W. R. Berkley Corporation Reports First Quarter Results
Net Income of $123 million; Investment Income Increased 14%
W. R. Berkley Corporation (NYSE:WRB) today reported net income for the first quarter of 2017 of $123 million, or $0.96
per share.
|
Summary Financial Data
(Amounts in thousands, except per share data)
|
| |
|
|
First Quarter |
|
|
2017 |
|
2016 |
|
|
|
|
|
| Gross premiums written |
|
$ |
1,936,207 |
|
|
$ |
1,955,697 |
|
| Net premiums written |
|
1,646,838 |
|
|
1,663,722 |
|
|
|
|
|
|
| Net income to common stockholders |
|
123,447 |
|
|
119,511 |
|
| Net income per diluted share |
|
0.96 |
|
|
0.93 |
|
|
|
|
|
|
| Return on equity (1) |
|
9.8 |
% |
|
10.4 |
% |
(1) Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’
equity.
First quarter highlights included:
- Pre-tax return on equity was 14.5%.
- Book value per share grew 2.6% in the quarter.
- Investment income increased 14%.
- Net realized investment gains were $52 million pre-tax and $34 million after-tax.
- The combined ratio was 95.7%, inclusive of 1.9 loss ratio points from the impact of the change in the
Ogden discount rate in the UK as previously announced.
The Company commented:
The first quarter reflected the competitive climate in the (re)insurance industry. While market conditions remain challenging,
particularly in the reinsurance segment, we were able to grow in select areas where margins remain attractive while gaining
traction in some of our new ventures. Our underwriting results were favorable as catastrophe losses remained consistent with the
comparable period in prior years and added less than one point to our loss ratio. Our long-term strategy around managing risk and
volatility proved to be a benefit this quarter. As previously announced, we increased loss reserves by $30 million, pre-tax, to
reflect the change in the Ogden discount rate in the UK, which principally impacted the reinsurance segment.
Favorable results in our alternative investment portfolio resulted in strong investment income for the quarter. In addition,
with net realized investment gains of $52 million in the quarter, we believe that we are on track to exceed our annual expectation
of $100 million of gains in 2017. We continue to make investments that we think will create further gains in the future.
Our book value per share grew at an annualized rate of slightly over 10% in the first quarter. We continue to plant the seeds of
opportunity in both our insurance operations and our investment portfolio, always with a focus on long-term value creation. While
financial statements may not always reflect the intrinsic value of a business at any point in time due to accounting rules, we
remain focused on creating shareholder value over the long-term.
As we celebrate 50 years of delivering outstanding returns to our shareholders, we are confident that our unique structure and
long-term focus on risk-adjusted return will enable us to continue to do so in 2017 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 24, 2017, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at http://www.wrberkley.com/investor-relations/events-and-presentations.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.
About W. R. Berkley Corporation
Celebrating 50 years, 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.
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 2017 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 alternative
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;
natural and man-made catastrophic losses, including as a result of terrorist activities; 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 expected 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 2015; the ability 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 data security; 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 2017 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 |
|
|
2017 |
|
2016 |
| Revenues: |
|
|
|
|
| Net premiums written |
|
$ |
1,646,838 |
|
|
$ |
1,663,722 |
|
| Change in unearned premiums |
|
(76,796 |
) |
|
(136,387 |
) |
| Net premiums earned |
|
1,570,042 |
|
|
1,527,335 |
|
| Investment income |
|
148,858 |
|
|
130,133 |
|
| Insurance service fees |
|
33,280 |
|
|
40,362 |
|
| Net realized investment gains |
|
52,348 |
|
|
25,457 |
|
| Other than temporary impairments |
|
— |
|
|
(18,114 |
) |
| Revenues from non-insurance businesses (1) |
|
65,390 |
|
|
101,780 |
|
| Other income |
|
500 |
|
|
258 |
|
| Total revenues |
|
1,870,418 |
|
|
1,807,211 |
|
| Expenses: |
|
|
|
|
| Losses and loss expenses |
|
979,603 |
|
|
922,321 |
|
| Other operating costs and expenses |
|
603,700 |
|
|
582,459 |
|
| Expenses from non-insurance businesses (1) |
|
66,019 |
|
|
95,531 |
|
| Interest expense |
|
36,799 |
|
|
32,224 |
|
| Total expenses |
|
1,686,121 |
|
|
1,632,535 |
|
| Income before income taxes |
|
184,297 |
|
|
174,676 |
|
| Income tax expense |
|
(59,623 |
) |
|
(54,428 |
) |
| Net income before noncontrolling interests |
|
124,674 |
|
|
120,248 |
|
| Noncontrolling interests |
|
(1,227 |
) |
|
(737 |
) |
| Net income to common stockholders |
|
$ |
123,447 |
|
|
$ |
119,511 |
|
|
|
|
|
|
| Net income per share: |
|
|
|
|
| Basic |
|
$ |
1.01 |
|
|
$ |
0.97 |
|
| Diluted |
|
$ |
0.96 |
|
|
$ |
0.93 |
|
|
|
|
|
|
| Average shares outstanding (2): |
|
|
|
|
| Basic |
|
121,893 |
|
122,780 |
| Diluted |
|
128,453 |
|
128,529 |
(1) Revenues and expenses from non-insurance businesses declined because of the sale of a wholly-owned investment, Aero
Precision Industries, and certain related aviation services businesses in August 2016.
