W. R. Berkley Corporation Reports Second Quarter Results

W. R. Berkley Corporation Reports Second Quarter Results

Net Income per Share up 8%, Net Premiums Written up 13%


GREENWICH, Conn.--(BUSINESS WIRE)-- W. R. Berkley Corporation (NYSE: WRB) today reported net income for the second quarter of 2013 of $116 million, or 82 cents per share, compared with $109 million, or 76 cents per share, for the second quarter of 2012.

Summary Financial Data

(Amounts in thousands, except per share data)

Second Quarter

Six Months

2013

2012

2013

2012

Gross premiums written

$

1,617,936

$

1,430,920

$

3,249,557

$

2,832,446

Net premiums written

1,341,898

1,190,991

2,718,864

2,394,517

Net income

115,957

108,838

232,572

244,156

Net income per diluted share

0.82

0.76

1.65

1.70

Operating income (1)

98,830

92,988

202,465

197,224

Operating income per diluted share

0.70

0.65

1.43

1.37

Return on equity (2)

10.8

%

11.0

%

10.8

%

12.4

%

(1) Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains and after-tax debt extinguishment costs.

(2) Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders' equity.

Second quarter highlights included:

  • Net premiums written increased 12.7%.

  • Average rates on renewed policies increased 6.5%.

  • GAAP combined ratio was 96.6%.

  • Return on equity of 10.8%.

Commenting on the Company's performance, William R. Berkley, chairman and chief executive officer, said: "We are pleased with the second quarter's results. Our improved performance was driven by higher underwriting margins and a declining expense ratio. The benefits from improved underwriting results more than offset the decline in investment income.

"Our cumulative rate increases since 2010 are in excess of 18%, and our premium volume has grown by over 30% in the past two years. Our Company continues to improve its relative competitive position while avoiding the extreme volatility impacting the general marketplace. We expect our returns to increase as our earned premium reflects the recently improved pricing levels.

"The current bond market yields continue to impact our investment income. In spite of the recent improvement in yields, new purchases result in substantially lower returns than maturing securities. We continue to search for attractive opportunities but we are still unwilling to extend the duration or diminish the quality of our portfolio. Overall, yields will remain under pressure, although we anticipate benefiting from capital gains through the balance of the year.

"We are confident that our growth will continue and our returns will improve for the foreseeable future," Mr. Berkley concluded.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on Monday, July 22, 2013 at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at www.wrberkley.com. 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

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 in three segments of the property casualty business: Insurance-Domestic, Insurance-International and Reinsurance-Global.

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 2013 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; 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, real estate, merger arbitrage 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 to it, 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 Act of 2002, as amended ("TRIA"), and the potential expiration of TRIA; 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 2013 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

2013

2012

2013

2012

Revenues:

Net premiums written

$

1,341,898

$

1,190,991

$

2,718,864

$

2,394,517

Change in unearned premiums

(59,383

)

(43,634

)

(204,230

)

(147,509

)

Net premiums earned

1,282,515

1,147,357

2,514,634

2,247,008

Investment income

143,737

161,250

279,666

318,869

Insurance service fees

27,652

27,036

54,388

50,913

Net investment gains

33,058

24,286

53,027

67,763

Change in investment valuation allowance, net of other than temporary impairments

4,014

Revenues from wholly-owned investees

83,775

55,434

175,510

105,109

Other income

225

384

506

776

Total revenues

1,570,962

1,415,747

3,077,731

2,794,452

Expenses:

Losses and loss expenses

805,470

731,202

1,550,149

1,410,674

Other operating costs and expenses

494,286

448,758

975,890

880,537

Expenses from wholly-owned investees

81,293

54,931

170,445

106,261

Interest expense

31,207

32,417

62,318

61,238

Total expenses

1,412,256

1,267,308

2,758,802

2,458,710

Income before income taxes

158,706

148,439

318,929

335,742

Income tax expense

(43,579

)

(39,535

)

(87,204

)

(91,606

)

Net income before noncontrolling interests

115,127

108,904

231,725

244,136

Noncontrolling interests

830

(66

)

847

20

Net income to common stockholders

$

115,957

$

108,838

$

232,572

$

244,156

Net income per share:

Basic

$

0.85

$

0.79

$

1.71

$

1.77

Diluted

$

0.82

$

0.76

$

1.65

$

1.70

Average shares outstanding:

Basic

135,894

138,181

135,959

137,997

Diluted

141,274

143,528

141,257

143,506



Business Segment Operating Results

(Amounts in thousands, except ratios) (1) (2)

Second Quarter

Six Months

2013

2012

2013

2012

Insurance-Domestic:

Gross premiums written

$

1,186,186

$

1,051,138

$

2,365,908

$

2,089,572

Net premiums written

967,784

869,319

1,953,964

1,752,262

Premiums earned

925,997

846,734

1,810,375

1,656,803

Pre-tax income

152,334

144,640

293,684

292,375

Loss ratio

62.9

%

65.1

%

62.7

%

64.0

%

Expense ratio

32.5

%

32.7

%

32.8

%

33.0

%

GAAP combined ratio

95.4

%

97.8

%

95.5

%

97.0

%

Insurance-International:

Gross premiums written

$

241,738

$

217,062

$

493,313

$

417,566

Net premiums written

201,445

174,976

406,580

342,970

Premiums earned

180,192

154,501

351,311

298,386

Pre-tax income

12,583

13,782

34,965

29,481

Loss ratio

61.0

%

58.3

%

58.5

%

57.8

%

Expense ratio

38.9

%

40.5

%

38.4

%

40.4

%

GAAP combined ratio

99.9

%

98.8

%

96.9

%

98.2

%

Reinsurance-Global:

Gross premiums written

$

190,012

$

162,720

$

390,336

$

325,308

Net premiums written

172,669

146,696

358,320

299,285

Premiums earned

176,326

146,122

352,948

291,819

Pre-tax income

24,752

27,454

62,693

59,092

Loss ratio

63.9

%

61.6

%

59.4

%

60.9

%

Expense ratio

35.1

%

38.6

%

35.7

%

38.1

%

GAAP combined ratio

99.0

%

100.2

%

95.1

%

99.0

%

Corporate and Eliminations:

Net realized investment gains

$

33,058

$

24,286

$

53,027

$

71,777

Interest expense

(31,207

)

(32,417

)

(62,318

)

(61,238

)

Other revenues and expenses

(32,814

)

(29,306

)

(63,122

)

(55,745

)

Pre-tax loss

(30,963

)

(37,437

)

(72,413

)

(45,206

)

Consolidated:

Gross premiums written

$

1,617,936

$

1,430,920

$

3,249,557

$

2,832,446

Net premiums written

1,341,898

1,190,991

2,718,864

2,394,517

Premiums earned

1,282,515

1,147,357

2,514,634

2,247,008

Pre-tax income

158,706

148,439

318,929

335,742

Loss ratio

62.8

%

63.7

%

61.6

%

62.8