Business Wire | Jul 22, 2021 04:10PM EDT

W. R. Berkley Corporation Reports Second Quarter Results

Jul. 22, 2021

GREENWICH, Conn.--(BUSINESS WIRE)--Jul. 22, 2021--W. R. Berkley Corporation (NYSE: WRB) today reported its second quarter 2021 results.

Summary Financial Data

(Amounts in thousands, except per share data)

Second Quarter Six Months

2021 2020 2021 2020



Gross premiums $ 2,661,236 $ 2,132,246 $ 5,145,948 $ 4,363,618 written

Net premiums 2,212,181 1,739,818 4,262,219 3,585,664 written



Net income tocommon 237,238 71,260 466,763 66,842 stockholders

Net income per 1.27 0.38 2.50 0.35 diluted share



Operating income 219,059 11,552 420,840 144,064 (1)

Operating income 1.17 0.06 2.25 0.76 per diluted share



Return on equity 15.0 % 4.7 % 14.8 % 2.2 %(2)

(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 common stockholders' equity.

Second quarter highlights included:

* Net premiums written increased 27.2%. * The reported combined ratio was 89.7%. The current accident year combined ratio before catastrophe losses of 2.2 loss ratio points was 87.5%. * Return on equity of 15.0%. * Record quarterly underwriting income of $202.2 million. * Average rate increases excluding workers' compensation were approximately 9.7%. * Net investment income increased 96.9% to $168.2 million. * Total capital returned to shareholders was $112 million, consisting of $89 million of special dividends and $23 million of regular dividends.

The Company commented:

The Company reported outstanding results in the second quarter of 2021 with net premium growth in excess of 27%, a combined ratio of 89.7%, and an annualized return on equity of 15%.

Rate increases continued to outpace loss costs, further solidifying our current rate adequacy. As more products achieved or exceeded our target rate levels, our attention turned to exposure growth and business expansion. We expect this growth and rate achievement will contribute to additional underwriting profits as they are fully earned.

Our alternative investment portfolio also delivered strong performance, driven by investment funds and approximately $39 million of realized investment gains. We remain committed to a total return investment strategy and anticipate that it will continue to generate attractive returns for shareholders.

The combination of rate adequacy and an improving economy have created opportunities for profitable growth for the property casualty insurance market. Our structure, operating model and specialty product focus distinctly position us to outperform in such circumstances. We anticipate that these economic and market trends will continue to yield positive results for our Company for the foreseeable future.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on July 22, 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 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 cybersecurity-related risks; natural and man-made catastrophic losses, including as a result of terrorist activities; the ongoing COVID-19 pandemic; 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, 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)

Second Quarter Six Months

2021 2020 2021 2020

Revenues:

Net premiums $ 2,212,181 $ 1,739,818 $ 4,262,219 $ 3,585,664 written

Change in (240,557) (62,903) (440,639) (217,331) unearned premiums

Net premium 1,971,624 1,676,915 3,821,580 3,368,333 earned

Net investment 168,187 85,431 326,764 260,194 income

Net investment gains (losses):

Net realized andunrealized gains 20,461 61,653 72,219 (81,632) (losses) oninvestments

Change inallowance for 3,603 16,232 (13,316) (17,657) credit losses oninvestments

Net investment 24,064 77,885 58,903 (99,289) gains (losses)

Revenues fromnon-insurance 109,122 75,742 196,552 169,471 businesses

Insurance service 22,256 19,870 48,064 45,621 fees

Other Income 833 183 1,092 2,305

Total Revenues 2,296,086 1,936,026 4,452,955 3,746,635

Expenses:

Loss and loss 1,203,647 1,135,126 2,325,238 2,242,379 expenses

Other operatingcosts and 647,705 580,840 1,263,973 1,159,173 expenses

Expenses fromnon-insurance 106,698 76,238 192,989 170,996 businesses

Interest expense 38,096 38,373 74,747 75,105

Total expenses 1,996,146 1,830,577 3,856,947 3,647,653

Income before 299,940 105,449 596,008 98,982 income tax

Income tax (62,262) (33,793) (126,614) (30,852) expense

Net Income beforenoncontrolling 237,678 71,656 469,394 68,130 interests

Noncontrolling (440) (396) (2,631) (1,288) interest

Net income tocommon $ 237,238 $ 71,260 $ 466,763 $ 66,842 stockholders



Net income per share:

