Business Wire | Oct 21, 2021 04:10PM EDT

W. R. Berkley Corporation Reports Third Quarter Results

Oct. 21, 2021

GREENWICH, Conn.--(BUSINESS WIRE)--Oct. 21, 2021--W. R. Berkley Corporation (NYSE: WRB) today reported its third quarter 2021 results.

Summary Financial Data

(Amounts in thousands, except per share data)

Third Quarter Nine Months

2021 2020 2021 2020



Gross premiums $ 2,787,499 $ 2,262,545 $ 7,933,446 $ 6,626,163 written

Net premiums 2,325,138 1,879,316 6,587,357 5,464,980 written



Net income tocommon 261,297 151,678 728,060 218,520 stockholders

Net income per 1.40 0.81 3.89 1.15 diluted share



Operating income 246,699 121,146 667,539 265,210 (1)

Operating income 1.32 0.65 3.57 1.40 per diluted share



Return on equity 16.6 % 10.0 % 15.4 % 4.8 %(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.

Third quarter highlights included:

* Return on equity of 16.6%. * Net premiums written increased 23.7%. * The current accident year combined ratio before catastrophe losses of 3.5 loss ratio points was 86.9%. * The reported combined ratio was 90.4%, including catastrophe losses of $73.8 million. * Average rate increases excluding workers' compensation were approximately 10.1%. * Net investment income increased 26.1% to $179.9 million. * Operating income increased 103.6% to $246.7 million. * Total capital returned to shareholders was $115.8 million, consisting of $92.7 million of share repurchases and $23.1 million of dividends.

The Company commented:

The Company had another outstanding quarter with 24% growth in net premiums written, a combined ratio of 90.4%, and an annualized return on equity of 16.6%. These results were achieved in spite of significant industry catastrophe losses and low interest rates.

Overall rate increases remained robust in nearly all lines of business, and we expect this to continue for the foreseeable future. We see expanding opportunities to write business at attractive underwriting margins, given the strong commercial property and casualty pricing environment. The increasing focus that distribution partners and clients are placing on stable markets with balance sheet strength and expertise, particularly in specialty and E&S lines, is also contributing to growth.

Underwriting income increased 80% in the quarter. We expect that exposure growth and compounding rate achievement will contribute to additional underwriting profits as premiums are fully earned. While we maintain a high-quality short-duration fixed-maturity portfolio, investment income grew 26% in the quarter as investment funds delivered another strong performance.

The Company is performing well as we remain focused on our total risk-adjusted return strategy. Opportunities like the current environment are infrequent in the property casualty insurance market, and we are striving to make the most of it.

Webcast Conference Call

The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on October 21, 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)

Third Quarter Nine Months

2021 2020 2021 2020

Revenues:

Net premiums $ 2,325,138 $ 1,879,316 $ 6,587,357 $ 5,464,980 written

Change in (244,120) (130,395) (684,759) (347,727) unearned premiums

Net premium 2,081,018 1,748,921 5,902,598 5,117,253 earned

Net investment 179,851 142,650 506,615 402,844 income

Net investment gains (losses):

Net realized andunrealized gains 17,187 (7,772) 89,407 (89,404) (losses) oninvestments

Change inallowance for 2,314 46,750 (11,003) 29,093 credit losses oninvestments

Net investment 19,501 38,978 78,404 (60,311) gains (losses)

Revenues fromnon-insurance 120,374 87,495 316,927 256,966 businesses

Insurance service 21,467 21,635 69,531 67,256 fees

Other Income 2,072 140 3,163 2,446

Total Revenues 2,424,283 2,039,819 6,877,238 5,786,454

Expenses:

Loss and loss 1,298,392 1,114,632 3,623,630 3,357,011 expenses

Other operatingcosts and 643,045 593,969 1,907,020 1,753,142 expenses

Expenses fromnon-insurance 115,465 85,036 308,453 256,032 businesses

Interest expense 35,100 39,768 109,846 114,874

Total expenses 2,092,002 1,833,405 5,948,949 5,481,059

Income before 332,281 206,414 928,289 305,395 income tax

Income tax (64,963) (54,048) (191,577) (84,900) expense

Net Income beforenoncontrolling 267,318 152,366 736,712 220,495 interests

Noncontrolling (6,021) (688) (8,652) (1,975) interest

Net income tocommon $ 261,297 $ 151,678 $ 728,060 $ 218,520 stockholders



Net income per share:

