W. R. Berkley Corporation Reports Fourth Quarter and Full Year 2023 Results

Rhea-AI Summary

W. R. Berkley Corporation (WRB) reported a 23.6% return on equity in the fourth quarter of 2023, with record quarterly and annual pre-tax underwriting income and net investment income. The company achieved significant growth in net premiums written, book value per share, and total capital returned to shareholders. The webcast conference call to discuss its earnings and other information will be held on January 24, 2024.

Positive

• Record quarterly and annual pre-tax underwriting income and net investment income
• Significant growth in net premiums written, book value per share, and total capital returned to shareholders

Negative

• None.

Insights

Financial Analyst

The reported figures, such as the Return on Equity (RoE) of 23.6% and the Operating Return on Equity of 23.2%, are significantly high, especially when compared to the industry average RoE for property and casualty insurers, which typically ranges around 8-12%. Such a robust RoE indicates that W. R. Berkley Corporation has effectively utilized shareholders' equity to generate profits. This performance could be attributed to disciplined underwriting and strategic asset allocation, as evidenced by the record pre-tax underwriting income and net investment income.

The growth in net premiums written by 12.0% and the combined ratio of 88.4%, which remains below 100%, signal operational efficiency and profitability in insurance operations. A combined ratio below 100% means the company is earning more in premiums than it is paying out in claims and expenses. The average rate increases further suggest the company's pricing power in the market. Investors might view these results as positive indicators of the company's financial health and future profitability, potentially influencing the stock's performance.

Market Research Analyst

The insurance industry is experiencing a period of transition, with various lines of business moving independently. W. R. Berkley Corporation's decentralized structure, which the company cites as a competitive advantage, allows for agility and responsiveness to market changes. This structural advantage may enable the company to capitalize on niche markets and tailor its product offerings more effectively than its competitors.

Additionally, the substantial increase in net investment income, driven by a 52.9% increase in the core portfolio, reflects the company's strategic investment decisions amid rising interest rates. The ability to reinvest at higher rates than the annual book yield suggests a favorable investment environment that could support sustained growth in investment income, which is critical for insurance companies that rely on these earnings to offset underwriting costs and enhance profitability.

Economist

The economic context in which W. R. Berkley Corporation operates is characterized by fluctuating interest rates and a dynamic insurance landscape. The company's ability to reinvest at higher interest rates than its annual book yield is indicative of a broader economic trend of rising rates, which can benefit insurers' investment portfolios. However, it is essential to note that such conditions also present risks, such as increased borrowing costs and potential for decreased consumer demand for insurance products.

The operating cash flow increase of 14.0% to a record $2.9 billion provides the company with liquidity to navigate potential economic headwinds and invest in profitable ventures. The firm's proactive capital management, demonstrated by the return of $1.0 billion to shareholders through repurchases and dividends, reflects confidence in its financial stability and commitment to shareholder value. This balance between reinvestment in the business and capital return to shareholders is a delicate equilibrium that requires careful economic forecasting and risk assessment.

Fourth Quarter Return on Equity of 23.6% and Operating Return on Equity of 23.2%;

Record Quarterly and Annual Pre-Tax Underwriting Income and Net Investment Income

GREENWICH, Conn.--(BUSINESS WIRE)-- W. R. Berkley Corporation (NYSE: WRB) today reported its fourth quarter and full year 2023 results.

Summary Financial Data (Amounts in thousands, except per share data)
		Fourth Quarter								Twelve Months
			2023				2022				2023				2022
Gross premiums written		$	3,232,710			$	2,914,877			$	12,972,006			$	11,909,052
Net premiums written			2,719,668				2,427,907				10,954,467				10,004,070
Net income to common stockholders			397,340				382,223				1,381,359				1,381,062
Net income per diluted share			1.47				1.37				5.05				4.94
Operating income (1)			391,753				323,329				1,344,567				1,223,934
Operating income per diluted share			1.45				1.16				4.92				4.38
Return on equity (2)			23.6	%			23.0	%			20.5	%			20.8	%
Operating return on equity (1) (2)			23.2	%			19.4	%			19.9	%			18.4	%

(1)		Operating income is a non-GAAP financial measure defined by the Company as net income excluding after-tax net investment gains and related expenses.
(2)		Return on equity and operating return on equity represent net income and operating income, respectively, expressed on an annualized basis as a percentage of beginning of year common stockholders’ equity.

