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

Fourth Quarter Gross Premiums Written Grew 9.3% and Return on Equity of 20.6%

GREENWICH, Conn.–(BUSINESS WIRE)–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.

 

Contacts

Karen A. Horvath

Vice President – External

Financial Communications

(203) 629-3000

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