EX-99.1 2 wrb630178kex991.htm EARNINGS PRESS RELEASE JUNE 30, 2017 Exhibit
 
 
 
 
NEWS
RELEASE
 
W. R. Berkley Corporation
475 Steamboat Road
Greenwich, Connecticut 06830
(203) 629-3000
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 FOR IMMEDIATE RELEASE
 
 
CONTACT: 
 
Karen A. Horvath
 
 
 
 
 
 
Vice President - External
 
 
 
 
 
 
Financial Communications
 
 
 
 
 
 
(203) 629-3000
             

W. R. BERKLEY CORPORATION REPORTS SECOND QUARTER RESULTS
Net Income of $109 Million

Greenwich, CT, July 25, 2017 -- W. R. Berkley Corporation (NYSE: WRB) today reported net income for the second quarter of 2017 of $109 million, or $0.85 per share.

Summary Financial Data
(Amounts in thousands, except per share data)
 
 
Second Quarter
 
Six Months
 
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
 
Gross premiums written
 
$
1,887,152

 
$
1,939,365

 
$
3,823,359

 
$
3,895,062

Net premiums written
 
1,564,251

 
1,642,569

 
3,211,089

 
3,306,291

 
 
 
 
 
 
 
 
 
Net income to common stockholders
 
109,004

 
108,967

 
232,451

 
228,477

Net income per diluted share
 
0.85

 
0.85

 
1.81

 
1.78

 
 
 
 
 
 
 
 
 
Return on equity (1)
 
8.6
%
 
9.5
%
 
9.2
%
 
9.9
%

(1)
Return on equity represents net income expressed on an annualized basis as a percentage of beginning of year stockholders’ equity.




W. R. Berkley Corporation     Page 2

Second quarter highlights included:

•
Pre-tax return on equity was 12.7%.

•
Total capital returned to shareholders was $78 million, including $61 million of special dividends.

•
Before ordinary and special dividends, book value per share grew 3.5%.

•
The combined ratio was 95.1%, inclusive of 2.1 loss ratio points from catastrophes and 0.7 loss ratio points from non-catastrophe weather.

•
Investment income increased 4.8%.

•
Net realized investment gains were $40 million pre-tax and $26 million, or $0.20 per share, after-tax.

•
We established a surety and specialty commercial insurance business in Mexico.


The Company commented:
We continue to manage our business with a focus on creating long-term value for our shareholders. In the second quarter of 2017, book value grew at an annualized rate of 14% before dividends, and we declared a $0.50 special dividend to shareholders.
Market conditions are increasingly competitive, especially in the reinsurance business. We are willing to sacrifice growth in order to achieve underwriting profits and adequate returns. The combined ratio of 95.1%, including 2.8 points from weather-related losses, remained stable despite the competitive environment. We continue to see new opportunities in specialized areas.
Investment income, including realized gains, grew 30% year-over-year to $176 million. While our total return approach in our portfolio has resulted in more variability from quarter to quarter, it has provided improved returns overall. We expect the previously announced pre-tax gain of approximately $120 million from the sale of a real estate investment to contribute to our third quarter results.
Over the past five years, growth in book value per share before dividends and share repurchases has averaged 12%. Our focus continues to be on delivering value to shareholders through building book value as well as returning excess capital to shareholders.
Webcast Conference Call
The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on July 25, 2017, at 5:00 p.m. eastern time. The conference call will be webcast live on the Company's website at http://www.wrberkley.com/investor-relations/events-and-presentations.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.
About W. R. Berkley Corporation
Celebrating 50 years, 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.    



W. R. Berkley Corporation     Page 3

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 2017 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 alternative 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; natural and man-made catastrophic losses, including as a result of terrorist activities; 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 expected 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 2015; the ability 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 data security; 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 2017 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.


