W. R. Berkley Corporation Reports Fourth Quarter and Full Year Results

GREENWICH, Conn.–(BUSINESS WIRE)–Jan 26, 2021–
W. R. Berkley Corporation (NYSE: WRB) today reported its fourth quarter and full year 2020 results.

Summary Financial Data
(Amounts in thousands, except per share data)
    Fourth Quarter   Twelve Months
    2020   2019   2020   2019
                 
Gross premiums written   $ 2,221,484   $ 2,033,078   $ 8,847,647   $ 8,262,219
Net premiums written   1,797,457   1,660,528   7,262,437   6,863,499
                 
Net income to common stockholders   312,150   119,306   530,670   681,944
Net income per diluted share   1.67   0.62   2.81   3.52
                 
Operating income (1)   173,043   137,530   438,253   589,057
Operating income per diluted share   0.92   0.71   2.32   3.04
                 
Return on equity (2)   20.6%   8.8%   8.7%   12.5%

(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 represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’ equity.
Fourth quarter highlights included:

  • All-time record net income of $312.2 million.
  • Return on equity of 20.6%.
  • Gross and net premiums written increased 9.3% and 8.2%, respectively.
  • The reported combined ratio was 90.9%. The accident year combined ratio before catastrophe losses was 88.8%.
  • Underwriting income increased 44.2% to $165.4 million.
  • Catastrophes added 2.3 loss ratio points to the reported combined ratio, including 1.5 loss ratio points for COVID-19 related losses.
  • Average rate increases excluding workers’ compensation were approximately 15.4%.
  • Book value per share grew 6.1%, before share repurchases and dividends.

Full year highlights included:

  • Average rate increases excluding workers’ compensation were approximately 13.6%.
  • Paid loss ratio of 51.9%.
  • Operating cash flow increased 41.3% to more than $1.6 billion.
  • Gross and net premiums written increased 7.1% and 5.8%, respectively.
  • Book value per share grew 10.5%, before share repurchases and dividends.
  • Total capital returned to shareholders was $430 million, including $346 million of share repurchases and $84 million of dividends.

The Company commented:
By every measure, the Company had an outstanding quarter, with earnings of $312 million and more than 9% growth in gross premiums written. We reported a combined ratio of 90.9%, which is the lowest in 13 years, and underwriting income of $165 million, which increased by 44.2%.
Our rate increases continued to accelerate throughout the year in connection with our efforts to stay ahead of current and expected loss trends. The global pandemic, frequent catastrophe losses, social inflation and low interest rates continue to reinforce the industry’s need for disciplined underwriting and additional rate.
Our total return investment strategy delivered strong performance, driven by our alternative investment portfolio. Net investment income grew 32%, despite the defensive position in our fixed-maturity securities, where we maintain a relatively short duration and a high level of liquidity.
The Company again delivered a superior risk-adjusted return, in a challenging environment. We see no signs of rate increases moderating and expect that 2021 will provide opportunities for margin improvement.
Webcast Conference Call
The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on January 26, 2021, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company’s website at https://ir.berkley.com/news-and-events/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/annual-reports/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 2021 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 ongoing COVID-19 pandemic, including the related impact on the U.S. and global economies; 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, including claims for cybersecurity-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities, epidemics or pandemics, such as COVID-19; the impact of climate change, which may increase the frequency and 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 2021 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)
    Fourth Quarter   Twelve Months
    2020   2019   2020   2019
Revenues:                
Net premiums written   $ 1,797,457     $ 1,660,528     $ 7,262,437     $ 6,863,499
Change in unearned premiums   16,133     56,253     (331,594)     (230,211)
Net premiums earned   1,813,590     1,716,781     6,930,843     6,633,288
Net investment income   180,977     137,334     583,821     645,614
Net investment gains (losses):                
Net realized and unrealized gains (losses) on investments   162,918     (22,988)     73,514     120,703
Change in allowance for credit losses on investments (1)   393         29,486    
Net investment gains (losses)   163,311     (22,988)     103,000     120,703
Revenues from non-insurance businesses   132,923     123,537     389,888     406,541
Insurance service fees   21,521     21,240     88,777     92,680
Other income   149     170     2,596     3,370
Total revenues   2,312,471     1,976,074     8,098,925     7,902,196
Expenses:                
Losses and loss expenses   1,111,695     1,072,166     4,468,706     4,131,116
Other operating costs and expenses   637,250     601,121     2,390,392     2,362,082
Expenses from non-insurance businesses   128,457     122,527     384,488     402,669
Interest expense   35,663     33,496     150,537     153,409
Total expenses   1,913,065     1,829,310     7,394,123     7,049,276
Income before income taxes   399,406     146,764     704,802     852,920
Income tax expense   (86,917)     (26,970)     (171,817)     (168,935)
Net income before noncontrolling interests   312,489     119,794     532,985     683,985
Noncontrolling interests   (339)     (488)     (2,315)     (2,041)
Net income to common stockholders   $ 312,150     $ 119,306     $ 530,670     $ 681,944
                 
