EX-99.1 2 wrb93020198-kex991.htm 8-K 3Q19 EXHIBIT 99.1 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 THIRD QUARTER RESULTS
Gross Premiums Written Up 8.6%; Return on Equity of 12.2%

Greenwich, CT, October 22, 2019 - W. R. Berkley Corporation (NYSE: WRB)
today reported net income for the third quarter of 2019 of $165 million, or $0.85 per share.


Summary Financial Data
(Amounts in thousands, except per share data)
 
 
Third Quarter
 
Nine Months
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Gross premiums written
 
$
2,093,050

 
$
1,927,785

 
$
6,229,141

 
$
5,855,280

Net premiums written
 
1,749,906

 
1,624,214

 
5,202,971

 
4,913,656

 
 
 
 
 
 
 
 
 
Net income to common stockholders
 
165,208

 
161,920

 
562,638

 
508,392

Net income per diluted share (1)
 
0.85

 
0.84

 
2.91

 
2.64

 
 
 
 
 
 
 
 
 
Return on equity (2)
 
12.2
%
 
12.0
%
 
13.8
%
 
12.5
%


(1)
2018 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.
(2)
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

Third quarter highlights included:

•Gross and net premiums written increased 8.6% and 7.7%, respectively.
•Average rate increases excluding workers' compensation were more than 7%.
•Underwriting income increased 61.1% to $107 million.
•Annualized after-tax return on equity was 12.2% (pre-tax of 14.9%).
•
The accident year combined ratio excluding catastrophe losses was 91.9%. The reported combined ratio was 93.6%, inclusive of 1.9 loss ratio points from catastrophes.
•
For the nine months ended, book value per share grew 13.7%, before dividends.


The Company commented:
The Company continued its strong performance in the third quarter of 2019 with a 12.2% annualized after-tax return on equity.
Growing opportunities presented by current market conditions, including accelerating rate increases in all lines of business except workers’ compensation, drove growth in premiums written. We continue to focus on lines of business that have the potential to meet or exceed our targeted risk-adjusted return and have been carefully monitoring the rising trends in loss costs for an extended period of time. As market momentum accelerates, we anticipate that price increases will persist for the foreseeable future.
The investment portfolio performed as anticipated despite a challenging interest rate environment that remains volatile and difficult to predict. We manage the investment portfolio for stability and predictability by maintaining the quality and duration of our fixed maturity securities. Overall net investment income was impacted as investment fund performance returned to an average level compared to the notably strong earnings in the prior year. While our total return approach to portfolio management has resulted in some variability from quarter to quarter, it has benefited our overall long-term returns.
We continue to successfully execute our long-term strategy of delivering superior risk-adjusted returns to our shareholders through profitable underwriting with low volatility, growth in areas of the market with attractive returns and an above average-total return in our investment portfolio. The (re)insurance market is in the early stages of a meaningful transition. Historically, this type of market dislocation has provided the Company with meaningful opportunities and, once again, we expect our results will benefit from them.














W. R. Berkley Corporation     Page 3

Webcast Conference Call
The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on October 22, 2019, 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.




W. R. Berkley Corporation     Page 4

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 2019 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; the impact of climate change, which may increase the frequency and 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 2015 ("TRIPRA"), and TRIPRA's potential expiration; 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 2019 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 5


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

 
 
Third Quarter
 
Nine Months
 
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Net premiums written
 
$
1,749,906

 
$
1,624,214

 
$
5,202,971

 
$
4,913,656

Change in unearned premiums
 
(73,096
)
 
(20,729
)
 
(286,464
)
 
(161,709
)
Net premiums earned
 
1,676,810

 
1,603,485

 
4,916,507

 
4,751,947

Net investment income
 
161,692

 
186,124

 
508,279

 
514,419

Net realized and unrealized gains on investments
 
1,465

 
22,334

 
143,691

 
140,429

Revenues from non-insurance businesses
 
101,880

 
95,168

 
283,005

 
242,037

Insurance service fees
 
23,681

 
30,782

 
71,440

 
91,175

Other income
 
188

 
9

 
3,200

 
59

Total revenues
 
1,965,716

 
1,937,902

 
5,926,122

 
5,740,066

Expenses:
 
