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W. R. Berkley Corporation Reports Second Quarter Results

Return on Equity of 21.1%;

Quarterly Net Income Doubles to $356 Million

W. R. Berkley Corporation (NYSE: WRB) today reported its second quarter 2023 results.

Summary Financial Data

(Amounts in thousands, except per share data)

 

 

Second Quarter

 

Six Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Gross premiums written

$

3,336,773

 

 

$

3,052,401

 

 

$

6,386,091

 

 

$

5,912,237

 

Net premiums written

 

2,811,515

 

 

 

2,585,635

 

 

 

5,386,339

 

 

 

4,998,889

 

 

 

 

 

 

 

 

 

Net income to common stockholders

 

356,308

 

 

 

179,322

 

 

 

650,434

 

 

 

769,960

 

Net income per diluted share

 

1.30

 

 

 

0.64

 

 

 

2.36

 

 

 

2.76

 

 

 

 

 

 

 

 

 

Operating income (1)

 

310,862

 

 

 

313,359

 

 

 

586,531

 

 

 

619,827

 

Operating income per diluted share

 

1.14

 

 

 

1.12

 

 

 

2.13

 

 

 

2.22

 

 

 

 

 

 

 

 

 

Return on equity (2)

 

21.1

%

 

 

10.8

%

 

 

19.3

%

 

 

23.1

%

Operating return on equity (1) (2)

 

18.4

%

 

 

18.8

%

 

 

17.4

%

 

 

18.6

%

(1)

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.

(2)

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 21.1% and 18.4%, respectively.
  • Net income doubles to $356.3 million.
  • Record net investment income of $245.2 million driven by core portfolio increase of 71.6%.
  • Average rate increases excluding workers' compensation were approximately 8.2%.
  • The current accident year combined ratio before catastrophe losses of 2.1 loss ratio points was 87.6%.
  • The reported combined ratio was 89.6%, including current accident year catastrophe losses of $53.5 million.
  • Record gross and net premiums written grew 9.3% and 8.7% to $3.3 billion and $2.8 billion, respectively.
  • Total capital returned to shareholders was $320.8 million, consisting of $292.5 million of share repurchases and $28.3 million of regular dividends.

The Company commented:

The Company reported excellent results for the second quarter of 2023, with an annualized return on equity of 21.1%.

As anticipated, growth in premiums written accelerated compared to the first quarter of 2023, setting premium on pace for another record year. We continue to selectively expand in areas that we anticipate will meet or exceed our targeted risk-adjusted return, as distinct market segments and lines of business move independently. We maintained our rate momentum and reported a strong combined ratio, though the industry experienced another quarter of elevated natural catastrophe losses.

Net investment income grew 42.9% during the quarter as an increasingly greater portion of our fixed-maturity portfolio was (re)invested at higher interest rates. The short duration and high quality of our fixed-maturity portfolio has enabled us to simultaneously benefit from improved yields and grow book value as interest rates have risen. In addition, during the quarter, our investment results continued to benefit from our total return approach.

The Company’s focus on risk-adjusted return in all aspects of our business continues to generate superior results for our shareholders. Having a decentralized model allows us to navigate risks and embrace opportunities in a wide range of economic and operating environments. We have positive momentum as we head into the second half of the year and are very optimistic about the remainder of 2023 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 20, 2023, 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 2023 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 cybersecurity-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing effects of the COVID-19 pandemic; 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, on our results and financial condition; foreign currency and political risks (including those associated with the United Kingdom's withdrawal from the European Union, or "Brexit") 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; potential difficulties with technology and/or cyber security issues; 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 2023 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

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

Net premiums written

$

2,811,515

 

 

$

2,585,635

 

 

$

5,386,339

 

 

$

4,998,889

 

Change in unearned premiums

 

(258,788

)

 

 

(228,477

)

 

 

(342,180

)

 

 

(392,645

)

Net premiums earned

 

2,552,727

 

 

 

2,357,158

 

 

 

5,044,159

 

 

 

4,606,244

 

Net investment income

 

245,152

 

 

 

171,574

 

 

 

468,551

 

 

 

345,086

 

Net investment gains (losses):

 

 

 

 

 

 

 

Net realized and unrealized gains (losses) on investments

 

68,647

 

 

 

(163,935

)

 

 

91,258

 

 

 

205,947

 

Change in allowance for credit losses on investments

 

(9,993

)

 

 

(7,620

)

 

 

(9,594

)

 

 

(11,237

)

Net investment gains (losses)

 

58,654

 

 

 

(171,555

)

 

 

81,664

 

 

 

194,710

 