Net income per share:                
Basic   $ 1.68     $ 0.62     $ 2.84     $ 3.58
Diluted   $ 1.67     $ 0.62     $ 2.81     $ 3.52
                 
Average shares outstanding (2):                
Basic   185,693     191,106   186,924     190,722
Diluted   187,180     193,280   188,763     193,521

(1) The inclusion of the allowance for credit losses on investments commenced January 1, 2020 due to the adoption of ASU 2016-13.
(2) 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)
 
    Fourth Quarter   Twelve Months
    2020   2019   2020   2019
Insurance:                
Gross premiums written   $ 1,996,169   $ 1,832,711   $ 7,837,496   $ 7,398,573
Net premiums written   1,592,311   1,484,932   6,347,101   6,086,009
Premiums earned   1,586,578   1,523,748   6,067,669   5,919,819
Pre-tax income   236,548   202,085   668,012   814,862
Loss ratio   63.4%   62.6%   64.9%   62.4%
Expense ratio   29.4%   30.4%   30.3%   31.1%
GAAP combined ratio   92.8%   93.0%   95.2%   93.5%
                 
Reinsurance & Monoline Excess:                
Gross premiums written   $ 225,315   $ 200,367   $ 1,010,151   $ 863,646
Net premiums written   205,146   175,596   915,336   777,490
Premiums earned   227,012   193,033   863,174   713,469
Pre-tax income   94,975   44,837   205,587   189,188
Loss ratio   46.7%   61.1%   61.3%   61.5%
Expense ratio   31.1%   34.4%   31.8%   35.0%
GAAP combined ratio   77.8%   95.5%   93.1%   96.5%
                 
Corporate and Eliminations:                
Net investment gains (losses)   $ 163,311   $ (22,988)   $ 103,000   $ 120,703
Interest expense   (35,663)   (33,496)   (150,537)   (153,409)
Other revenues and expenses   (59,765)   (43,674)   (121,260)   (118,424)
Pre-tax gain (loss)   67,883   (100,158)   (168,797)   (151,130)
                 
Consolidated:                
Gross premiums written   $ 2,221,484   $ 2,033,078   $ 8,847,647   $ 8,262,219
Net premiums written   1,797,457   1,660,528   7,262,437   6,863,499
Premiums earned   1,813,590   1,716,781   6,930,843   6,633,288
Pre-tax income   399,406   146,764   704,802   852,920
Loss ratio   61.3%   62.4%   64.5%   62.3%
Expense ratio   29.6%   30.9%   30.4%   31.5%
GAAP combined ratio   90.9%   93.3%   94.9%   93.8%

(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)
 
    Fourth Quarter   Twelve Months
    2020   2019   2020   2019
Net premiums written:                
Other liability   $ 594,546     $ 537,674     $ 2,342,884     $ 2,145,287  
Short-tail lines (1)   325,809     319,423     1,300,750     1,254,180  
Workers’ compensation   241,935     282,840     1,099,886     1,280,573  
Commercial automobile   227,190     188,459     876,031     796,993  
Professional liability   202,831     156,536     727,550     608,976  
Total Insurance   1,592,311     1,484,932     6,347,101     6,086,009  
Casualty reinsurance   141,481     116,698     560,717     460,239  
Property reinsurance   41,174     37,673     178,023     154,455  
Monoline excess   22,491     21,225     176,596     162,796  
Total Reinsurance & Monoline Excess   205,146     175,596     915,336     777,490  
Total   $ 1,797,457     $ 1,660,528     $ 7,262,437     $ 6,863,499  
                 
Losses from catastrophes (including COVID-19 related losses):            
Insurance   $ 62,380     $ 14,744     $ 307,037     $ 68,187  
Reinsurance & Monoline Excess   (19,934)     5,736     $ 32,799     21,914  
Total   $ 42,446     $ 20,480     339,836     $ 90,101  
                 
Net investment income:                
Core portfolio (2)   $ 102,039     $ 137,022     $ 451,637     $ 541,834  
Investment funds   52,992     (8,090)     54,253     69,194  
Arbitrage trading account   25,946     8,402     77,931     34,586  
Total   $ 180,977     $ 137,334     $ 583,821     $ 645,614  
                 