Fourth quarter highlights included:

• Return on equity of 23.6%.
• Book value per share grew 11.6%, before dividends and share repurchases.
• Record net investment income of $313.3 million driven by 52.9% increase in the core portfolio.
• Net premiums written growth increased to 12.0%.
• The current accident year combined ratio before catastrophe losses of 1.2 loss ratio points was 87.2%.
• The reported combined ratio was 88.4%, including current accident year catastrophe losses of $32.0 million.
• Record pre-tax underwriting income grew 8.2% to $315.9 million.
• Average rate increases excluding workers' compensation were approximately 8.0%.
• Total capital returned to shareholders was $263.8 million, consisting of $106.7 million of share repurchases, $128.8 million of special dividends and $28.3 million of regular dividends.

Full year highlights included:

• Return on equity of 20.5%.
• Book value per share grew 25.5%, before dividends and share repurchases.
• Record annual pre-tax underwriting income of $1.1 billion.
• Gross and net premiums written grew 8.9% and 9.5% to records of $13.0 billion and $11.0 billion, respectively.
• Average rate increases excluding workers' compensation were approximately 8.1%.
• Net investment income grew 35.1% to a record $1.1 billion.
• Operating cash flow increased 14.0% to a record of $2.9 billion.
• Total capital returned to shareholders was $1.0 billion, consisting of $537.2 million of share repurchases, $390.0 million of special dividends and $111.4 million of regular dividends.

The Company commented:

Our Company completed another record-setting year in 2023, achieving a 23.6% annualized return on beginning equity in the fourth quarter. Our quarter and full year results were characterized by growth in net premiums written, along with record underwriting performance and net investment income. Book value per share grew 11.6% during the fourth quarter, before the return of $264 million of capital to shareholders through special and ordinary dividends and share repurchases.

Growth in net premiums written accelerated to 12% in the fourth quarter, as we deployed capital in areas of the business that we expect to achieve or exceed our targeted risk-adjusted return on equity. In a market where lines of business increasingly move independently from each other, our decentralized structure provides us with a competitive advantage that allows us to better navigate risks and embrace opportunities.

Net investment income from our fixed-maturity portfolio increased more than 50% during the quarter and 60% for the year as our portfolio grew and we (re)invested at higher interest rates. The current rates at which we can reinvest remains higher than our annual book yield, and record operating cash flow positions us well for future investment income growth.

Our Company performed exceptionally well during 2023, and we anticipate 2024 will continue to be rewarding for our shareholders. We view the current property and casualty insurance and investment environments as favorable to our business model. We are confident that we will continue to deliver superior long-term risk-adjusted returns and increase value to shareholders in 2024 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 January 24, 2024, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at https://ir.berkley.com/events-and-presentations/default.aspx. Please log on early to register. 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/quarterly-results/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 2024 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 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 cyber security-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing effects of the COVID-19 pandemic, or other epidemics and pandemics; the impact of climate change, which may alter the frequency and increase the 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 to such conditions, 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 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; cyber security breaches of our information technology systems and the information technology systems of our vendors and other third parties, or related processes and systems; 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 2024 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
			2023				2022				2023				2022
Revenues:
Net premiums written		$	2,719,668			$	2,427,907			$	10,954,467			$	10,004,070
Change in unearned premiums			(5,054	)			85,317				(553,780	)			(442,641	)
Net premiums earned			2,714,614				2,513,224				10,400,687				9,561,429
Net investment income			313,341				231,283				1,052,835				779,185
Net investment gains:
Net realized and unrealized (losses) gains on investments			(2,862	)			77,647				47,540				217,311
Change in allowance for credit losses on investments			10,666				(2,549	)			(498	)			(14,914	)
Net investment gains			7,804				75,098				47,042				202,397
Revenues from non-insurance businesses			160,283				164,338				535,508				509,548
Insurance service fees			25,194				28,260				106,485				110,544
Other Income			146				1,599				381				3,396
Total Revenues			3,221,382				3,013,802				12,142,938				11,166,499
Expenses:
Loss and loss expenses			1,627,540				1,522,104				6,372,142				5,861,750
Other operating costs and expenses			906,011				822,248				3,363,936				2,961,505
Expenses from non-insurance businesses			154,754				159,127				524,998				493,189
Interest expense			31,879				31,902				127,459				130,374
Total expenses			2,720,184				2,535,381				10,388,535				9,446,818
Income before income tax			501,198				478,421				1,754,403				1,719,681
Income tax expense			(102,234	)			(96,437	)			(370,557	)			(334,727	)
Net Income before noncontrolling interests			398,964				381,984				1,383,846				1,384,954
Noncontrolling interest			(1,624	)			239				(2,487	)			(3,892	)
Net income to common stockholders		$	397,340			$	382,223			$	1,381,359			$	1,381,062
Net income per share:
Basic		$	1.48			$	1.38			$	5.10			$	4.99
Diluted		$	1.47			$	1.37			$	5.05			$	4.94
Average shares outstanding (1):
Basic			269,053				276,625				271,000				276,852
Diluted			271,015				278,888				273,298				279,461

