Q4 Earnings Beat at W.R. Berkley - Analyst Blog

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Property and casualty insurer W.R. Berkley Corp. ( WRB ) reported fourth-quarter 2013 core operating earnings of 85 cents per share, 8 cents ahead of the Zacks Consensus Estimate. Earnings were also up by 33% year over year.

The earnings beat came on the back of higher premiums written, pricing increases outpacing loss cost trends and a lower share count.

On a GAAP basis, W.R. Berkley's net income decreased 20.5% year over year to 93 cents per share.

Revenues came in at $1.70 billion, up 5.5% year over year and significantly above the Zacks Consensus Estimate of $1.55 billion. The year-over-year increase was attributable to higher premiums earned and higher income from wholly-owned investees.

W.R. Berkley's net written premium for the quarter was approximately $1.36 billion, an increase of 10.5% year over year. The company saw broad-based growth with each of its operating segments reporting higher premium.

W.R. Berkley's total expense also increased 10.1% year over year to $1.51 billion, due to an increase in loss and loss expenses, other operating costs and higher expenses from wholly-owned investees, partly offset by lower interest expenses.

Consolidated combined ratio improved 300 basis points (bps) year over year to 95.1%.

Full Year Details

For full year 2013, the company reported earnings of $3.06 per share, up 17.2% year over year and above the Zacks Consensus Estimate of $2.97 per share.

Total revenue amounted to $6.4 billion, surpassing the Zacks Consensus Estimate of $6.0 billion and the prior-year figure by 10.0%.

Segment Details

Net premiums written in W.R. Berkley's Domestic Insurance segment increased 14.0% year over year to $986 million. Combined ratio improved 280 bps to 92.8% in the quarter.

Net premiums written in the International Insurance segment inched up 1.4% year over year to $183.5 million. Combined ratio improved 100 bps year over year to 102.4%.

The Global Reinsurance segment reported a 3.5% increase in net premiums written to $188.2 million in the quarter. Combined ratio improved 510 bps year over year to 100.2%.

Financial Update

W.R. Berkley's return on equity decreased to 12.1% from 16.7% in the year-ago quarter.

Book value per share increased to $31.74 as of Dec 31, 2013, up 2.6% year over year.

During the reported quarter, W.R. Berkley spent $127 million on share buybacks.

Our Take

W.R. Berkley has reported better-than-expected earnings results in the past several quarters. The company has maintained this winning streak in the reported quarter as well. We expect the trend to continue in 2014. The company has positioned itself well to take advantage of hardening in the insurance market by forming several new units over the past few years. Premiums written for its core business have increased and the new units are accruing to earnings. Average renewal rates are on the rise and so is the price trend.

Moreover, W.R. Berkley's balance sheet, which is adequately capitalized, is a major strength. The company has also duly maintained its practice of increasing yearly dividends.

W.R. Berkley currently holds a Zacks Rank #4 (Sell).

Other better-ranked property & casualty stocks like Aspen Insurance Holdings Ltd. ( AHL ), The Chubb Corp. ( CB ), Platinum Underwriters Holdings Ltd. ( PTP ) - all with a Zacks Rank #1 (Strong Buy) and positive Earnings ESP of  3.57%, 0.49% and 10.7%, respectively - are worth considering.



ASPEN INS HLDGS (AHL): Free Stock Analysis Report

CHUBB CORP (CB): Free Stock Analysis Report

PLATINUM UNDRWT (PTP): Free Stock Analysis Report

BERKLEY (WR) CP (WRB): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: AHL , CB , PTP , WR , WRB

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