Net realized and unrealized gains (losses) on investments:                
Net realized gains on investments   $ 126,927     $ 7,442     $ 99,382     $ 35,411  
Change in unrealized gains (losses) on equity securities   35,991     (30,430)     (25,868)     85,292  
Total   $ 162,918     $ (22,988)     $ 73,514     $ 120,703  
                 
Other operating costs and expenses:                
Policy acquisition and insurance operating expenses   $ 536,507     $ 529,951     $ 2,111,013     $ 2,090,301  
Insurance service expenses   21,694     23,804     85,724     101,317  
Net foreign currency losses (gains)   24,207     (1,631)     363     (30,715)  
Debt extinguishment costs   8,440         8,440      
Other costs and expenses   46,402     48,997     184,852     201,179  
Total   $ 637,250     $ 601,121     $ 2,390,392     $ 2,362,082  
                 
Cash flow from operations   $ 479,740     $ 348,749     $ 1,616,686     $ 1,143,793  
                 
Reconciliation of net income to operating income:                
Net income   $ 312,150     $ 119,306     $ 530,670     $ 681,944  
Pre-tax investment (gains) losses, net of related expenses   (162,337)     23,066     (102,027)     (117,730)  
Income tax expense (benefit)   23,230     (4,842)     9,610     24,843  
Operating income after-tax (3)   $ 173,043     $ 137,530     $ 438,253     $ 589,057  

(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)
 
  December 31,
2020
  December 31,
2019
       
Net invested assets (1) $ 21,370,503     $ 19,856,776  
Total assets 28,606,913     26,662,144  
Reserves for losses and loss expenses 13,784,430     12,583,249  
Senior notes and other debt 1,623,025     1,427,575  
Subordinated debentures 1,102,309     1,198,704  
Common stockholders’ equity (2) 6,310,802     6,074,939  
Common stock outstanding (3) 177,825     183,412  
Book value per share (4) 35.49     33.12  
Tangible book value per share (4) 34.22     31.87  

(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 December 31, 2020, reflected in common stockholders’ equity are after-tax unrealized investment gains of $290 million and unrealized currency translation losses of $352 million. As of December 31, 2019, after-tax unrealized investment gains were $125 million and unrealized currency translation losses were $382 million.
(3) During the three months ended December 31, 2020, the Company repurchased 542,434 shares of its common stock for $34 million. During the twelve months ended December 31, 2020, the Company repurchased 6,363,301 shares of its common stock for $346 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
December 31, 2020
(Amounts in thousands)
 
    Carrying
Value
  Percent
of Total
Fixed maturity securities:        
United States government and government agencies   $ 603,871     2.8 %
State and municipal:        
Special revenue   $ 2,252,067     10.6 %
State general obligation   493,147     2.3 %
Local general obligation   450,624     2.1 %
Pre-refunded   276,672     1.3 %
Corporate backed   214,473     1.0 %
Total state and municipal   3,686,983     17.3 %
Mortgage-backed securities:        
Agency   630,784     3.0 %
Residential – Prime   199,481     0.9 %
Commercial   187,717     0.9 %
Residential – Alt A   8,803     %
Total mortgage-backed securities   1,026,785     4.8 %
Asset-backed securities   3,194,586     14.9 %
Corporate:        
Industrial   2,564,475     12.0 %
Financial   1,575,903     7.4 %
Utilities   421,165     2.0 %
Other   110,038     0.5 %
Total corporate   4,671,581     21.9 %
Foreign government   975,563     4.6 %
Total fixed maturity securities (1)   14,159,369     66.3 %
Equity securities available for sale:        
Common stocks   350,181     1.6 %
Preferred stocks   275,486     1.3 %
Total equity securities available for sale   625,667     2.9 %
Cash and cash equivalents (2)   2,889,630     13.5 %
Real estate   1,960,914     9.2 %
Investment funds (3)   1,308,537     6.1 %
Arbitrage trading account   341,473     1.6 %
Loans receivable   84,913     0.4 %
Net invested assets   $ 21,370,503     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 $0.9 million.
 
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CONTACT: Karen A. Horvath
Vice President – External
Financial Communications
(203) 629-3000
KEYWORD: CONNECTICUT UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: FINANCE CONSULTING BANKING PROFESSIONAL SERVICES OTHER PROFESSIONAL SERVICES
SOURCE: W. R. Berkley Corporation
Copyright Business Wire 2021.
PUB: 01/26/2021 04:10 PM/DISC: 01/26/2021 04:10 PM
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