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W. R. Berkley Corporation Reports Third Quarter Results

Net Income Increased by 45.7% to $334 Million;

Operating Return on Equity of 21.7% and Return on Equity of 19.8%;

Record Quarterly Net Investment Income of $271 Million Driven by 59.3% Increase in the Core Portfolio 

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

Summary Financial Data

 

(Amounts in thousands, except per share data)

 

Third Quarter

 

Nine Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

 

 

 

 

 

 

 

 

Gross premiums written

$

3,353,205

 

 

$

3,081,938

 

 

$

9,739,296

 

 

$

8,994,175

 

Net premiums written

 

2,848,459

 

 

 

2,577,274

 

 

 

8,234,799

 

 

 

7,576,163

 

 

 

 

 

 

 

 

 

Net income to common stockholders

 

333,586

 

 

 

228,879

 

 

 

984,020

 

 

 

998,839

 

Net income per diluted share

 

1.23

 

 

 

0.82

 

 

 

3.59

 

 

 

3.57

 

 

 

 

 

 

 

 

 

Operating income (1)

 

366,608

 

 

 

281,833

 

 

 

952,868

 

 

 

901,436

 

Operating income per diluted share

 

1.35

 

 

 

1.01

 

 

 

3.48

 

 

 

3.22

 

 

 

 

 

 

 

 

 

Return on equity (2)

 

19.8

%

 

 

13.8

%

 

 

19.4

%

 

 

20.0

%

Operating return on equity (1) (2)

 

21.7

%

 

 

16.9

%

 

 

18.8

%

 

 

18.1

%

(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.

Third quarter highlights included:

  • Operating return on equity and return on equity of 21.7% and 19.8%, respectively.
  • Record net investment income of $270.9 million driven by 59.3% increase in the core portfolio.
  • The current accident year combined ratio before catastrophe losses of 2.3 loss ratio points was 87.9%.
  • The reported combined ratio was 90.2%, including current accident year catastrophe losses of $61.5 million.
  • Record net premiums written grew 10.5% to $2.8 billion.
  • Underwriting income and net income grew 34.7% and 45.7% to $258.7 million and $333.6 million, respectively.
  • Average rate increases excluding workers' compensation were approximately 8.5%.
  • Total capital returned to shareholders was $160.3 million, consisting of $129.0 million of special dividends, $28.4 million of regular dividends, and $2.9 million of share repurchases.

The Company commented:

Strong underwriting profits and record quarterly net investment income drove the Company’s exceptional annualized operating return on equity of 21.7% in the third quarter of 2023.

Net premiums written grew 10.5% in the quarter. Market segments, territories and lines of business continue to move independently of one another. Accordingly, we are expanding in areas that are likely to provide attractive risk-adjusted profitability. Overall rate increases excluding workers’ compensation remained strong at 8.5%.

The higher interest rate environment contributed to a meaningful year-over-year increase in investment income. We anticipate this trend will continue as we benefit from record operating cash flows and reinvest at higher interest rates. Simultaneously, the short duration and high quality of our fixed-maturity portfolio have enabled us to grow book value even as interest rates have risen.

Our focus on total risk-adjusted return, decentralized operations, and entrepreneurial culture, coupled with effective capital management, has enabled us to continue to create value for our shareholders. We remain well positioned for continued success and very optimistic about the remainder of 2023 and the foreseeable future.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on October 23, 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 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 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)

 

 

Third Quarter

 

Nine Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

Net premiums written

$

2,848,459

 

 

$

2,577,274

 

 

$

8,234,799

 

 

$

7,576,163

 

Change in unearned premiums

 

(206,545

)

 

 

(135,313

)

 

 

(548,726

)

 

 

(527,958

)

Net premiums earned

 

2,641,914

 

 

 

2,441,961

 

 

 

7,686,073

 

 

 

7,048,205

 

Net investment income

 

270,944

 

 

 

202,816

 

 

 

739,494

 

 

 

547,902

 

Net investment (losses) gains:

 

 

 

 

 

 

 

Net realized and unrealized (losses) gains on investments

 

(40,855

)

 

 

(66,282

)

 

 

50,403

 

 

 

139,664

 

Change in allowance for credit losses on investments

 

(1,571

)

 

 

(1,128

)

 

 

(11,164

)

 

 

(12,365

)

Net investment (losses) gains

 

(42,426

)

 

 

(67,410

)

 

 

39,239

 

 

 

127,299

 

Revenues from non-insurance businesses

 

