Fourth Quarter Net Premiums Written Grew
26.6% and Return on Equity of 18.7%
W. R. Berkley Corporation (NYSE: WRB) today reported its
fourth quarter and full year 2021 results.
Summary Financial Data
(Amounts in thousands, except per share data)
Fourth Quarter
Twelve Months
2021
2020
2021
2020
Gross premiums written
$
2,766,688
$
2,221,484
$
10,700,134
$
8,847,647
Net premiums written
2,275,509
1,797,457
8,862,867
7,262,437
Net income to common stockholders
294,430
312,150
1,022,490
530,670
Net income per diluted share
1.59
1.67
5.48
2.81
Operating income (1)
284,323
173,043
951,861
438,253
Operating income per diluted share
1.53
0.92
5.10
2.32
Return on equity (2)
18.7
%
20.6
%
16.2
%
8.7
%
(1)
Operating income is a non-GAAP financial measure defined by the
Company as net income excluding after-tax net investment gains
(losses) and related expenses.
(2)
Return on equity represents net income expressed on an
annualized basis as a percentage of beginning of year common
stockholders’ equity.
Fourth quarter highlights included:
- Return on equity of 18.7%.
- Record quarterly underwriting income of $260.9 million.
- Net premiums written increased 26.6%.
- The current accident year combined ratio before catastrophe
losses of 2.2 loss ratio points was 86.0%.
- The reported combined ratio was 88.2%, including catastrophe
losses of $48.5 million.
- Average rate increases excluding workers' compensation were
approximately 9.3%.
- Total capital returned to shareholders was $199.6 million,
consisting of $176.7 million of special dividends and $22.9 million
of regular dividends.
Full year highlights included:
- Record full year underwriting income and net income of $845.3
million and $1.0 billion, respectively.
- Return on equity of 16.2%.
- Record gross and net premiums written grew 20.9% and 22.0% to
$10.7 billion and $8.9 billion, respectively.
- Average rate increases excluding workers' compensation were
approximately 10.4%.
- Operating cash flow increased 35.1% to approximately $2.2
billion.
- Book value per share grew 12.5%, before dividends and share
repurchases.
- Total capital returned to shareholders was $478.1 million,
including $265.3 million of special dividends, $90.4 million of
regular dividends and $122.4 million of share repurchases.
- Formed two new operating units, Berkley Management Protection
and Berkley Small Business Solutions.
The Company commented:
The Company had another outstanding quarter, which together with
strong performance in the first nine months of 2021, led to a
record year on many fronts, despite catastrophe losses and
continuing low interest rates. The fourth quarter was highlighted
by more than 26% growth in net premiums written and an 18.7%
annualized return on equity.
Robust premium growth was driven by continued strong rate
increases in nearly all lines of business combined with higher
exposure growth. Record underwriting income in the quarter
reflected year-over-year margin improvement and a further reduction
in the expense ratio. We anticipate that the factors fueling the
Company’s growth should remain in place for the foreseeable future
and that compounding rate increases in excess of loss trend will
further contribute to underwriting profits as premiums are fully
earned.
Our investment portfolio also performed extremely well in both
the quarter and full year. Through our total return strategy,
including our allocation to alternative investments, we seek to
maximize our investment portfolio’s risk-adjusted returns. In
addition, we maintain a short duration in our fixed-maturity
portfolio, which has limited the impact of rising interest rates on
book value.
Our decentralized business model, built on a culture of
innovation with specialized teams of people having extensive
knowledge and expertise, allows us to quickly and effectively
respond to opportunities in the marketplace. This structure enables
us to maintain appropriate discipline throughout the market cycle
and achieve robust growth in revenues and earnings when margins
improve. Our underwriting and investment portfolios are
well-positioned for the anticipated inflationary environment. The
Company is performing exceptionally well and we look forward to
another great year in 2022.
Webcast Conference Call
The Company will hold its quarterly conference call with
analysts and investors to discuss its earnings and other
information on January 27, 2022, 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/quarterly-results/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.