Basic $ 1.28 $ 0.38 $ 2.52 $ 0.36

Diluted $ 1.27 $ 0.38 $ 2.50 $ 0.35



Average shares outstanding (1):

Basic 185,155 185,979 185,175 188,133

Diluted 187,106 187,862 186,985 190,078

(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)

Second Quarter Six Months

2021 2020 2021 2020

Insurance:

Gross premiums $ 2,421,846 $ 1,917,702 $ 4,561,859 $ 3,859,511 written

Net premiums 1,994,212 1,543,157 3,734,036 3,126,475 written

Net premiums 1,727,202 1,465,044 3,332,181 2,949,999 earned

Pre-tax income 291,290 76,546 548,399 252,493

Loss ratio 61.4 % 67.0 % 61.3 % 66.1 %

Expense ratio 28.5 % 30.7 % 28.9 % 31.0 %

GAAP Combined 89.9 % 97.7 % 90.2 % 97.1 %ratio



Reinsurance & Monoline Excess:

Gross premiums $ 239,390 $ 214,544 $ 584,089 $ 504,107 written

Net premiums 217,969 196,661 528,183 459,189 written

Net premiums 244,422 211,871 489,399 418,334 earned

Pre-tax income 74,794 12,566 143,443 49,080

Loss ratio 58.2 % 72.2 % 57.4 % 70.3 %

Expense ratio 30.4 % 32.9 % 30.6 % 32.6 %

GAAP Combined 88.6 % 105.1 % 88.0 % 102.9 %ratio



Corporate and Eliminations:

Net investment $ 24,064 $ 77,885 $ 58,903 $ (99,289) gains (losses)

Interest expense (38,096) (38,373) (74,747) (75,105)

Other revenues (52,112) (23,175) (79,990) (28,197) and expenses

Pre-tax (loss) (66,144) 16,337 (95,834) (202,591) income



Consolidated:

Gross premiums $ 2,661,236 $ 2,132,246 $ 5,145,948 $ 4,363,618 written

Net premiums 2,212,181 1,739,818 4,262,219 3,585,664 written

Net premiums 1,971,624 1,676,915 3,821,580 3,368,333 earned

Pre-tax income 299,940 105,449 596,008 98,982

Loss ratio 61.0 % 67.7 % 60.8 % 66.6 %

Expense ratio 28.7 % 31.0 % 29.1 % 31.2 %

GAAP Combined 89.7 % 98.7 % 89.9 % 97.8 %ratio

(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)

Second Quarter Six Months

2021 2020 2021 2020

Net premiums written:

Other liability $ 720,523 $ 559,727 $ 1,378,301 $ 1,141,371

Short-tail lines 391,778 323,164 716,830 631,053 (1)

Workers' 315,638 273,036 602,362 600,322 compensation

Commercial 279,204 213,063 527,771 418,490 automobile

Professional 287,069 174,167 508,772 335,239 liability

Total Insurance 1,994,212 1,543,157 3,734,036 3,126,475

Casualty 156,216 132,927 331,081 276,388 reinsurance

Monoline excess 23,664 19,571 109,172 94,838

Property 38,089 44,163 87,930 87,963 reinsurance

Total Reinsurance 217,969 196,661 528,183 459,189 & Monoline Excess

Total $ 2,212,181 $ 1,739,818 $ 4,262,219 $ 3,585,664



Current accident year losses from catastrophes (including COVID-19 related losses):

Insurance $ 36,803 $ 114,038 $ 69,632 $ 170,619

Reinsurance & 7,162 31,822 10,162 54,015 Monoline Excess

Total $ 43,965 $ 145,860 $ 79,794 $ 224,634



Net Investment income:

Core portfolio $ 102,961 $ 111,679 $ 203,528 $ 244,727 (2)

Investment funds 61,311 (57,552) 100,246 (16,975)

