1)	$	28,011,519	$	26,973,703
Total assets		38,909,919		37,111,830
Reserves for losses and loss expenses		19,567,190		18,739,652
Senior notes and other debt		1,828,422		1,827,951
Subordinated debentures		1,009,449		1,009,090
Common stockholders' equity (2)		7,773,782		7,455,431
Common stock outstanding (3) (4)		380,647		384,817
Book value per share (4) (5)		20.42		19.37
Tangible book value per share (4) (5)		19.78		18.72

(1)		Net invested assets include investments, cash and cash equivalents, trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases, net of related liabilities.
(2)		As of June 30, 2024, reflected in common stockholders' equity are after-tax unrealized investment losses of $670 million and unrealized currency translation losses of $364 million. As of December 31, 2023, reflected in common stockholders' equity are after-tax unrealized investment losses of $586 million and unrealized currency translation losses of $340 million.
(3)		During the six months ended and three months ended June 30, 2024, the Company repurchased 4,298,510 shares of its common stock for $223.8 million. The number of shares of common stock outstanding excludes shares held in a grantor trust.
(4)		The 2024 per share amounts have been adjusted to reflect the 3-for-2 common stock split effected on July 10, 2024, and the 2023 per share amounts were restated for comparative purposes to reflect such common stock split.
(5)		Book value per share is total common stockholders’ equity divided by the number of common shares outstanding. Tangible book value per share is total common stockholders’ equity excluding the after-tax value of goodwill and other intangible assets divided by the number of common shares outstanding.

Investment Portfolio
June 30, 2024
(Amounts in thousands, except percentages)

	Carrying Value		Percent of Total
Fixed maturity securities:
United States government and government agencies	$	1,822,376	6.5	%
State and municipal:
Special revenue		1,508,209	5.4	%
State general obligation		443,673	1.6	%
Local general obligation		379,024	1.4	%
Corporate backed		161,332	0.6	%
Pre-refunded		87,978	0.3	%
Total state and municipal		2,580,216	9.3	%
Mortgage-backed securities:
Agency		1,855,209	6.6	%
Commercial		558,051	2.0	%
Residential - Prime		179,841	0.6	%
Residential - Alt A		2,508	0.0	%
Total mortgage-backed securities		2,595,609	9.2	%
Asset-backed securities		4,014,446	14.3	%
Corporate:
Industrial		3,893,745	13.9	%
Financial		3,196,583	11.4	%
Utilities		711,967	2.5	%
Other		610,125	2.2	%
Total corporate		8,412,420	30.0	%
Foreign government		1,657,609	5.9	%
Total fixed maturity securities (1)		21,082,676	75.2	%
Equity securities available for sale:
Common stocks		696,555	2.5	%
Preferred stocks		381,537	1.4	%
Total equity securities available for sale		1,078,092	3.9	%
Investment funds		1,589,119	5.7	%
Cash and cash equivalents (2)		1,411,140	5.0	%
Real estate		1,279,306	4.6	%
Arbitrage trading account		1,221,861	4.4	%
Loans receivable		349,325	1.2	%
Net invested assets	$	28,011,519	100.0	%

(1)		Total fixed maturity securities had an average rating of AA- and an average duration of 2.5 years, including cash and cash equivalents.
(2)		Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240722013182/en/

Contacts

Karen A. Horvath
Vice President - External
Financial Communications
(203) 629-3000

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