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 2022 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 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,
including claims for cybersecurity-related risks; natural and
man-made catastrophic losses, including as a result of terrorist
activities; the ongoing COVID-19 pandemic; the impact of climate
change, which may alter the frequency and increase the 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 2019; 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 2022 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.
Consolidated Financial
Summary (Amounts in thousands, except per share data)
Fourth Quarter
Twelve Months
2021
2020
2021
2020
Revenues:
Net premiums written
$
2,275,509
$
1,797,457
$
8,862,867
$
7,262,437
Change in unearned premiums
(72,076
)
16,133
(756,836
)
(331,594
)
Net premium earned
2,203,433
1,813,590
8,106,031
6,930,843
Net investment income
165,003
180,977
671,618
583,821
Net investment gains:
Net realized and unrealized gains on
investments
17,551
162,918
106,958
73,514
Change in allowance for credit losses on
investments
(5,322
)
393
(16,326
)
29,486
Net investment gains
12,229
163,311
90,632
103,000
Revenues from non-insurance businesses
172,225
132,923
489,151
389,888
Insurance service fees
24,326
21,521
93,857
88,777
Other Income
1,014
149
4,177
2,596
Total Revenues
2,578,230
2,312,471
9,455,466
8,098,925
Expenses:
Loss and loss expenses
1,330,330
1,111,695
4,953,960
4,468,706
Other operating costs and expenses
692,252
637,250
2,599,270
2,390,392
Expenses from non-insurance businesses
163,698
128,457
472,151
384,488
Interest expense
37,333
35,663
147,180
150,537
Total expenses
2,223,613
1,913,065
8,172,561
7,394,123
Income before income tax
354,617
399,406
1,282,905
704,802
Income tax expense
(60,313
)
(86,917
)
(251,890
)
(171,817
)
Net Income before noncontrolling
interests
294,304
312,489
1,031,015
532,985
Noncontrolling interest
126
(339
)
(8,525
)
(2,315
)
Net income to common stockholders
$
294,430
$
312,150
$
1,022,490
$
530,670
Net income per share:
Basic
$
1.60
$
1.68
$
5.53
$
2.84
Diluted
$
1.59
$
1.67
$
5.48
$
2.81
Average shares outstanding (1):
Basic
184,436
185,693
184,953
186,924
Diluted
185,690
187,180
186,499
188,763
(1)
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.
Business Segment Operating
Results (Amounts in thousands, except ratios) (1)
Fourth Quarter
Twelve Months
2021
2020
2021
2020
Insurance:
Gross premiums written
$
2,463,050
$
1,996,169
$
9,471,667
$
7,837,496
Net premiums written
2,002,584
1,592,311
7,743,814
6,347,101
Net premiums earned
1,926,456
1,586,578
7,077,708
6,067,669
Pre-tax income
357,399
236,548
1,219,798
668,012
Loss ratio
60.5
%
63.4
%
61.1
%
64.9
%
Expense ratio
27.6
%
29.4
%
28.3
%
30.3
%
GAAP Combined ratio
88.1
%
92.8
%
89.4
%
95.2
%
Reinsurance & Monoline
Excess:
Gross premiums written
$
303,638
$
225,315
$
1,228,467
$
1,010,151
Net premiums written
272,925
205,146
1,119,053
915,336
Net premiums earned
276,977
227,012
1,028,323
863,174
Pre-tax income
74,378
94,975
270,563
205,587
Loss ratio
59.7
%
46.7
%
61.0
%
61.3
%
Expense ratio
28.7
%
31.1
%
29.7
%
31.8
%
GAAP Combined ratio
88.4
%
77.8
%
90.7
%
93.1
%
Corporate and Eliminations:
Net investment gains
$
12,229
$
163,311
$
90,632
$
103,000
Interest expense
(37,333
)
(35,663
)
(147,180
)
(150,537
)
Other revenues and expenses
(52,056
)
(59,765
)
(150,908
)
(121,260
)
Pre-tax (loss) gain
(77,160
)
67,883
(207,456
)
(168,797
)
Consolidated:
Gross premiums written
$
2,766,688
$
2,221,484
$
10,700,134
$
8,847,647
Net premiums written
2,275,509
1,797,457
8,862,867
7,262,437
Net premiums earned
2,203,433
1,813,590
8,106,031
6,930,843
Pre-tax income
354,617
399,406
1,282,905
704,802
Loss ratio
60.4
%
61.3
%
61.1
%
64.5
%
Expense ratio
27.8
%
29.6
%
28.5
%
30.4
%
GAAP Combined ratio
88.2
%
90.9
%
89.6
%
94.9
%
(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.