Revenues from non-insurance businesses

 

113,910

 

 

 

128,421

 

 

 

238,110

 

 

 

226,197

 

Insurance service fees

 

25,471

 

 

 

26,393

 

 

 

58,328

 

 

 

54,344

 

Other Income

 

 

 

 

896

 

 

 

106

 

 

 

1,716

 

Total Revenues

 

2,995,914

 

 

 

2,512,887

 

 

 

5,890,918

 

 

 

5,428,297

 

Expenses:

 

 

 

 

 

 

 

Loss and loss expenses

 

1,569,654

 

 

 

1,435,817

 

 

 

3,108,409

 

 

 

2,775,069

 

Other operating costs and expenses

 

823,682

 

 

 

699,819

 

 

 

1,649,255

 

 

 

1,413,718

 

Expenses from non-insurance businesses

 

113,538

 

 

 

122,966

 

 

 

236,306

 

 

 

217,822

 

Interest expense

 

31,856

 

 

 

31,723

 

 

 

63,692

 

 

 

66,693

 

Total expenses

 

2,538,730

 

 

 

2,290,325

 

 

 

5,057,662

 

 

 

4,473,302

 

Income before income tax

 

457,184

 

 

 

222,562

 

 

 

833,256

 

 

 

954,995

 

Income tax expense

 

(101,460

)

 

 

(43,095

)

 

 

(181,803

)

 

 

(182,499

)

Net Income before noncontrolling interests

 

355,724

 

 

 

179,467

 

 

 

651,453

 

 

 

772,496

 

Noncontrolling interest

 

584

 

 

 

(145

)

 

 

(1,019

)

 

 

(2,536

)

Net income to common stockholders

$

356,308

 

 

$

179,322

 

 

$

650,434

 

 

$

769,960

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.32

 

 

$

0.65

 

 

$

2.38

 

 

$

2.78

 

Diluted

$

1.30

 

 

$

0.64

 

 

$

2.36

 

 

$

2.76

 

 

 

 

 

 

 

 

 

Average shares outstanding (1):

 

 

 

 

 

 

 

Basic

 

270,864

 

 

 

276,815

 

 

 

272,909

 

 

 

276,794

 

Diluted

 

273,095

 

 

 

279,525

 

 

 

275,213

 

 

 

279,327

 

(1)

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)

 

 

Second Quarter

 

Six Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Insurance:

 

 

 

 

 

 

 

Gross premiums written

$

3,016,024

 

 

$

2,771,665

 

 

$

5,668,259

 

 

$

5,256,464

 

Net premiums written

 

2,527,198

 

 

 

2,326,125

 

 

 

4,738,033

 

 

 

4,399,416

 

Net premiums earned

 

2,246,394

 

 

 

2,070,157

 

 

 

4,428,269

 

 

 

4,032,991

 

Pre-tax income

 

386,264

 

 

 

347,461

 

 

 

738,463

 

 

 

729,873

 

Loss ratio

 

63.1

%

 

 

61.0

%

 

 

62.9

%

 

 

60.3

%

Expense ratio

 

28.0

%

 

 

27.7

%

 

 

28.4

%

 

 

27.9

%

GAAP Combined ratio

 

91.1

%

 

 

88.7

%

 

 

91.3

%

 

 

88.2

%

 

 

 

 

 

 

 

 

Reinsurance & Monoline Excess:

 

 

 

 

 

 

 

Gross premiums written

$

320,749

 

 

$

280,736

 

 

$

717,832

 

 

$

655,773

 

Net premiums written

 

284,317

 

 

 

259,510

 

 

 

648,306

 

 

 

599,473

 

Net premiums earned

 

306,333

 

 

 

287,001

 

 

 

615,890

 

 

 

573,253

 

Pre-tax income

 

105,506

 

 

 

92,177

 

 

 

207,218

 

 

 

149,805

 

Loss ratio

 

49.7

%

 

 

60.4

%

 

 

52.1

%

 

 

60.2

%

Expense ratio

 

29.0

%

 

 

27.4

%

 

 

29.2

%

 

 

28.4

%

GAAP Combined ratio

 

78.7

%

 

 

87.8

%

 

 

81.3

%

 

 

88.6

%

 

 

 

 

 

 

 

 

Corporate and Eliminations:

 

 

 

 

 

 

 

Net investment gains (losses)

$

58,654

 

 

$

(171,555

)

 

$

81,664

 

 

$

194,710

 

Interest expense

 

(31,856

)

 

 

(31,723

)

 

 

(63,692

)

 

 

(66,693

)

Other expenses

 

(61,384

)

 

 