(2) Basic shares outstanding consists of the weighted average number of common shares outstanding during the period (including
shares held in a grantor trust established in March 2017). Diluted shares outstanding consists 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)
|
| |
|
|
First Quarter |
|
|
2017 |
|
2016 |
| Insurance: |
|
|
|
|
| Gross premiums written |
|
$ |
1,769,405 |
|
|
$ |
1,752,033 |
|
| Net premiums written |
|
1,494,135 |
|
|
1,479,207 |
|
| Premiums earned |
|
1,413,170 |
|
|
1,366,605 |
|
| Pre-tax income |
|
199,994 |
|
|
199,651 |
|
| Loss ratio |
|
60.9 |
% |
|
60.5 |
% |
| Expense ratio |
|
32.9 |
% |
|
32.5 |
% |
| GAAP combined ratio |
|
93.8 |
% |
|
93.0 |
% |
|
|
|
|
|
| Reinsurance: |
|
|
|
|
| Gross premiums written |
|
$ |
166,802 |
|
|
$ |
203,664 |
|
| Net premiums written |
|
152,703 |
|
|
184,515 |
|
| Premiums earned |
|
156,872 |
|
|
160,730 |
|
| Pre-tax income |
|
4,594 |
|
|
28,061 |
|
| Loss ratio |
|
75.9 |
% |
|
59.2 |
% |
| Expense ratio |
|
37.0 |
% |
|
38.4 |
% |
| GAAP combined ratio |
|
112.9 |
% |
|
97.6 |
% |
|
|
|
|
|
| Corporate and Eliminations: |
|
|
|
|
| Net realized investment gains |
|
$ |
52,348 |
|
|
$ |
7,343 |
|
| Interest expense |
|
(36,799 |
) |
|
(32,224 |
) |
| Other revenues and expenses |
|
(35,840 |
) |
|
(28,155 |
) |
| Pre-tax income (loss) |
|
(20,291 |
) |
|
(53,036 |
) |
|
|
|
|
|
| Consolidated: |
|
|
|
|
| Gross premiums written |
|
$ |
1,936,207 |
|
|
$ |
1,955,697 |
|
| Net premiums written |
|
1,646,838 |
|
|
1,663,722 |
|
| Premiums earned |
|
1,570,042 |
|
|
1,527,335 |
|
| Pre-tax income |
|
184,297 |
|
|
174,676 |
|
| Loss ratio |
|
62.4 |
% |
|
60.4 |
% |
| Expense ratio |
|
33.3 |
% |
|
33.1 |
% |
| GAAP combined ratio |
|
95.7 |
% |
|
93.5 |
% |
(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 2017, the Company reclassified two businesses from the Insurance segment to the
Reinsurance segment. Reclassifications have been made to the Company's 2016 financial information to conform with this
presentation.
|
Supplemental Information
(Amounts in thousands)
|
| |
|
|
First Quarter |
|
|
2017 |
|
2016 |
| Net premiums written: |
|
|
|
|
| Other liability |
|
$ |
436,446 |
|
|
$ |
444,465 |
| Workers' compensation |
|
426,557 |
|
|
399,907 |
| Short-tail lines (1) |
|
325,714 |
|
|
347,238 |
| Commercial automobile |
|
165,564 |
|
|
159,002 |
| Professional liability |
|
139,854 |
|
|
128,595 |
| Total Insurance |
|
1,494,135 |
|
|
1,479,207 |
| Casualty reinsurance |
|
93,541 |
|
|
104,060 |
| Property reinsurance |
|
59,162 |
|
|
80,455 |
| Total Reinsurance |
|
152,703 |
|
|
184,515 |
| Total |
|
$ |
1,646,838 |
|
|
$ |
1,663,722 |
|
|
|
|
|
| Losses from catastrophes: |
|
|
|
|
| Insurance |
|
$ |
14,304 |
|
|
$ |
15,097 |
| Reinsurance |
|
194 |
|
|
539 |
| Total |
|
$ |
14,498 |
|
|
$ |
15,636 |
|
|
|
|
|
| Investment income: |
|
|
|
|
| Core portfolio (2) |
|
$ |
115,834 |
|
|
$ |
110,307 |
| Investment funds |
|
26,649 |
|
|
16,636 |
| Arbitrage trading account |
|
6,360 |
|
|
3,190 |
| Total |
|
$ |
148,843 |
|
|
$ |
130,133 |
|
|
|
|
|
| Other operating costs and expenses: |
|
|
|
|
| Policy acquisition and insurance operating expenses |
|
$ |
523,409 |
|
|
$ |
505,255 |
| Service expenses |
|
29,933 |
|
|
33,798 |
| Net foreign currency losses |
|
5,508 |
|
|
3,728 |
| Other costs and expenses |
|
44,850 |
|
|
39,678 |
| Total |
|
$ |
603,700 |
|
|
$ |
582,459 |
|
|
|
|
|
| Cash flow from operations |
|
$ |
75,472 |
|
|
$ |
140,768 |
(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.