Basic $ 1.41 $ 0.82 $ 3.93 $ 1.17

Diluted $ 1.40 $ 0.81 $ 3.89 $ 1.15



Average shares outstanding (1):

Basic 185,031 185,765 185,127 187,338

Diluted 186,742 187,717 187,060 189,515

(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)

Third Quarter Nine Months

2021 2020 2021 2020

Insurance:

Gross premiums $ 2,446,758 $ 1,981,816 $ 7,008,617 $ 5,841,328 written

Net premiums 2,007,194 1,628,316 5,741,229 4,754,791 written

Net premiums 1,819,071 1,531,093 5,151,253 4,481,092 earned

Pre-tax income 314,000 178,971 862,399 431,464

Loss ratio 61.4 % 64.4 % 61.4 % 65.5 %

Expense ratio 27.9 % 29.7 % 28.5 % 30.6 %

GAAP Combined 89.3 % 94.1 % 89.9 % 96.1 %ratio



Reinsurance & Monoline Excess:

Gross premiums $ 340,740 $ 280,729 $ 924,829 $ 784,835 written

Net premiums 317,945 251,000 846,128 710,189 written

Net premiums 261,947 217,828 751,345 636,161 earned

Pre-tax income 52,742 61,532 196,185 110,611

Loss ratio 69.3 % 59.1 % 61.5 % 66.5 %

Expense ratio 29.1 % 31.2 % 30.1 % 32.1 %

GAAP Combined 98.4 % 90.3 % 91.6 % 98.6 %ratio



Corporate and Eliminations:

Net investment $ 19,501 $ 38,978 $ 78,404 $ (60,311) gains (losses)

Interest expense (35,100) (39,768) (109,846) (114,874)

Other revenues (18,862) (33,299) (98,853) (61,495) and expenses

Pre-tax loss (34,461) (34,089) (130,295) (236,680)



Consolidated:

Gross premiums $ 2,787,499 $ 2,262,545 $ 7,933,446 $ 6,626,163 written

Net premiums 2,325,138 1,879,316 6,587,357 5,464,980 written

Net premiums 2,081,018 1,748,921 5,902,598 5,117,253 earned

Pre-tax income 332,281 206,414 928,289 305,395

Loss ratio 62.4 % 63.7 % 61.4 % 65.6 %

Expense ratio 28.0 % 30.0 % 28.7 % 30.8 %

GAAP Combined 90.4 % 93.7 % 90.1 % 96.4 %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)

Third Quarter Nine Months

2021 2020 2021 2020

Net premiums written:

Other liability $ 760,515 $ 606,967 $ 2,138,816 $ 1,748,338

Short-tail lines 373,427 343,888 1,090,257 974,941 (1)

Workers' 277,490 257,629 879,852 857,951 compensation

Commercial 295,132 230,352 822,903 648,842 automobile

Professional 300,629 189,480 809,401 524,719 liability

Total Insurance 2,007,194 1,628,316 5,741,229 4,754,791

Casualty 194,253 142,847 525,333 419,235 reinsurance

Monoline excess 75,504 59,267 184,676 154,105

Property 48,189 48,886 136,118 136,849 reinsurance

Total Reinsurance 317,945 251,000 846,128 710,189 & Monoline Excess

Total $ 2,325,138 $ 1,879,316 $ 6,587,357 $ 5,464,980



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

Insurance $ 39,230 $ 74,038 $ 108,863 $ 244,657

Reinsurance & 34,560 (1,282) 44,722 52,733 Monoline Excess

Total $ 73,790 $ 72,756 $ 153,585 $ 297,390



Net Investment income:

Core portfolio $ 103,372 $ 104,872 $ 306,901 $ 349,598 (2)