(1)

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
			2023				2022				2023				2022
Insurance:
Gross premiums written		$	2,902,010			$	2,607,497			$	11,561,138			$	10,583,785
Net premiums written			2,410,348				2,147,121				9,657,121				8,784,146
Net premiums earned			2,382,621				2,207,057				9,130,324				8,369,062
Pre-tax income			486,697				403,473				1,640,438				1,455,658
Loss ratio			60.8	%			61.4	%			62.3	%			61.3	%
Expense ratio			28.6	%			27.8	%			28.4	%			27.9	%
GAAP Combined ratio			89.4	%			89.2	%			90.7	%			89.2	%
Reinsurance & Monoline Excess:
Gross premiums written		$	330,700			$	307,380			$	1,410,868			$	1,325,267
Net premiums written			309,320				280,786				1,297,346				1,219,924
Net premiums earned			331,993				306,167				1,270,363				1,192,367
Pre-tax income			125,474				107,161				438,765				316,527
Loss ratio			53.8	%			54.2	%			53.8	%			61.3	%
Expense ratio			27.4	%			28.6	%			28.3	%			28.4	%
GAAP Combined ratio			81.2	%			82.8	%			82.1	%			89.7	%
Corporate and Eliminations:
Net investment gains		$	7,804			$	75,098			$	47,042			$	202,397
Interest expense			(31,879	)			(31,902	)			(127,459	)			(130,374	)
Other expenses			(86,898	)			(75,409	)			(244,383	)			(124,527	)
Pre-tax loss			(110,973	)			(32,213	)			(324,800	)			(52,504	)
Consolidated:
Gross premiums written		$	3,232,710			$	2,914,877			$	12,972,006			$	11,909,052
Net premiums written			2,719,668				2,427,907				10,954,467				10,004,070
Net premiums earned			2,714,614				2,513,224				10,400,687				9,561,429
Pre-tax income			501,198				478,421				1,754,403				1,719,681
Loss ratio			60.0	%			60.6	%			61.3	%			61.3	%
Expense ratio			28.4	%			27.8	%			28.4	%			28.0	%
GAAP Combined ratio			88.4	%			88.4	%			89.7	%			89.3	%

(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
			2023				2022				2023				2022
Net premiums written:
Other liability		$	971,611			$	838,516			$	3,840,908			$	3,408,254
Short-tail lines (1)			527,074				431,528				2,099,684				1,749,926
Auto			351,934				308,746				1,397,585				1,257,659
Workers' compensation			290,203				281,070				1,228,058				1,221,804
Professional liability			269,526				287,261				1,090,886				1,146,503
Total Insurance			2,410,348				2,147,121				9,657,121				8,784,146
Casualty reinsurance			197,059				201,851				769,161				785,631
Property reinsurance			76,975				49,137				280,060				211,772
Monoline excess			35,286				29,798				248,125				222,521
Total Reinsurance & Monoline Excess			309,320				280,786				1,297,346				1,219,924
Total		$	2,719,668			$	2,427,907			$	10,954,467			$	10,004,070
Current accident year losses from catastrophes (including COVID-19 related losses):
Insurance		$	20,488			$	24,592			$	159,897			$	126,393
Reinsurance & Monoline Excess			11,529				6,253				35,065				85,317
Total		$	32,017			$	30,845			$	194,962			$	211,710
Net Investment income:
Core portfolio (2)		$	285,841			$	186,897			$	966,723			$	588,873
Investment funds			11,300				23,180				16,743				145,099
Arbitrage trading account			16,200				21,206				69,369				45,213
Total		$	313,341			$	231,283			$	1,052,835			$	779,185
Net realized and unrealized (losses) gains on investments:
Net realized (losses) gains on investments		$	(27,705	)		$	(10,422	)		$	(22,908	)		$	217,943
Change in unrealized gains (losses) on equity securities			24,843				88,069				70,448				(632	)
Total		$	(2,862	)		$	77,647			$	47,540			$	217,311
Other operating costs and expenses:
Policy acquisition and insurance operating expenses		$	771,170			$	699,227			$	2,954,686			$	2,673,903
Insurance service expenses			21,379				25,071				91,714				96,419
Net foreign currency losses (gains)			33,577				34,130				31,799				(50,930	)
Other costs and expenses			79,885				63,820				285,737				242,113
Total		$	906,011			$	822,248			$	3,363,936			$	2,961,505
Cash flow from operations		$	698,076			$	795,301			$	2,929,238			$	2,568,604
Reconciliation of net income to operating income:
Net income		$	397,340			$	382,223			$	1,381,359			$	1,381,062
Pre-tax investment gains, net of related expenses			(7,804	)			(75,098	)			(47,042	)			(199,087	)
Income tax expense			2,217				16,204				10,250				41,959
Operating income after-tax (3)		$	391,753			$	323,329			$	1,344,567			$	1,223,934