Arbitrage trading 3,915 31,304 22,989 32,442 account

Total $ 168,187 $ 85,431 $ 326,764 $ 260,194



Net realized andunrealized gains (losses) oninvestments:

Net realizedgains (losses) on $ 38,700 $ (261) $ 114,793 $ 10,921 investments

Change inunrealized (18,239) 61,914 (42,574) (92,553) (losses) gains onequity securities

Total $ 20,461 $ 61,653 $ 72,219 $ (81,632)



Other operatingcosts and expenses:

Policyacquisition andinsurance $ 565,733 $ 519,234 $ 1,111,483 $ 1,051,158 operatingexpenses

Insurance service 21,789 20,423 42,575 42,995 expenses

Net foreign (1,125) (7,382) (6,719) (28,923) currency gains

Debtextinguishment 7,903 - 11,520 - costs

Other costs and 53,405 48,565 105,114 93,943 expenses

Total $ 647,705 $ 580,840 $ 1,263,973 $ 1,159,173



Cash flow from $ 384,819 $ 427,282 $ 695,809 $ 579,851 operations



Reconciliation ofnet income to operating income:

Net income $ 237,238 $ 71,260 $ 466,763 $ 66,842

Pre-taxinvestment(gains) losses, (23,271) (77,785) (56,573) 99,807 net of relatedexpenses

Income tax 5,092 18,077 10,650 (22,585) expense (benefit)

Operating income $ 219,059 $ 11,552 $ 420,840 $ 144,064 after-tax (3)

(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)

June 30, 2021 December 31, 2020



Net invested assets (1) $ 22,315,029 $ 21,370,503

Total assets 30,297,917 28,571,965

Reserves for losses and loss expenses 14,480,947 13,784,430

Senior notes and other debt 1,911,753 1,623,025

Subordinated debentures 1,007,293 1,102,309

Common stockholders' equity (2) 6,578,276 6,310,802

Common stock outstanding (3) 177,414 177,825

Book value per share (4) 37.08 35.49

Tangible book value per share (4) 35.83 34.22

(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 June 30, 2021, reflected in common stockholders' equity are after-tax unrealized investment gains of $223 million and unrealized currency translation losses of $345 million. As of December 31, 2020, after-tax unrealized investment gains were $290 million and unrealized currency translation losses were $352 million.

(3) During the six months ended June 30, 2021, the Company repurchased 465,063 shares of its common stock for $30 million. During the three months ended June 30, 2021, the Company did not repurchase any shares of its common stock. 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

June 30, 2021

(Amounts in thousands, except percentages)

Carrying Value Percent of Total

Fixed maturity securities:

United States government and government $ 502,625 2.3 %agencies

State and municipal:

Special revenue 2,176,388 9.8 %

Local general obligation 452,710 2.0 %

State general obligation 451,588 2.0 %

Pre-refunded 248,137 1.1 %

Corporate backed 165,190 0.8 %

Total state and municipal 3,494,013 15.7 %

Mortgage-backed securities:

Agency 661,323 3.0 %

Commercial 143,586 0.6 %

Residential - Prime 117,488 0.5 %

Residential - Alt A 7,029 0.0 %

Total mortgage-backed securities 929,426 4.1 %

Asset-backed securities 4,317,863 19.4 %

Corporate:

Industrial 3,106,003 13.9 %

Financial 1,633,318 7.3 %

Utilities 423,848 1.9 %

Other 177,494 0.8 %

Total corporate 5,340,663 23.9 %

Foreign government 1,068,918 4.8 %

Total fixed maturity securities (1) 15,653,508 70.2 %

Equity securities available for sale:

Common stocks 449,500 2.0 %

Preferred stocks 193,493 0.9 %

Total equity securities available for sale 642,993 2.9 %

Cash and cash equivalents (2) 2,088,319 9.4 %

Real estate 1,811,263 8.1 %

Investment funds (3) 1,368,661 6.1 %

Arbitrage trading account 634,276 2.8 %

Loans receivable 116,009 0.5 %

Net invested assets $ 22,315,029 100.0 %

(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 $0.8 million.

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