Investment funds 69,292 18,235 169,538 1,260

Arbitrage trading 7,187 19,543 30,176 51,986 account

Total $ 179,851 $ 142,650 $ 506,615 $ 402,844



Net realized andunrealized gains (losses) oninvestments:

Net realizedgains (losses) on $ 36,431 $ (38,466) $ 151,225 $ (27,545) investments

Change inunrealized (19,244) 30,694 (61,818) (61,859) (losses) gains onequity securities

Total $ 17,187 $ (7,772) $ 89,407 $ (89,404)



Other operatingcosts and expenses:

Policyacquisition andinsurance $ 583,065 $ 523,349 $ 1,694,548 $ 1,574,507 operatingexpenses

Insurance service 21,243 21,034 63,817 64,029 expenses

Net foreigncurrency (gains) (12,497) 5,078 (19,216) (23,845) losses

Debtextinguishment - - 11,521 - costs

Other costs and 51,234 44,508 156,350 138,451 expenses

Total $ 643,045 $ 593,969 $ 1,907,020 $ 1,753,142



Cash flow from $ 828,585 $ 557,094 $ 1,524,394 $ 1,136,945 operations



Reconciliation ofnet income to operating income:

Net income $ 261,297 $ 151,678 $ 728,060 $ 218,520

Pre-taxinvestment(gains) losses, (18,820) (39,497) (75,393) 60,311 net of relatedexpenses

Income tax 4,222 8,965 14,872 (13,621) expense (benefit)

Operating income $ 246,699 $ 121,146 $ 667,539 $ 265,210 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)

September 30, 2021 December 31, 2020



Net invested assets (1) $ 23,292,268 $ 21,370,503

Total assets 31,544,288 28,571,965

Reserves for losses and loss expenses 14,919,576 13,784,430

Senior notes and other debt 2,258,646 1,623,025

Subordinated debentures 1,007,472 1,102,309

Common stockholders' equity (2) 6,648,441 6,310,802

Common stock outstanding (3) 176,639 177,825

Book value per share (4) 37.64 35.49

Tangible book value per share (4) 36.39 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 September 30, 2021, reflected in common stockholders' equity are after-tax unrealized investment gains of $187 million and unrealized currency translation losses of $378 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 nine months ended September 30, 2021, the Company repurchased 1,752,619 shares of its common stock for $122 million. During the three months ended September 30, 2021, the Company repurchased 1,287,556 shares of its common stock for $93 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

September 30, 2021

(Amounts in thousands, except percentages)

Carrying Value Percent of Total

Fixed maturity securities:

United States government and government $ 518,333 2.2 %agencies

State and municipal:

Special revenue 2,110,271 9.1 %

State general obligation 447,320 1.9 %

Local general obligation 431,522 1.9 %

Pre-refunded 230,840 1.0 %

Corporate backed 177,916 0.7 %

Total state and municipal 3,397,869 14.6 %

Mortgage-backed securities:

Agency 681,798 2.9 %

Residential - Prime 159,826 0.7 %

Commercial 130,637 0.6 %

Residential - Alt A 6,326 0.0 %

Total mortgage-backed securities 978,587 4.2 %

Asset-backed securities 4,655,555 20.0 %

Corporate:

Industrial 3,132,362 13.5 %

Financial 1,699,840 7.3 %

Utilities 418,853 1.8 %

Other 173,009 0.7 %

Total corporate 5,424,064 23.3 %

Foreign government 1,098,727 4.7 %

Total fixed maturity securities (1) 16,073,135 69.0 %

Equity securities available for sale:

Common stocks 609,939 2.6 %

Preferred stocks 208,799 0.9 %

Total equity securities available for sale 818,738 3.5 %

Cash and cash equivalents (2) 2,182,020 9.4 %

Real estate 1,842,400 7.9 %

Investment funds (3) 1,400,140 6.0 %

Arbitrage trading account 860,339 3.7 %

Loans receivable 115,496 0.5 %

Net invested assets $ 23,292,268 100.0 %

(1) Total fixed maturity securities had an average rating of AA- and an average duration of 2.3 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211021006008/en/

CONTACT: Karen A. Horvath Vice President - External Financial Communications (203) 629-3000