 
 
 
 
 
 
 
Losses and loss expenses
 
1,041,471

 
1,017,720

 
3,058,950

 
2,954,575

Other operating costs and expenses
 
581,045

 
577,648

 
1,760,961

 
1,781,230

Expenses from non-insurance businesses
 
101,743

 
93,463

 
280,141

 
238,198

Interest expense
 
38,475

 
39,848

 
119,913

 
116,608

Total expenses
 
1,762,734

 
1,728,679

 
5,219,965

 
5,090,611

Income before income taxes
 
202,982

 
209,223

 
706,157

 
649,455

Income tax expense
 
(37,831
)
 
(44,780
)
 
(141,965
)
 
(136,661
)
Net income before noncontrolling interests
 
165,151

 
164,443

 
564,192

 
512,794

Noncontrolling interests
 
57

 
(2,523
)
 
(1,554
)
 
(4,402
)
Net income to common stockholders
 
$
165,208

 
$
161,920

 
$
562,638

 
$
508,392

 
 
 
 
 
 
 
 
 
Net income per share (1):
 
 
 
 
 
 
 
 
Basic
 
$
0.87

 
$
0.85

 
$
2.95

 
$
2.68

Diluted
 
$
0.85

 
$
0.84

 
$
2.91

 
$
2.64

 
 
 
 
 
 
 
 
 
Average shares outstanding (1) (2):
 
 
 
 
 
 
 
 
Basic
 
190,862

 
190,241

 
190,593

 
189,862

Diluted
 
193,589

 
192,842

 
193,557

 
192,606



(1)
2018 per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.
(2)
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.



W. R. Berkley Corporation     Page 6

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

 
 
Third Quarter
 
Nine Months
 
 
2019
 
2018
 
2019
 
2018
Insurance:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
1,850,012

 
$
1,740,318

 
$
5,565,862

 
$
5,298,564

Net premiums written
 
1,529,113

 
1,455,342

 
4,601,077

 
4,420,019

Premiums earned
 
1,493,854

 
1,447,628

 
4,396,071

 
4,254,497

Pre-tax income
 
202,390

 
193,587

 
612,777

 
555,697

Loss ratio
 
61.8
%
 
63.6
%
 
62.3
%
 
62.3
%
Expense ratio
 
31.2
%
 
32.0
%
 
31.3
%
 
32.6
%
GAAP combined ratio
 
93.0
%
 
95.6
%
 
93.6
%
 
94.9
%
 
 
 
 
 
 
 
 
 
Reinsurance & Monoline Excess:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
243,038

 
$
187,467

 
$
663,279

 
$
556,716

Net premiums written
 
220,793

 
168,872

 
601,894

 
493,637

Premiums earned
 
182,956

 
155,857

 
520,436

 
497,450

Pre-tax income
 
46,863

 
48,061

 
144,353

 
148,926

Loss ratio
 
64.6
%
 
62.1
%
 
61.6
%
 
60.9
%
Expense ratio
 
33.7
%
 
36.2
%
 
35.2
%
 
36.2
%
GAAP combined ratio
 
98.3
%
 
98.3
%
 
96.8
%
 
97.1
%
 
 
 
 
 
 
 
 
 
Corporate and Eliminations:
 
 
 
 
 
 
 
 
  Net realized and unrealized gains on investments
 
$
1,465

 
$
22,334

 
$
143,691

 
$
140,429

  Interest expense
 
(38,475
)
 
(39,848
)
 
(119,913
)
 
(116,608
)
  Other revenues and expenses
 
(9,261
)
 
(14,911
)
 
(74,751
)
 
(78,989
)
  Pre-tax loss
 
(46,271
)
 
(32,425
)
 
