W. R. Berkley Corporation Reports First Quarter Results

Return on Equity of 17.4%;

Quarterly Net Investment Income of $223 Million Driven By Core Portfolio Increase of 80.7%

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

Summary Financial Data

(Amounts in thousands, except per share data)

 

 

First Quarter

 

 

2023

 

 

 

2022

 

 

 

 

 

Gross premiums written

$

3,049,317

 

 

$

2,859,837

 

Net premiums written

 

2,574,824

 

 

 

2,413,254

 

 

 

 

 

Net income to common stockholders

 

294,126

 

 

 

590,638

 

Net income per diluted share

 

1.06

 

 

 

2.12

 

 

 

 

 

Operating income (1)

 

275,966

 

 

 

306,921

 

Operating income per diluted share

 

1.00

 

 

 

1.10

 

 

 

 

 

Return on equity (2)

 

17.4

%

 

 

35.5

%

Operating return on equity (1) (2)

 

16.4

%

 

 

18.5

%

(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.

First quarter highlights included:

  • Return on equity of 17.4%.
  • Book value per share grew 7.2% prior to dividends and share repurchases.
  • Net investment income grew 28.8% to $223.4 million.
  • Average rate increases excluding workers' compensation were approximately 8.3%.
  • Pre-tax underwriting income of $234.4 million.
  • The current accident year combined ratio before catastrophe losses of 1.9 loss ratio points was 87.7%.
  • The reported combined ratio was 90.6%, including current accident year catastrophe losses of $47.9 million and prior year development principally from property catastrophe losses of approximately $24 million.
  • Total capital returned to shareholders was $293.8 million, consisting of $132.3 million of special dividends, $26.3 million of regular dividends and $135.2 million of share repurchases.

The Company commented:

The Company reported strong results for the first quarter of 2023, with continued strong underwriting performance and significant growth in investment income. The annualized return on equity was 17.4% and growth in book value per share, prior to dividends and share repurchases, was 7.2%.

The business continued to grow in areas that we anticipate will meet or exceed our targeted risk-adjusted return. While there is greater evidence that market segments and lines of business are not all moving in lock-step, our structure and discipline enable us to execute on and manage each of these cycles to optimize profitability, even as we maintain a prudent view of loss trends. We continue to carefully evaluate the available opportunities to deploy capital as we selectively expand our business.

Net investment income grew almost 29% during the quarter as an increasingly greater portion of the fixed-maturity portfolio was (re)invested at higher interest rates. We maintained the short duration and high quality of our fixed-maturity portfolio, given the inverted yield curve and market volatility.

The Company continues to focus on risk-adjusted return in all aspects of its business. Over time, this discipline has allowed us to navigate risks and embrace opportunities to deliver superior results for our shareholders. We remain encouraged about the opportunities that we see in 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 April 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 at least ten minutes early to register and download and install any necessary software. 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 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)

 

 

First Quarter

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

Net premiums written

$

2,574,824

 

 

$

2,413,254

 

Change in unearned premiums

 

(83,392

)

 

 

(164,167

)

Net premiums earned

 

2,491,432

 

 

 

2,249,087

 

Net investment income

 

223,398

 

 

 

173,512

 

Net investment gains:

 

 

 

Net realized and unrealized gains on investments

 

22,611

 

 

 

369,882

 

Change in allowance for credit losses on investments

 

399

 

 

 

(3,617

)

Net investment gains

 

23,010

 

 

 

366,265

 

Revenues from non-insurance businesses

 

124,200

 

 

 

97,776

 

Insurance service fees

 

32,857

 

 

 

27,951

 

Other Income

 

107

 

 

 

818

 

Total Revenues

 

2,895,004

 

 

 

2,915,409

 

Expenses:

 

 

 

Loss and loss expenses

 

1,538,755

 

 

 

1,339,252

 

Other operating costs and expenses

 

825,575

 

 

 

713,899

 

Expenses from non-insurance businesses

 

122,767

 

 

 

94,855

 

Interest expense

 

31,836

 

 

 

34,970

 

Total expenses

 

2,518,933

 