137,116

 

 

 

119,013

 

 

 

375,225

 

 

 

345,210

 

Insurance service fees

 

22,962

 

 

 

27,940

 

 

 

81,290

 

 

 

82,284

 

Other Income

 

128

 

 

 

80

 

 

 

235

 

 

 

1,797

 

Total Revenues

 

3,030,638

 

 

 

2,724,400

 

 

 

8,921,556

 

 

 

8,152,697

 

Expenses:

 

 

 

 

 

 

 

Loss and loss expenses

 

1,636,193

 

 

 

1,564,578

 

 

 

4,744,602

 

 

 

4,339,646

 

Other operating costs and expenses

 

808,669

 

 

 

725,537

 

 

 

2,457,925

 

 

 

2,139,256

 

Expenses from non-insurance businesses

 

133,939

 

 

 

116,240

 

 

 

370,244

 

 

 

334,062

 

Interest expense

 

31,888

 

 

 

31,780

 

 

 

95,580

 

 

 

98,473

 

Total expenses

 

2,610,689

 

 

 

2,438,135

 

 

 

7,668,351

 

 

 

6,911,437

 

Income before income tax

 

419,949

 

 

 

286,265

 

 

 

1,253,205

 

 

 

1,241,260

 

Income tax expense

 

(86,519

)

 

 

(55,791

)

 

 

(268,322

)

 

 

(238,290

)

Net Income before noncontrolling interests

 

333,430

 

 

 

230,474

 

 

 

984,883

 

 

 

1,002,970

 

Noncontrolling interest

 

156

 

 

 

(1,595

)

 

 

(863

)

 

 

(4,131

)

Net income to common stockholders

$

333,586

 

 

$

228,879

 

 

$

984,020

 

 

$

998,839

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

Basic

$

1.24

 

 

$

0.83

 

 

$

3.62

 

 

$

3.61

 

Diluted

$

1.23

 

 

$

0.82

 

 

$

3.59

 

 

$

3.57

 

 

 

 

 

 

 

 

 

Average shares outstanding (1):

 

 

 

 

 

 

 

Basic

 

269,191

 

 

 

277,192

 

 

 

271,656

 

 

 

276,928

 

Diluted

 

271,439

 

 

 

279,642

 

 

 

274,146

 

 

 

279,644

 

(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)

 

 

Third Quarter

 

Nine Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Insurance:

 

 

 

 

 

 

 

Gross premiums written

$

2,990,869

 

 

$

2,719,824

 

 

$

8,659,128

 

 

$

7,976,288

 

Net premiums written

 

2,508,740

 

 

 

2,237,608

 

 

 

7,246,773

 

 

 

6,637,024

 

Net premiums earned

 

2,319,435

 

 

 

2,129,014

 

 

 

6,747,704

 

 

 

6,162,005

 

Pre-tax income

 

415,279

 

 

 

322,312

 

 

 

1,153,742

 

 

 

1,052,185

 

Loss ratio

 

62.6

%

 

 

63.2

%

 

 

62.8

%

 

 

61.3

%

Expense ratio

 

28.4

%

 

 

28.0

%

 

 

28.4

%

 

 

27.9

%

GAAP Combined ratio

 

91.0

%

 

 

91.2

%

 

 

91.2

%

 

 

89.2

%

 

 

 

 

 

 

 

 

Reinsurance & Monoline Excess:

 

 

 

 

 

 

 

Gross premiums written

$

362,336

 

 

$

362,114

 

 

$

1,080,168

 

 

$

1,017,887

 

Net premiums written

 

339,719

 

 

 

339,666

 

 

 

988,026

 

 

 

939,139

 

Net premiums earned

 

322,479

 

 

 

312,947

 

 

 

938,369

 

 

 

886,200

 

Pre-tax income

 

106,072

 

 

 

59,561

 

 

 

313,290

 

 

 

209,366

 

Loss ratio

 

56.8

%

 

 

70.2

%

 

 

53.7

%

 

 

63.7

%

Expense ratio

 

27.8

%

 

 

28.4

%

 

 

28.7

%

 

 

28.4

%

GAAP Combined ratio

 

84.6

%

 

 

98.6

%

 

 

82.4

%

 

 

92.1

%

 

 

 

 

 

 

 

 

Corporate and Eliminations:

 

 

 

 

 

 

 

Net investment (losses) gains

$

(42,426

)

 

$

(67,410

)

 

$

39,239

 

 