(1)		Short-tail lines include commercial multi-peril (non-liability), inland marine, accident and health, fidelity and surety, boiler and machinery, high net worth homeowners 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, 2023			December 31 2022
Net invested assets (1)		$	26,973,703		$	24,545,672
Total assets			37,202,015			33,861,099
Reserves for losses and loss expenses			18,739,652			17,011,223
Senior notes and other debt			1,827,951			1,828,823
Subordinated debentures			1,009,090			1,008,371
Common stockholders' equity (2)			7,455,431			6,748,332
Common stock outstanding (3)			256,545			264,546
Book value per share (4)			29.06			25.51
Tangible book value per share (4)			28.08			24.58

(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, 2023, reflected in common stockholders' equity are after-tax unrealized investment losses of $586 million and unrealized currency translation losses of $340 million. As of December 31, 2022, after-tax unrealized investment losses were $893 million and unrealized currency translation losses were $372 million.
(3)		During the twelve months ended December 31, 2023, the Company repurchased 8,707,676 shares of its common stock for $537.2 million. During the three months ended December 31, 2023, the Company repurchased 1,560,701 shares of its common stock for $106.7 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, 2023 (Amounts in thousands, except percentages)
		Carrying Value			Percent of Total
Fixed maturity securities:
United States government and government agencies		$	1,716,731		6.4	%
State and municipal:
Special revenue			1,606,195		6.0	%
State general obligation			432,078		1.6	%
Local general obligation			387,336		1.4	%
Corporate backed			154,839		0.6	%
Pre-refunded			104,478		0.4	%
Total state and municipal			2,684,926		10.0	%
Mortgage-backed securities:
Agency			1,429,956		5.3	%
Commercial			644,313		2.4	%
Residential - Prime			192,193		0.7	%
Residential - Alt A			2,861		0.0	%
Total mortgage-backed securities			2,269,323		8.4	%
Asset-backed securities			4,187,040		15.5	%
Corporate:
Industrial			3,559,555		13.2	%
Financial			2,779,234		10.3	%
Utilities			684,924		2.5	%
Other			630,346		2.3	%
Total corporate			7,654,059		28.3	%
Foreign government			1,666,229		6.2	%
Total fixed maturity securities (1)			20,178,308		74.8	%
Equity securities available for sale:
Common stocks			838,054		3.1	%
Preferred stocks			252,293		0.9	%
Total equity securities available for sale			1,090,347		4.0	%
Cash and cash equivalents (2)			1,694,199		6.3	%
Investment funds			1,621,655		6.0	%
Real estate			1,249,874		4.6	%
Arbitrage trading account			938,049		3.5	%
Loans receivable			201,271		0.8	%
Net invested assets		$	26,973,703		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 purchase.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240124926833/en/

Karen A. Horvath

Vice President - External

Financial Communications

(203) 629-3000

Source: W. R. Berkley Corporation

FAQ

What is the ticker symbol for W. R. Berkley Corporation?

The ticker symbol for W. R. Berkley Corporation is WRB.

What was the return on equity in the fourth quarter of 2023?

The return on equity in the fourth quarter of 2023 was 23.6%.

When will the webcast conference call to discuss the earnings be held?

The webcast conference call will be held on January 24, 2024, at 5:00 p.m. eastern time.

Where can additional financial information be found?

Additional financial information can be found on the Company's website at https://ir.berkley.com/investor-relations/financial-information/quarterly-results/default.aspx.