 

 

2,182,976

 

Income before income tax

 

376,071

 

 

 

732,433

 

Income tax expense

 

(80,342

)

 

 

(139,403

)

Net Income before noncontrolling interests

 

295,729

 

 

 

593,030

 

Noncontrolling interest

 

(1,603

)

 

 

(2,392

)

Net income to common stockholders

$

294,126

 

 

$

590,638

 

 

 

 

 

Net income per share:

 

 

 

Basic

$

1.07

 

 

$

2.13

 

Diluted

$

1.06

 

 

$

2.12

 

 

 

 

 

Average shares outstanding (1):

 

 

 

Basic

 

274,977

 

 

 

276,772

 

Diluted

 

277,339

 

 

 

279,157

 

(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)

 

 

First Quarter

 

 

2023

 

 

 

2022

 

Insurance:

 

 

 

Gross premiums written

$

2,652,234

 

 

$

2,484,799

 

Net premiums written

 

2,210,834

 

 

 

2,073,291

 

Net premiums earned

 

2,181,876

 

 

 

1,962,835

 

Pre-tax income

 

352,199

 

 

 

382,412

 

Loss ratio

 

62.8

%

 

 

59.5

%

Expense ratio

 

28.7

%

 

 

28.1

%

GAAP Combined ratio

 

91.5

%

 

 

87.6

%

 

 

 

 

Reinsurance & Monoline Excess:

 

 

 

Gross premiums written

$

397,083

 

 

$

375,038

 

Net premiums written

 

363,990

 

 

 

339,963

 

Net premiums earned

 

309,556

 

 

 

286,252

 

Pre-tax income

 

101,712

 

 

 

57,628

 

Loss ratio

 

54.5

%

 

 

59.9

%

Expense ratio

 

29.5

%

 

 

29.5

%

GAAP Combined ratio

 

84.0

%

 

 

89.4

%

 

 

 

 

Corporate and Eliminations:

 

 

 

Net investment gains

$

23,010

 

 

$

366,265

 

Interest expense

 

(31,836

)

 

 

(34,970

)

Other expenses

 

(69,014

)

 

 

(38,902

)

Pre-tax loss (income)

 

(77,840

)

 

 

292,393

 

 

 

 

 

Consolidated:

 

 

 

Gross premiums written

$

3,049,317

 

 

$

2,859,837

 

Net premiums written

 

2,574,824

 

 

 

2,413,254

 

Net premiums earned

 

2,491,432

 

 

 

2,249,087

 

Pre-tax income

 

376,071

 

 

 

732,433

 

Loss ratio

 

61.8

%

 

 

59.5

%

Expense ratio

 

28.8

%

 

 

28.3

%

GAAP Combined ratio

 

90.6

%

 

 

87.8

%

(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)

 

First Quarter

 

 

2023

 

 

 

2022

 

Net premiums written:

 

 

 

Other liability

$

901,879

 

 

$

830,067

 

Short-tail lines (1)

 

444,112

 

 

 

393,918

 

Workers' compensation

 

309,984

 

 

 

303,420

 

Commercial automobile

 

301,226

 

 

 

279,528

 

Professional liability

 

253,633

 

 

 

266,358

 

Total Insurance

 

2,210,834

 

 

 

2,073,291

 

Casualty reinsurance

 

203,337

 

 

 

198,156

 

Monoline excess

 

104,518

 

 

 

92,536

 

Property reinsurance

 

56,135

 

 

 

49,272

 

Total Reinsurance & Monoline Excess

 

363,990

 

 

 

339,963

 

Total

$

2,574,824

 

 

$

2,413,254

 

 

 

 

 

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

Insurance

$

45,242

 

 

$

10,767

 

Reinsurance & Monoline Excess

 

2,627

 

 

 

18,064

 

Total

$

47,869

 

 

$

28,831

 

 

 

 

 

Net Investment income:

 

 

 

Core portfolio (2)

$

202,962

 

 

$

112,312

 

Investment funds

 

2,180

 

 

 

52,013

 

Arbitrage trading account

 

18,256

 

 

