W.R. Berkley Corp Increased Premium Drives Q2 Earnings Beat - Analyst Blog

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W.R. Berkley Corp. ( WRB ) reported second-quarter 2014 core operating earnings of 82 cents per share, beating the Zacks Consensus Estimate by couple of cents. Earnings surged 17.1% year over year. The earnings beat came on the back of growth in premiums written, pricing increases, cost control and a lower share count.

On a GAAP basis, W.R. Berkley Corp.'s net income increased a whopping 64.6% year over year to $1.35 per share.

Revenues came in at $1.80 billion, up 14.4% year over year and significantly above the Zacks Consensus Estimate of $1.62 billion. The year-over-year increase was attributable to higher premiums earned, increased net investment gains and higher income from wholly owned investees, partly offset by lower investment income.

W.R. Berkley Corp.'s net written premium for the quarter was approximately $1.50 billion, reflecting an increase of 11.0% year over year. The company saw growth in its domestic and international insurance operation that was partly offset by a decline in the reinsurance segment.  

W.R. Berkley Corp.'s total expense also increased 8.6% year over year to $1.53 billion, due to an increase in loss and loss expenses, other operating costs and higher expenses from wholly owned investees. The increase was partly offset by lower interest expenses.

Consolidated combined ratio (a measure of underwriting profitability) improved 220 basis points year over year to 94.4%. 

Segment Details

Net premiums written in W.R. Berkley Corp.'s Domestic Insurance segment increased 16.1% year over year to $1.12 billion. All lines - Other liability, Workers Compensation, Short-tail lines, commercial automobile as well as professional liability -- led to the rise.  Combined ratio improved 220 basis points year over year to 93.2% in the quarter. The segment incurred catastrophe loss of $38.4 million compared with $26.7 million in the year ago quarter. 

Net premiums written in the Internationa l Insurance segment increased 10.5% year over year to $222.6 million. Combined ratio improved 40 bps year over year to 99.5%. Catastrophe loss in the segment was $0.3 million, much lower than $3.2 million in the year-ago quarter. 

The Global Reinsurance segment reported a 17.0% decline in net premiums written to $143.3 million in the quarter. Combined ratio improved 370 bps year over year to 95.3%.

Financial Update

W.R. Berkley Corp.'s return on equity improved to 16.6% from 10.8% in the year-ago quarter.

Book value per share increased to $36.2 as of Jun 30, 2014, up 10.4% from year-end 2013.

During the reported quarter, W.R. Berkley Corp. spent $4.6 million on share buyback.

Our Take

W.R. Berkley Corp.'s second-quarter earnings marks the fourth quarter of positive earnings surprise in a row. We expect the company to keep delivering strong results, given the improving industry fundamentals. 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 accretive to earnings. Average renewal rates are on the rise and so is the price trend.

W.R. Berkley Corp.'s balance sheet, which is adequately capitalized, is a key strength. The company has also maintained its practice of increasing yearly dividends. In our view, the company is well poised to return value to its shareholders over the long term.

W.R. Berkley Corp. carries a Zacks Rank #3 (Hold). 

Peer Performance

Other property & casualty insurers which have reported ahead of estimates include Assurant Inc. ( AIZ ), ACE Limited ( ACE ) and Aspen Insurance Holdings Ltd. ( AHL ).


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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: WR , WRB , ACE , AIZ , AHL

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