# # #



W. R. Berkley Corporation     Page 4

 


Consolidated Financial Summary
(Amounts in thousands, except per share data)

 
 
Second Quarter
 
Six Months
 
 
2017
 
2016
 
2017
 
2016
Revenues:
 
 
 
 
 
 
 
 
Net premiums written
 
$
1,564,251

 
$
1,642,569

 
$
3,211,089

 
$
3,306,291

Change in unearned premiums
 
4,452

 
(82,776
)
 
(72,345
)
 
(219,163
)
Net premiums earned
 
1,568,703

 
1,559,793

 
3,138,744

 
3,087,128

Net investment income
 
135,264

 
129,049

 
284,123

 
259,182

  Net realized investment gains
 
40,453

 
6,315

 
92,801

 
31,772

Other than temporary impairments
 
—

 
—

 
—

 
(18,114
)
Revenues from non-insurance businesses (1)
 
69,857

 
123,764

 
135,247

 
225,544

Insurance service fees
 
33,584

 
36,939

 
66,864

 
77,301

Other income
 
188

 
54

 
688

 
312

Total revenues
 
1,848,049

 
1,855,914

 
3,718,467

 
3,663,125

Expenses:
 
 
 
 
 
 
 
 
Losses and loss expenses
 
964,698

 
964,162

 
1,944,302

 
1,886,483

Other operating costs and expenses
 
616,632

 
581,955

 
1,220,332

 
1,164,414

Expenses from non-insurance businesses (1)
 
68,959

 
116,731

 
134,978

 
212,262

Interest expense
 
36,799

 
34,752

 
73,597

 
66,976

Total expenses
 
1,687,088

 
1,697,600

 
3,373,209

 
3,330,135

Income before income taxes
 
160,961

 
158,314

 
345,258

 
332,990

Income tax expense
 
(51,388
)
 
(49,408
)
 
(111,011
)
 
(103,837
)
Net income before noncontrolling interests
 
109,573

 
108,906

 
234,247

 
229,153

Noncontrolling interests
 
(569
)
 
61

 
(1,796
)
 
(676
)
Net income to common stockholders
 
$
109,004

 
$
108,967

 
$
232,451

 
$
228,477

 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
Basic
 
$
0.87

 
$
0.89

 
$
1.88

 
$
1.86

Diluted
 
$
0.85

 
$
0.85

 
$
1.81

 
$
1.78

 
 
 
 
 
 
 
 
 
Average shares outstanding (2):
 
 
 
 
 
 
 
 
Basic
 
125,334

 
122,616
 
123,623

 
122,698
Diluted
 
128,601

 
128,575
 
128,546

 
128,562


(1) Revenues and expenses from non-insurance businesses declined because of the sale of a wholly-owned investment, Aero Precision Industries, and certain related aviation services businesses in August 2016.
 
(2) Basic shares outstanding consists of the weighted average number of common shares outstanding during the period (including shares held in a grantor trust established in March 2017). Diluted shares outstanding consists of the weighted average number of basic and common equivalent shares outstanding during the period.

W. R. Berkley Corporation     Page 5

Business Segment Operating Results
(Amounts in thousands, except ratios) (1) (2)

 
 
Second Quarter
 
Six Months
 
 
2017
 
2016
 
2017
 
2016
Insurance:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
1,745,734

 
$
1,743,290

 
$
3,515,139

 
$
3,495,321

Net premiums written
 
1,438,169

 
1,463,751

 
2,932,303

 
2,942,958

Premiums earned
 
1,415,586

 
1,390,744

 
2,828,755

 
2,757,350

Pre-tax income
 
186,134

 
176,500

 
386,127

 
376,153

Loss ratio
 
61.1
%
 
61.9
%
 
61.0
%
 
61.2
%
Expense ratio
 
33.0
%
 
32.3
%
 
33.0
%
 
32.4
%
GAAP combined ratio
 
94.1
%
 
94.2
%
 
94.0
%
 
93.6
%
 
 
 
 
 
 
 
 
 
Reinsurance:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
141,418

 
$
196,077

 
$
308,220

 
$
399,741

Net premiums written
 
126,082

 
178,818

 
278,786

 
363,333

Premiums earned
 
153,117

 
169,049

 
309,989

 
329,778

Pre-tax income
 
14,771

 
23,834

 
19,364

 
51,816

Loss ratio
 
65.2
%
 
60.9
%
 
70.6
%
 
60.1
%
Expense ratio
 
39.2
%
 
40.0
%
 
38.1
%
 
39.2
%
GAAP combined ratio
 
104.4
%
 
100.9
%
 
108.7
%
 
99.3
%
 
 
 