(13,798

)

 

 

(130,397

)

 

 

(52,700

)

Pre-tax (loss) income

 

(34,586

)

 

 

(217,076

)

 

 

(112,425

)

 

 

75,317

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

Gross premiums written

$

3,336,773

 

 

$

3,052,401

 

 

$

6,386,091

 

 

$

5,912,237

 

Net premiums written

 

2,811,515

 

 

 

2,585,635

 

 

 

5,386,339

 

 

 

4,998,889

 

Net premiums earned

 

2,552,727

 

 

 

2,357,158

 

 

 

5,044,159

 

 

 

4,606,244

 

Pre-tax income

 

457,184

 

 

 

222,562

 

 

 

833,256

 

 

 

954,995

 

Loss ratio

 

61.5

%

 

 

60.9

%

 

 

61.6

%

 

 

60.2

%

Expense ratio

 

28.1

%

 

 

27.7

%

 

 

28.5

%

 

 

28.0

%

GAAP Combined ratio

 

89.6

%

 

 

88.6

%

 

 

90.1

%

 

 

88.2

%

(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.

Supplemental Information

(Amounts in thousands)

 

 

Second Quarter

 

Six Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net premiums written:

 

 

 

 

 

 

 

Other liability

$

988,393

 

 

$

878,120

 

 

$

1,890,272

 

 

$

1,708,187

 

Short-tail lines (1)

 

575,050

 

 

 

484,849

 

 

 

1,019,162

 

 

 

878,767

 

Workers' compensation

 

325,170

 

 

 

330,721

 

 

 

635,154

 

 

 

634,141

 

Commercial automobile

 

356,293

 

 

 

335,451

 

 

 

657,519

 

 

 

614,978

 

Professional liability

 

282,292

 

 

 

296,984

 

 

 

535,926

 

 

 

563,343

 

Total Insurance

 

2,527,198

 

 

 

2,326,125

 

 

 

4,738,033

 

 

 

4,399,416

 

Casualty reinsurance

 

185,554

 

 

 

189,983

 

 

 

388,891

 

 

 

388,138

 

Monoline excess

 

25,104

 

 

 

24,228

 

 

 

129,621

 

 

 

116,764

 

Property reinsurance

 

73,659

 

 

 

45,299

 

 

 

129,794

 

 

 

94,571

 

Total Reinsurance & Monoline Excess

 

284,317

 

 

 

259,510

 

 

 

648,306

 

 

 

599,473

 

Total

$

2,811,515

 

 

$

2,585,635

 

 

$

5,386,339

 

 

$

4,998,889

 

 

 

 

 

 

 

 

 

Current accident year losses from catastrophes (including COVID-19 related losses):

Insurance

$

48,007

 

 

$

39,891

 

 

$

93,249

 

 

$

50,658

 

Reinsurance & Monoline Excess

 

5,540

 

 

 

18,000

 

 

 

8,167

 

 

 

36,065

 

Total

$

53,547

 

 

$

57,891

 

 

$

101,416

 

 

$

86,723

 

 

 

 

 

 

 

 

 

Net Investment income:

 

 

 

 

 

 

 

Core portfolio (2)

$

229,302

 

 

$

133,587

 

 

$

432,265

 

 

$

245,899

 

Investment funds

 

(1,187

)

 

 

33,861

 

 

 

993

 

 

 

85,874

 

Arbitrage trading account

 

17,037

 

 

 

4,126

 

 

 

35,293

 

 

 

13,313

 

Total

$

245,152

 

 

$

171,574

 

 

$

468,551

 

 

$

345,086

 

 

 

 

 

 

 

 

 

Net realized and unrealized gains (losses) on investments:

 

 

 

 

 

 

 

Net realized gains (losses) on investments

$

47,387

 

 

$

(32,405

)

 

$

26,594

 

 

$

244,264

 

Change in unrealized gains (losses) on equity securities

 

21,260

 

 

 

(131,530

)

 

 

64,664

 

 

 

(38,317

)

Total

$

68,647

 

 

$

(163,935

)

 

$

91,258

 

 

$

205,947

 

 

 

 

 

 

 

 

 

Other operating costs and expenses:

 

 

 

 

 

 

 

Policy acquisition and insurance operating expenses

$

718,234

 

 

$

653,093

 

 

$

1,436,510

 

 

$

1,288,547

 

Insurance service expenses

 

23,931

 

 

 

23,890

 

 

 

49,111

 

 

 

46,356

 

Net foreign currency losses (gains)

 

11,226

 

 

 

(39,827

)

 

 

20,721

 

 

 

(43,995

)