|
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
|
| |
|
March 31, 2017 |
|
December 31, 2016 |
|
|
|
|
| Net invested assets (1) |
$ |
17,955,440 |
|
|
$ |
17,857,006 |
| Total assets |
23,547,414 |
|
|
23,350,076 |
| Reserves for losses and loss expenses |
11,224,324 |
|
|
11,197,195 |
| Senior notes and other debt |
1,759,494 |
|
|
1,760,595 |
| Subordinated debentures |
727,777 |
|
|
727,630 |
| Common stockholders’ equity (2) |
5,179,607 |
|
|
5,047,208 |
| Common stock outstanding (3) |
121,218 |
|
|
121,194 |
| Book value per share (4) |
42.73 |
|
|
41.65 |
| Tangible book value per share (4) |
40.82 |
|
|
40.06 |
(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) After-tax unrealized investment gains were $418 million and $427 million as of March 31, 2017 and December 31, 2016,
respectively. Unrealized currency translation losses were $349 million and $372 million as of March 31, 2017 and December 31, 2016,
respectively.
(3) During the three months ended March 31, 2017, the Company did not repurchase any shares of its common stock. The number of
shares 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, 2017
(Amounts in thousands)
|
| |
|
|
Carrying
Value
|
|
Percent
of Total
|
|
|
|
|
|
| Fixed maturity securities: |
|
|
|
|
| United States government and government agencies |
|
$ |
486,676 |
|
|
2.7 |
% |
| State and municipal: |
|
|
|
|
| Special revenue |
|
2,836,614 |
|
|
15.8 |
% |
| State general obligation |
|
554,643 |
|
|
3.1 |
% |
| Local general obligation |
|
393,876 |
|
|
2.2 |
% |
| Corporate backed |
|
379,315 |
|
|
2.1 |
% |
| Pre-refunded |
|
370,269 |
|
|
2.1 |
% |
| Total state and municipal |
|
4,534,717 |
|
|
25.3 |
% |
| Mortgage-backed securities: |
|
|
|
|
| Agency |
|
831,772 |
|
|
4.6 |
% |
| Residential - Prime |
|
221,507 |
|
|
1.2 |
% |
| Commercial |
|
142,804 |
|
|
0.8 |
% |
| Residential - Alt A |
|
30,867 |
|
|
0.2 |
% |
| Total mortgage-backed securities |
|
1,226,950 |
|
|
6.8 |
% |
| Asset-backed securities |
|
2,028,169 |
|
|
11.3 |
% |
| Corporate: |
|
|
|
|
| Industrial |
|
2,456,960 |
|
|
13.7 |
% |
| Financial |
|
1,484,257 |
|
|
8.3 |
% |
| Utilities |
|
247,330 |
|
|
1.4 |
% |
| Other |
|
56,249 |
|
|
0.3 |
% |
| Total corporate |
|
4,244,796 |
|
|
23.7 |
% |
| Foreign government |
|
901,671 |
|
|
5.0 |
% |
| Total fixed maturity securities (1) |
|
13,422,979 |
|
|
74.8 |
% |
| Equity securities available for sale: |
|
|
|
|
| Common stocks |
|
421,329 |
|
|
2.3 |
% |
| Preferred stocks |
|
190,049 |
|
|
1.1 |
% |
| Total equity securities available for sale |
|
611,378 |
|
|
3.4 |
% |
| Cash and cash equivalents (2) |
|
589,925 |
|
|
3.3 |
% |
| Real Estate |
|
1,237,738 |
|
|
6.9 |
% |
| Investment funds (3) |
|
1,236,492 |
|
|
6.9 |
% |
| Arbitrage trading account |
|
753,278 |
|
|
4.2 |
% |
| Loans receivable |
|
103,650 |
|
|
0.5 |
% |
| Net invested assets |
|
$ |
17,955,440 |
|
|
100.0 |
% |
(1) Total fixed maturity securities had an average rating of AA- and an average duration of 3.0 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 $2.1 million.
|
Foreign Government Fixed Maturity Securities
March 31, 2017
(Amounts in thousands)
|
| |
|
|
Carrying Value |
|
|
|
| Argentina |
|
$ |
263,374 |
| Australia |
|
217,042 |
| Canada |
|
163,023 |
| United Kingdom |
|
84,438 |
| Brazil |
|
50,378 |
| Germany |
|
46,187 |
| Supranational (1) |
|
37,081 |
| Norway |
|
19,735 |
| Colombia |
|
7,873 |
| Uruguay |
|
6,340 |
| Singapore |
|
6,200 |
| Total |
|
$ |
901,671 |
(1) Supranational represents investments in the North American Development Bank, European Investment Bank and International Bank
for Reconstruction & Development.
W. R. Berkley Corporation
Karen A. Horvath
Vice President - External
Financial Communications
203-629-3000
View source version on businesswire.com: http://www.businesswire.com/news/home/20170424006477/en/