 
 
 
 
 
 
Corporate and Eliminations:
 
 
 
 
 
 
 
 
  Net realized investment gains
 
$
40,453

 
$
6,315

 
$
92,801

 
$
13,658

  Interest expense
 
(36,799
)
 
(34,752
)
 
(73,597
)
 
(66,976
)
  Other revenues and expenses
 
(43,598
)
 
(13,583
)
 
(79,437
)
 
(41,738
)
  Pre-tax loss
 
(39,944
)
 
(42,020
)
 
(60,233
)
 
(95,056
)
 
 
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
 
  Gross premiums written
 
$
1,887,152

 
$
1,939,365

 
$
3,823,359

 
$
3,895,062

  Net premiums written
 
1,564,251

 
1,642,569

 
3,211,089

 
3,306,291

  Premiums earned
 
1,568,703

 
1,559,793

 
3,138,744

 
3,087,128

  Pre-tax income
 
160,961

 
158,314

 
345,258

 
332,990

  Loss ratio
 
61.5
%
 
61.8
%
 
61.9
%
 
61.1
%
  Expense ratio
 
33.6
%
 
33.1
%
 
33.5
%
 
33.1
%
  GAAP combined ratio
 
95.1
%
 
94.9
%
 
95.4
%
 
94.2
%


(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.

(2) Commencing with the first quarter of 2017, the Company reclassified two businesses from the Insurance segment to the Reinsurance segment. Reclassifications have been made to the Company's 2016 financial information to conform with this presentation.










W. R. Berkley Corporation     Page 6



Supplemental Information
(Amounts in thousands)
 
Second Quarter
 
Six Months
 
2017
 
2016
 
2017
 
2016
Net premiums written: 
 
 
 
 
 
 
 
  Other liability
$
478,595

 
$
491,904

 
$
915,041

 
$
936,369

  Workers' compensation
372,006

 
345,475

 
798,563

 
745,382

  Short-tail lines (1)
282,607

 
322,291

 
608,320

 
669,530

  Commercial automobile
171,449

 
167,277

 
337,013

 
326,278

  Professional liability
133,512

 
136,804

 
273,366

 
265,399

    Total Insurance
1,438,169

 
1,463,751

 
2,932,303

 
2,942,958

  Casualty reinsurance
86,386

 
108,387

 
179,927

 
212,447

  Property reinsurance
39,696

 
70,431

 
98,859

 
150,886

     Total Reinsurance
126,082

 
178,818

 
278,786

 
363,333

          Total
$
1,564,251

 
$
1,642,569

 
$
3,211,089

 
$
3,306,291

 
 
 
 
 
 
 
 
Losses from catastrophes:
 
 
 
 
 
 
 
  Insurance
$
32,540

 
$
32,609

 
$
46,844

 
$
47,706

  Reinsurance
429

 
7,901

 
623

 
8,440

    Total
$
32,969

 
$
40,510

 
$
47,467


$
56,146

 
 
 
 
 

 
 
Net investment income:
 
 
 
 
 
 
 
  Core portfolio (2)
$
120,912

 
$
107,341

 
$
236,761

 
$
217,647

  Investment funds
8,895

 
18,456

 
35,544

 
35,093

  Arbitrage trading account
5,457

 
3,252

 
11,818

 
6,442

    Total
$
135,264

 
$
129,049

 
$
284,123

 
$
259,182

 
 
 
 
 
 
 
 
Other operating costs and expenses:
 
 
 
 
 
 
 
  Policy acquisition and insurance operating expenses
$
527,707

 
$
516,287

 
$
1,051,116

 
$
1,021,542

  Insurance service expenses
34,923

 
37,628

 
64,856

 
71,426

  Net foreign currency losses (gains)
6,968

 
(13,084
)
 
12,477

 
(9,356
)
  Other costs and expenses
47,034

 
41,124

 
91,883

 
80,802

    Total
$
616,632

 
$
581,955

 
$
1,220,332

 
$
1,164,414

 
 
 
 
 
 
 
 
Cash flow from operations
$
115,960

 
$
191,550

 
$
191,432

 
$
332,318


(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.