$

127,299

 

Interest expense

 

(31,888

)

 

 

(31,780

)

 

 

(95,580

)

 

 

(98,473

)

Other expenses

 

(27,088

)

 

 

3,582

 

 

 

(157,486

)

 

 

(49,117

)

Pre-tax loss

 

(101,402

)

 

 

(95,608

)

 

 

(213,827

)

 

 

(20,291

)

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

Gross premiums written

$

3,353,205

 

 

$

3,081,938

 

 

$

9,739,296

 

 

$

8,994,175

 

Net premiums written

 

2,848,459

 

 

 

2,577,274

 

 

 

8,234,799

 

 

 

7,576,163

 

Net premiums earned

 

2,641,914

 

 

 

2,441,961

 

 

 

7,686,073

 

 

 

7,048,205

 

Pre-tax income

 

419,949

 

 

 

286,265

 

 

 

1,253,205

 

 

 

1,241,260

 

Loss ratio

 

61.9

%

 

 

64.1

%

 

 

61.7

%

 

 

61.6

%

Expense ratio

 

28.3

%

 

 

28.0

%

 

 

28.4

%

 

 

28.0

%

GAAP Combined ratio

 

90.2

%

 

 

92.1

%

 

 

90.1

%

 

 

89.6

%

(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)

 

 

Third Quarter

 

Nine Months

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Net premiums written:

 

 

 

 

 

 

 

Other liability

$

979,025

 

 

$

861,551

 

 

$

2,869,297

 

 

$

2,569,737

 

Short-tail lines (1)

 

553,447

 

 

 

439,630

 

 

 

1,572,609

 

 

 

1,318,398

 

Commercial automobile

 

388,132

 

 

 

333,935

 

 

 

1,045,651

 

 

 

948,913

 

Workers' compensation

 

302,701

 

 

 

306,593

 

 

 

937,855

 

 

 

940,734

 

Professional liability

 

285,435

 

 

 

295,899

 

 

 

821,361

 

 

 

859,242

 

Total Insurance

 

2,508,740

 

 

 

2,237,608

 

 

 

7,246,773

 

 

 

6,637,024

 

Casualty reinsurance

 

183,211

 

 

 

195,642

 

 

 

572,102

 

 

 

583,780

 

Monoline excess

 

83,217

 

 

 

75,959

 

 

 

212,839

 

 

 

192,723

 

Property reinsurance

 

73,291

 

 

 

68,065

 

 

 

203,085

 

 

 

162,636

 

Total Reinsurance & Monoline Excess

 

339,719

 

 

 

339,666

 

 

 

988,026

 

 

 

939,139

 

Total

$

2,848,459

 

 

$

2,577,274

 

 

$

8,234,799

 

 

$

7,576,163

 

 

 

 

 

 

 

 

 

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

 

 

 

 

Insurance

$

46,160

 

 

$

51,144

 

 

$

139,409

 

 

$

101,802

 

Reinsurance & Monoline Excess

 

15,369

 

 

 

42,999

 

 

 

23,536

 

 

 

79,063

 

Total

$

61,529

 

 

$

94,143

 

 

$

162,945

 

 

$

180,865

 

 

 

 

 

 

 

 

 

Net Investment income:

 

 

 

 

 

 

 

Core portfolio (2)

$

248,618

 

 

$

156,077

 

 

$

680,883

 

 

$

401,975

 

Investment funds

 

4,450

 

 

 

36,045

 

 

 

5,443

 

 

 

121,919

 

Arbitrage trading account

 

17,876

 

 

 

10,694

 

 

 

53,168

 

 

 

24,008

 

Total

$

270,944

 

 

$

202,816

 

 

$

739,494

 

 

$

547,902

 

 

 

 

 

 

 

 

 

Net realized and unrealized (losses) gains on investments:

 

 

 

 

 

 

 

Net realized (losses) gains on investments

$

(21,796

)

 

$

(15,898

)

 

$

4,798

 

 

$

228,365

 

Change in unrealized (losses) gains on equity securities

 

(19,059

)

 

 

(50,384

)

 

 

45,605

 

 

 

(88,701

)

Total

$

(40,855

)

 

$

(66,282

)

 

$

50,403

 

 

$

139,664

 

 

 

 

 

 

 

 

 

Other operating costs and expenses:

 

 

 

 

 

 

 

Policy acquisition and insurance operating expenses

$

747,007

 

 

$

685,325

 

 

$

2,183,517

 

 