 

9,187

 

Total

$

223,398

 

 

$

173,512

 

 

 

 

 

Net realized and unrealized gains on investments:

 

 

 

Net realized (losses) gains on investments

$

(20,793

)

 

$

276,669

 

Change in unrealized gains on equity securities

 

43,404

 

 

 

93,213

 

Total

$

22,611

 

 

$

369,882

 

 

 

 

 

Other operating costs and expenses:

 

 

 

Policy acquisition and insurance operating expenses

$

718,276

 

 

$

635,453

 

Insurance service expenses

 

25,180

 

 

 

22,466

 

Net foreign currency losses (gains)

 

9,495

 

 

 

(4,168

)

Other costs and expenses

 

72,624

 

 

 

60,148

 

Total

$

825,575

 

 

$

713,899

 

 

 

 

 

Cash flow from operations

$

445,323

 

 

$

477,682

 

 

 

 

 

Reconciliation of net income to operating income:

 

 

 

Net income

$

294,126

 

 

$

590,638

 

Pre-tax investment gains, net of related expenses

 

(23,010

)

 

 

(361,034

)

Income tax expense

 

4,850

 

 

 

77,317

 

Operating income after-tax (3)

$

275,966

 

 

$

306,921

 

(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)

 

March 31, 2023

 

December 31, 2022

 

 

 

 

Net invested assets (1)

$

24,957,826

 

$

24,545,672

Total assets

 

34,296,064

 

 

33,815,103

Reserves for losses and loss expenses

 

17,431,635

 

 

17,011,223

Senior notes and other debt

 

1,827,981

 

 

1,828,823

Subordinated debentures

 

1,008,551

 

 

1,008,371

Common stockholders' equity (2)

 

6,944,015

 

 

6,748,332

Common stock outstanding (3)

 

262,537

 

 

264,546

Book value per share (4)

 

26.45

 

 

25.51

Tangible book value per share (4)

 

25.53

 

 

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 March 31, 2023, reflected in common stockholders' equity are after-tax unrealized investment losses of $712 million and unrealized currency translation losses of $367 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 three months ended March 31, 2023, the Company repurchased 2,038,391 shares of its common stock for $135.2 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

March 31, 2023

(Amounts in thousands, except percentages)

 

 

Carrying Value

 

Percent of Total

Fixed maturity securities:

 

 

 

United States government and government agencies

$

1,049,267

 

4.2%

State and municipal:

 

 

 

Special revenue

 

1,674,483

 

6.7%

Local general obligation

 

434,679

 

1.8%

State general obligation

 

422,832

 

1.7%

Corporate backed

 

196,817

 

0.8%

Pre-refunded

 

108,915

 

0.4%

Total state and municipal

 

2,837,726

 

11.4%

Mortgage-backed securities:

 

 

 

Agency

 

1,081,356

 

4.4%

Commercial

 

583,745

 

2.3%

Residential - Prime

 

232,602

 

0.9%

Residential - Alt A

 

3,425

 

0.0%

Total mortgage-backed securities

 

1,901,128

 

7.6%

Asset-backed securities

 

3,845,453

 

15.4%

Corporate:

 

 

 

Industrial

 

3,385,444

 

13.6%

Financial

 

2,626,304

 

10.5%

Utilities

 

627,327

 

2.5%

Other

 

486,574

 

1.9%

Total corporate

 

7,125,649

 

28.5%

Foreign government

 

1,331,890

 

5.4%

Total fixed maturity securities (1)

 

18,091,113

 

72.5%

Equity securities available for sale:

 

 

 

Common stocks

 

1,057,599

 

4.2%

Preferred stocks

 

222,356

 

0.9%

Total equity securities available for sale

 

1,279,955

 

5.1%

Cash and cash equivalents (2)

 

1,843,534

 

7.4%

Investment funds (3)

 

1,600,775

 

6.4%

Real estate

 

1,338,504

 

5.4%

Arbitrage trading account

 

609,001

 

2.4%

Loans receivable

 

194,944

 

0.8%

Net invested assets

$

24,957,826

 

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.

(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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