W. R. Berkley Corporation     Page 7

Selected Balance Sheet Information
(Amounts in thousands, except per share data)

 
June 30,
 2017
 
December 31, 2016
 
 
 
 
Net invested assets (1)
$
18,128,720

 
$
17,857,006

Total assets
23,993,491

 
23,350,076

Reserves for losses and loss expenses
11,324,267

 
11,197,195

Senior notes and other debt
1,759,115

 
1,760,595

Subordinated debentures
727,924

 
727,630

Common stockholders’ equity (2)
5,286,518

 
5,047,208

Common stock outstanding (3)
121,271

 
121,194

Book value per share (4)
43.59

 
41.65

Tangible book value per share (4)
41.69

 
40.06


(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)
After-tax unrealized investment gains were $462 million and $427 million as of June 30, 2017 and December 31, 2016, respectively. Unrealized currency translation losses were $329 million and $372 million as of June 30, 2017 and December 31, 2016, respectively.
(3)
During the three and six months ended June 30, 2017, 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.


W. R. Berkley Corporation     Page 8

Investment Portfolio
June 30, 2017
(Amounts in thousands)
 
 
Carrying
Value
 
Percent
of Total
Fixed maturity securities:
 
 
 
 
United States government and government agencies
 
$
443,951

 
2.4
%
State and municipal:
 
 
 
 
Special revenue
 
2,866,475

 
15.8
%
State general obligation
 
527,378

 
2.9
%
Corporate backed
 
394,302

 
2.2
%
Local general obligation
 
384,738

 
2.1
%
Pre-refunded
 
334,849

 
1.9
%
Total state and municipal
 
4,507,742

 
24.9
%
Mortgage-backed securities:
 
 
 
 
Agency
 
765,931

 
4.2
%
Residential - Prime
 
226,096

 
1.2
%
      Commercial
 
189,661

 
1.0
%
Residential - Alt A
 
24,973

 
0.2
%
Total mortgage-backed securities
 
1,206,661

 
6.6
%
Asset-backed securities
 
2,192,030

 
12.1
%
Corporate:
 
 
 
 
Industrial
 
2,465,541

 
13.6
%
Financial
 
1,488,796

 
8.2
%
Utilities
 
267,926

 
1.5
%
Other
 
49,139

 
0.3
%
Total corporate
 
4,271,402

 
23.6
%
Foreign government
 
892,299

 
4.9
%
Total fixed maturity securities (1)
 
13,514,085

 
74.5
%
Equity securities available for sale:
 
 
 
 
Common stocks
 
447,600

 
2.5
%
Preferred stocks
 
165,207

 
0.9
%
Total equity securities available for sale
 
612,807

 
3.4
%
Real Estate
 
1,317,089

 
7.3
%
Investment funds (2)
 
1,188,897

 
6.6
%
Cash and cash equivalents (3)
 
765,762

 
4.2
%
Arbitrage trading account
 
634,016

 
3.5
%
Loans receivable
 
96,064

 
0.5
%
Net invested assets
 
$
18,128,720


100.0
%
(1)
Total fixed maturity securities had an average rating of AA- and an average duration of 3.0 years, including cash and cash equivalents.
(2)
Investment funds are net of related liabilities of $2.1 million.
(3)
Cash and cash equivalents includes trading accounts receivable from brokers and clearing organizations, trading account securities sold but not yet purchased and unsettled purchases.

W. R. Berkley Corporation     Page 9

Foreign Government Fixed Maturity Securities
June 30, 2017
(Amounts in thousands)

 
 
Carrying Value
Argentina
 
$
241,242

Australia
 
221,199

Canada
 
165,253

United Kingdom
 
82,870

Brazil
 
49,075

Germany
 
47,367

Supranational (1)
 
35,004

Norway
 
20,084

Singapore
 
15,800

Colombia
 
7,484

Uruguay
 
6,921

Total
 
$
892,299


(1)
Supranational represents investments in the North American Development Bank, European Investment Bank and International Bank for Reconstruction & Development.