$

1,974,676

 

Insurance service expenses

 

21,225

 

 

 

24,991

 

 

 

70,336

 

 

 

71,348

 

Net foreign currency gains

 

(22,498

)

 

 

(41,065

)

 

 

(1,777

)

 

 

(85,060

)

Other costs and expenses

 

62,935

 

 

 

56,286

 

 

 

205,849

 

 

 

178,292

 

Total

$

808,669

 

 

$

725,537

 

 

$

2,457,925

 

 

$

2,139,256

 

 

 

 

 

 

 

 

 

Cash flow from operations

$

1,077,093

 

 

$

767,649

 

 

$

2,231,162

 

 

$

1,773,303

 

 

 

 

 

 

 

 

 

Reconciliation of net income to operating income:

 

 

 

 

 

 

 

Net income

$

333,586

 

 

$

228,879

 

 

$

984,020

 

 

$

998,839

 

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

 

42,426

 

 

 

67,410

 

 

 

(39,170

)

 

 

(122,930

)

Income tax (benefit) expense

 

(9,404

)

 

 

(14,456

)

 

 

8,018

 

 

 

25,527

 

Operating income after-tax (3)

$

366,608

 

 

$

281,833

 

 

$

952,868

 

 

$

901,436

 

(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 (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)

 

 

September 30, 2023

 

December 31, 2022

 

 

 

 

Net invested assets (1)

$

26,126,604

 

$

24,545,672

Total assets

 

36,111,348

 

 

33,815,103

Reserves for losses and loss expenses

 

18,273,310

 

 

17,011,223

Senior notes and other debt

 

1,828,046

 

 

1,828,823

Subordinated debentures

 

1,008,910

 

 

1,008,371

Common stockholders' equity (2)

 

6,915,579

 

 

6,748,332

Common stock outstanding (3)

 

258,044

 

 

264,546

Book value per share (4)

 

26.80

 

 

25.51

Tangible book value per share (4)

 

25.91

 

 

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 September 30, 2023, reflected in common stockholders' equity are after-tax unrealized investment losses of $944 million and unrealized currency translation losses of $379 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 nine months ended September 30, 2023, the Company repurchased 7,146,975 shares of its common stock for $430.5 million. During the three months ended September 30, 2023, the Company repurchased 48,016 shares of its common stock for $2.9 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

September 30, 2023

(Amounts in thousands, except percentages)

 

 

Carrying Value

 

Percent of Total

Fixed maturity securities:

 

 

 

United States government and government agencies

$

1,467,199

 

5.6

%

State and municipal:

 

 

 

Special revenue

 

1,646,921

 

6.3

%

State general obligation

 

405,969

 

1.6

%

Local general obligation

 

385,340

 

1.5

%

Corporate backed

 

179,973

 

0.7

%

Pre-refunded

 

102,594

 

0.3

%

Total state and municipal

 

2,720,797

 

10.4

%

Mortgage-backed securities:

 

 

 

Agency

 

1,250,357

 

4.8

%

Commercial

 

629,512

 

2.4

%

Residential - Prime

 

196,519

 

0.8

%

Residential - Alt A

 

2,937

 

0.0

%

Total mortgage-backed securities

 

2,079,325

 

8.0

%

Asset-backed securities

 

4,087,458

 

15.6

%

Corporate:

 

 

 

Industrial

 

3,344,567

 

12.8

%

Financial

 

2,679,247

 

10.3

%

Utilities

 

643,277

 

2.5

%

Other

 

581,723

 

2.2

%

Total corporate

 

7,248,814

 

27.8

%

Foreign government

 

1,431,712

 

5.5

%

Total fixed maturity securities (1)

 

19,035,305

 

72.9

%

Equity securities available for sale:

 

 

 

Common stocks

 

961,433

 

3.7

%

Preferred stocks

 

220,628

 

0.8

%

Total equity securities available for sale

 

1,182,061

 

4.5

%

Cash and cash equivalents (2)

 

2,035,399

 

7.8

%

Investment funds

 

1,600,495

 

6.1

%

Real estate

 

1,270,545

 

4.9

%

Arbitrage trading account

 

825,049

 

3.1

%

Loans receivable

 

177,750

 

0.7

%

Net invested assets

$

26,126,604

 

100.0

%

(1) Total fixed maturity securities had an average rating of AA- and an average duration of 2.4 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.

Contacts

Karen A. Horvath

Vice President - External

Financial Communications

(203) 629-3000

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