(50,973
)
 
(55,168
)
 
 
 
 
 
 
 
 
 
Consolidated:
 
 
 
 
 
 
 
 
  Gross premiums written
 
$
2,093,050

 
$
1,927,785

 
$
6,229,141

 
$
5,855,280

  Net premiums written
 
1,749,906

 
1,624,214

 
5,202,971

 
4,913,656

  Premiums earned
 
1,676,810

 
1,603,485

 
4,916,507

 
4,751,947

  Pre-tax income
 
202,982

 
209,223

 
706,157

 
649,455

  Loss ratio
 
62.1
%
 
63.5
%
 
62.2
%
 
62.2
%
  Expense ratio
 
31.5
%
 
32.4
%
 
31.7
%
 
33.0
%
  GAAP combined ratio
 
93.6
%
 
95.9
%
 
93.9
%
 
95.2
%


(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 2019, the Company renamed the Reinsurance segment to Reinsurance & Monoline Excess, and reclassified the monoline excess business from the Insurance segment. The reclassified business includes operations that solely retains risk on an excess basis. Reclassifications have been made to the Company's 2018 financial information to conform with this presentation.




W. R. Berkley Corporation     Page 7


Supplemental Information
(Amounts in thousands)
 
 
Third Quarter
 
Nine Months
 
 
2019
 
2018
 
2019
 
2018
Net premiums written:
 
 
 
 
 
 
 
 
  Other liability
 
$
553,802

 
$
497,990

 
$
1,607,613

 
$
1,471,145

  Workers' compensation
 
303,116

 
321,995

 
997,733

 
1,026,543

  Short-tail lines (1)
 
318,310

 
305,516

 
934,757

 
908,765

  Commercial automobile
 
196,851

 
189,474

 
608,533

 
589,923

  Professional liability
 
157,034

 
140,367

 
452,441

 
423,643

    Total Insurance
 
1,529,113

 
1,455,342

 
4,601,077

 
4,420,019

  Casualty reinsurance
 
132,335

 
90,305

 
343,541

 
252,946

Monoline excess
 
49,851

 
49,450

 
141,572

 
141,351

  Property reinsurance
 
38,607

 
29,117

 
116,781

 
99,340

     Total Reinsurance & Monoline Excess
 
220,793

 
168,872

 
601,894

 
493,637

          Total
 
$
1,749,906

 
$
1,624,214

 
$
5,202,971

 
$
4,913,656

 
 
 
 
 
 
 
 
 
Losses from catastrophes:
 
 
 
 
 
 
 
 
  Insurance
 
$
15,381

 
$
29,352

 
$
53,444

 
$
49,412

  Reinsurance & Monoline Excess
 
16,079

 
9,650

 
16,178

 
10,534

    Total
 
$
31,460

 
$
39,002

 
$
69,622

 
$
59,946

 
 
 
 
 
 
 
 
 
Net investment income:
 
 
 
 
 
 
 
 
  Core portfolio (2)
 
$
134,259

 
$
137,487

 
$
404,812

 
$
399,188

  Investment funds
 
19,033

 
41,005

 
77,284

 
94,075

  Arbitrage trading account
 
8,400

 
7,632

 
26,183

 
21,156

    Total
 
$
161,692

 
$
186,124

 
$
508,279

 
$
514,419

 
 
 
 
 
 
 
 
 
Net realized and unrealized gains on investments:
 
 
 
 
 
 
 
 
  Net realized (losses) gains on investment sales
 
$
(2,761
)
 
$
153,847

 
$
27,969

 
$
420,799

  Change in unrealized gains on equity securities
 
4,226

 
(131,513
)
 
115,722

 
(280,370
)
    Total
 
$
1,465

 
$
22,334

 
$
143,691

 
$
140,429

 
 
 
 
 
 
 
 
 
Other operating costs and expenses:
 
 
 
 
 
 
 
