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W. R. Berkley (WRB) to Report Q2 Earnings: What's in Store?

W. R. Berkley Corporation WRB is slated to report second-quarter 2020 results on Jul 21, after market close. The company delivered a negative earnings surprise of 2.82% in the last reported quarter.

Let’s see how things have shaped up for this announcement.

Factors to Consider    

W. R. Berkley is likely to have benefited from higher premiums derived from its insurance and international businesses in the to-be-reported quarter. Renewal retention ratio is likely to have been healthy. Despite the pandemic inducing economic downturn, the company estimates net premiums written in the second quarter of 2020 to be flat year over year. The Zacks Consensus Estimate for first-quarter 2020 premiums earned is pegged at $1.7 billion, indicating an increase of 4.8% from the year-ago quarter reported figure.

Net investment income is expected to have remained under pressure, given a low interest rate environment. The consensus estimate is pegged at $88 million, implying a 57.4% drop from the year-ago quarter’s reported figure.

The Zacks Consensus Estimate for second-quarter 2020 revenues is pegged at $1.9 billion, indicating an improvement of 2.6% from the prior-year quarter reported figure.

The insurer estimates net catastrophe losses of $145 million, pre-tax in the to-be-reported quarter. The loss primarily constitutes $85 million due to the COVID-19 pandemic, $20 million for losses related to civil unrest and $40 million from severe weather-related events in the United States.

Nonetheless, underwriting results are expected to reflect better pricing. The company witnessed increase in loss costs and accelerated price hikes in the first quarter and these are expected to have continued in the second quarter. Excluding workers' compensation, the company stated that average rate increases in the second quarter of 2020 was about 13%.

Thus, W. R. Berkley projects a modest underwriting profit in the to-be-reported quarter.

Expense ratio is likely to have deteriorated due to the pandemic. Expenses are likely to have risen due to higher losses and loss expenses as well as expenses from the non-insurance business.

The company estimates a considerable decline in energy and transportation funds reflecting market downturn.

The Zacks Consensus Estimate for second-quarter 2020 earnings per share is pegged at 40 cents, indicating a decline of 51.2% from the year-ago quarter’s reported figure.

W.R. Berkley Corporation Price and EPS Surprise

W.R. Berkley Corporation Price and EPS Surprise

W.R. Berkley Corporation price-eps-surprise | W.R. Berkley Corporation Quote

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for W. R. Berkley this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.. That’s is not the case as you can see below.

Earnings ESP: W. R. Berkley has an Earnings ESP of -24.53%. This is because the Most Accurate Estimate of 30 cents is pegged lower than the Zacks Consensus Estimate of 40 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: W. R. Berkley currently carries a Zacks Rank of 3.

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

AXIS Capital Holdings Limited AXS has an Earnings ESP of +2.70% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Selective Insurance Group SIGI has an Earnings ESP of +13.21% and a Zacks Rank #3.

CNA Financial Corporation CNA has an Earnings ESP of +19.57% and a Zacks Rank of 3.

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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 Nasdaq, Inc.

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