W. R. Berkley Corporation Reports Second Quarter Results

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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 20122013 2012
 
Gross premiums written$1,617,936$1,430,920$3,249,557$2,832,446
Net premiums written1,341,8981,190,9912,718,8642,394,517
 
Net income115,957108,838232,572244,156
Net income per diluted share0.820.761.651.70
 
Operating income (1)98,83092,988202,465197,224
Operating income per diluted share0.700.651.431.37
 
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 20122013 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 earned1,282,5151,147,3572,514,6342,247,008
Investment income143,737161,250279,666318,869
Insurance service fees27,65227,03654,38850,913
Net investment gains33,05824,28653,02767,763
Change in investment valuation allowance, net of other than temporary impairments4,014
Revenues from wholly-owned investees83,77555,434175,510105,109
Other income225 384 506 776 
Total revenues1,570,962 1,415,747 3,077,731 2,794,452 
Expenses:
Losses and loss expenses805,470731,2021,550,1491,410,674
Other operating costs and expenses494,286448,758975,890880,537
Expenses from wholly-owned investees81,29354,931170,445106,261
Interest expense31,207 32,417 62,318 61,238 
Total expenses1,412,256 1,267,308 2,758,802 2,458,710 
Income before income taxes158,706148,439318,929335,742
Income tax expense(43,579)(39,535)(87,204)(91,606)
Net income before noncontrolling interests115,127108,904231,725244,136
Noncontrolling interests830 (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:
Basic135,894138,181135,959137,997
Diluted141,274143,528141,257143,506



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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 written967,784869,3191,953,9641,752,262
Premiums earned925,997846,7341,810,3751,656,803
Pre-tax income152,334144,640293,684292,375
Loss ratio62.9%65.1%62.7%64.0%
Expense ratio32.5%32.7%32.8%33.0%
GAAP combined ratio95.4%97.8%95.5%97.0%
 
Insurance-International:
Gross premiums written$241,738$217,062$493,313$417,566
Net premiums written201,445174,976406,580342,970
Premiums earned180,192154,501351,311298,386
Pre-tax income12,58313,78234,96529,481
Loss ratio61.0%58.3%58.5%57.8%
Expense ratio38.9%40.5%38.4%40.4%
GAAP combined ratio99.9%98.8%96.9%98.2%
 
Reinsurance-Global:
Gross premiums written$190,012$162,720$390,336$325,308
Net premiums written172,669146,696358,320299,285
Premiums earned176,326146,122352,948291,819
Pre-tax income24,75227,45462,69359,092
Loss ratio63.9%61.6%59.4%60.9%
Expense ratio35.1%38.6%35.7%38.1%
GAAP combined ratio99.0%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 written1,341,8981,190,9912,718,8642,394,517
Premiums earned1,282,5151,147,3572,514,6342,247,008
Pre-tax income158,706148,439318,929335,742
Loss ratio62.8%63.7%61.6%62.8