Other costs and expenses

 

70,291

 

 

 

62,663

 

 

 

142,913

 

 

 

122,810

 

Total

$

823,682

 

 

$

699,819

 

 

$

1,649,255

 

 

$

1,413,718

 

 

 

 

 

 

 

 

 

Cash flow from operations

$

708,745

 

 

$

527,971

 

 

$

1,154,069

 

 

$

1,005,653

 

 

 

 

 

 

 

 

 

Reconciliation of net income to operating income:

 

 

 

 

 

 

 

Net income

$

356,308

 

 

$

179,322

 

 

$

650,434

 

 

$

769,960

 

Pre-tax investment (gains) losses, net of related expenses

 

(57,862

)

 

 

171,555

 

 

 

(81,250

)

 

 

(190,056

)

Income tax expense (benefit)

 

12,416

 

 

 

(37,518

)

 

 

17,347

 

 

 

39,923

 

Operating income after-tax (3)

$

310,862

 

 

$

313,359

 

 

$

586,531

 

 

$

619,827

 

(1)

Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery and other lines.

(2)

Core portfolio includes fixed maturity securities, equity securities, cash and cash equivalents, real estate and loans receivable.

(3)

Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains. Net investment gains 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,

2023

 

December

31, 2022

 

 

 

 

Net invested assets (1)

$

25,293,717

 

$

24,545,672

Total assets

 

35,308,694

 

 

33,815,103

Reserves for losses and loss expenses

 

17,919,996

 

 

17,011,223

Senior notes and other debt

 

1,827,080

 

 

1,828,823

Subordinated debentures

 

1,008,730

 

 

1,008,371

Common stockholders' equity (2)

 

6,887,185

 

 

6,748,332

Common stock outstanding (3)

 

257,517

 

 

264,546

Book value per share (4)

 

26.74

 

 

25.51

Tangible book value per share (4)

 

25.85

 

 

24.58

(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, 2023, reflected in common stockholders' equity are after-tax unrealized investment losses of $825 million and unrealized currency translation losses of $356 million. As of December 31, 2022, after-tax unrealized investment losses were $893 million and unrealized currency translation losses were $372 million.

(3)

During the six months ended June 30, 2023, the Company repurchased 7,098,959 shares of its common stock for $427.6 million. During the three months ended June 30, 2023, the Company repurchased 5,060,568 shares of its common stock for $292.5 million. The number of shares of common stock outstanding excludes shares held in a grantor trust.

(4)

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, 2023

(Amounts in thousands, except percentages)

 

 

Carrying Value

 

Percent of Total

Fixed maturity securities:

 

 

 

United States government and government agencies

$

1,238,117

 

4.9%

State and municipal:

 

 

 

Special revenue

 

1,641,909

 

6.5%

Local general obligation

 

412,160

 

1.6%

State general obligation

 

402,251

 

1.6%

Corporate backed

 

188,741

 

0.7%

Pre-refunded

 

107,086

 

0.4%

Total state and municipal

 

2,752,147

 

10.8%

Mortgage-backed securities:

 

 

 

Agency

 

1,081,894

 

4.3%

Commercial

 

604,096

 

2.4%

Residential - Prime

 

217,690

 

0.9%

Residential - Alt A

 

3,200

 

0.0%

Total mortgage-backed securities

 

1,906,880

 

7.6%

Asset-backed securities

 

3,743,803

 

14.8%

Corporate:

 

 

 

Industrial

 

3,299,928

 

13.0%

Financial

 

2,618,100

 

10.4%

Utilities

 

621,425

 

2.5%

Other

 

467,615

 

1.8%

Total corporate

 

7,007,068

 

27.7%

Foreign government

 

1,407,608

 

5.6%

Total fixed maturity securities (1)

 

18,055,623

 

71.4%

Equity securities available for sale:

 

 

 

Common stocks

 

1,014,820

 

4.0%

Preferred stocks

 

224,892

 

0.9%

Total equity securities available for sale

 

1,239,712

 

4.9%

Cash and cash equivalents (2)

 

2,207,220

 

8.7%

Investment funds (3)

 

1,593,433

 

6.3%

Real estate

 

1,292,200

 

5.1%

Arbitrage trading account

 

723,967

 

2.9%

Loans receivable

 

181,562

 

0.7%

Net invested assets

$

25,293,717

 

100.0%

(1)

Total fixed maturity securities had an average rating of AA- and an average duration of 2.3 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.

(3)

Investment funds are net of related liabilities of $0.8 million.

 

Contacts

Karen A. Horvath

Vice President - External

Financial Communications

(203) 629-3000

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