 
  Policy acquisition and insurance operating expenses
 
$
528,399

 
$
519,380

 
$
1,560,350

 
$
1,566,473

  Insurance service expenses
 
26,171

 
27,268

 
77,513

 
90,970

  Net foreign currency gains
 
(22,590
)
 
(17,267
)
 
(29,084
)
 
(22,033
)
  Other costs and expenses
 
49,065

 
48,267

 
152,182

 
145,820

    Total
 
$
581,045

 
$
577,648

 
$
1,760,961

 
$
1,781,230

 
 
 
 
 
 
 
 
 
Cash flow from operations
 
$
392,398

 
$
223,162

 
$
795,044

 
$
342,524



(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 8

Selected Balance Sheet Information
(Amounts in thousands, except per share data)
 
September 30,
2019
 
December 31, 2018
 
 
 
 
Net invested assets (1)
$
19,470,231

 
$
18,828,321

Total assets
26,218,511

 
24,895,977

Reserves for losses and loss expenses
12,396,955

 
11,966,448

Senior notes and other debt
1,434,725

 
1,882,028

Subordinated debentures
908,053

 
907,491

Common stockholders’ equity (2)
6,056,296

 
5,437,851

Common stock outstanding (3) (4)
183,674

 
182,994

Book value per share (4) (5)
32.97

 
29.72

Tangible book value per share (4) (5)
31.71

 
28.42



(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, 2019, reflected in common stockholders' equity are after-tax unrealized investment gains of $128 million and unrealized currency translation losses of $450 million. As of December 31, 2018, after-tax unrealized investment losses were $91 million and unrealized currency translation losses were $419 million.
(3)
During the three and nine months ended September 30, 2019, 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)
December 31, 2018 shares outstanding and per share amounts were restated for comparative purposes to reflect the 3-for-2 common stock split effected on April 2, 2019.
(5)
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 9

Investment Portfolio
September 30, 2019
(Amounts in thousands)
 
 
Carrying
Value
 
Percent
of Total
Fixed maturity securities:
 
 
 
 
United States government and government agencies
 
$
816,114

 
4.2
%
State and municipal:
 
 
 
 
Special revenue
 
2,457,938

 
12.6
%
Local general obligation
 
466,969

 
2.4
%
State general obligation
 
404,875

 
2.1
%
Pre-refunded
 
305,546

 
1.6
%
Corporate backed
 
250,980

 
1.3
%
Total state and municipal
 
3,886,308

 
19.9
%
Mortgage-backed securities:
 
 
 
 
Agency
 
912,782

 
4.7
%
Residential - Prime
 
408,412

 
2.1
%
Commercial
 
363,075

 
1.9
%
Residential - Alt A
 
34,892

 
0.2
%
Total mortgage-backed securities
 
1,719,161

 
8.9
%
Asset-backed securities
 
2,748,256

 
14.1
%
Corporate:
 
 
 
 
Industrial
 
2,365,523

 
12.1
%
Financial
 
1,427,591

 
7.3
%
Utilities
 
322,060

 
1.8
%
Other
 
21,094

 
0.1
%
Total corporate
 
4,136,268

 
21.2
%
Foreign government
 
779,968

 
4.0
%
Total fixed maturity securities (1)
 
14,086,075

 
72.3
%
Equity securities available for sale:
 
 
 
 
Preferred stocks
 
295,593

 
1.5
%
Common stocks
 
148,061

 
0.8
%
Total equity securities available for sale
 
443,654

 
2.3
%
Real estate
 
2,102,391

 
10.8
%
Investment funds (2)
 
1,226,405

 
6.3
%
Cash and cash equivalents (3)
 
877,428

 
4.5
%
Arbitrage trading account
 
641,993

 
3.3
%
Loans receivable
 
92,285

 
0.5
%
Net invested assets
 
$
19,470,231

 
100.0
%


(1)
Total fixed maturity securities had an average rating of AA- and an average duration of 2.8 years, including cash and cash equivalents.
(2)
Investment funds are net of related liabilities of $0.9 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.