Supplemental Information
(Amounts in thousands)
Fourth Quarter
Twelve Months
2021
2020
2021
2020
Net premiums written:
Other liability
$
740,799
$
594,546
$
2,879,616
$
2,342,884
Short-tail lines (1)
392,430
325,809
1,482,687
1,300,750
Workers' compensation
269,060
241,935
1,148,912
1,099,886
Commercial automobile
297,663
227,190
1,120,566
876,031
Professional liability
302,632
202,831
1,112,033
727,550
Total Insurance
2,002,584
1,592,311
7,743,814
6,347,101
Casualty reinsurance
199,262
141,481
724,595
560,717
Property reinsurance
46,317
41,174
182,436
178,023
Monoline Excess
27,346
22,491
212,022
176,596
Total Reinsurance & Monoline
Excess
272,925
205,146
1,119,053
915,336
Total
$
2,275,509
$
1,797,457
$
8,862,867
$
7,262,437
Current accident year losses from
catastrophes (including COVID-19 related losses):
Insurance
$
41,462
$
62,380
$
150,326
$
307,037
Reinsurance & Monoline Excess
7,000
(19,934
)
51,721
32,799
Total
$
48,462
$
42,446
$
202,047
$
339,836
Net Investment income:
Core portfolio (2)
$
107,027
$
102,039
$
413,928
$
451,637
Investment funds
50,476
52,992
220,014
54,253
Arbitrage trading account
7,500
25,946
37,676
77,931
Total
$
165,003
$
180,977
$
671,618
$
583,821
Net realized and unrealized gains on
investments:
Net realized (losses) gains on
investments
$
(5,812
)
$
126,927
$
145,413
$
99,382
Change in unrealized gains (losses) on
equity securities
23,363
35,991
(38,455
)
(25,868
)
Total
$
17,551
$
162,918
$
106,958
$
73,514
Other operating costs and
expenses:
Policy acquisition and insurance operating
expenses
$
612,179
$
536,507
$
2,306,727
$
2,111,013
Insurance service expenses
22,186
21,694
86,003
85,724
Net foreign currency (gains) losses
(6,508
)
24,207
(25,725
)
363
Debt extinguishment costs
—
8,440
11,521
8,440
Other costs and expenses
64,395
46,402
220,744
184,852
Total
$
692,252
$
637,250
$
2,599,270
$
2,390,392
Cash flow from operations
$
659,593
$
479,740
$
2,183,987
$
1,616,686
Reconciliation of net income to
operating income:
Net income
$
294,430
$
312,150
$
1,022,490
$
530,670
Pre-tax investment gains, net of related
expenses
(12,317
)
(162,337
)
(87,712
)
(102,027
)
Income tax expense
2,210
23,230
17,083
9,610
Operating income after-tax (3)
$
284,323
$
173,043
$
951,861
$
438,253
(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.
(3)
Operating income is a non-GAAP financial
measure defined by the Company as net income excluding after-tax
net investment gains (losses). Net investment gains (losses) are
computed net of related expenses, including performance-based
compensatory costs associated with realized investment gains.
Management believes this measurement provides a useful indicator of
trends in the Company’s underlying operations.
Selected Balance Sheet
Information (Amounts in thousands, except per share data)
December 31, 2021
December 31, 2020
Net invested assets (1)
$
23,705,508
$
21,370,503
Total assets
32,086,414
28,606,913
Reserves for losses and loss expenses
15,390,888
13,784,430
Senior notes and other debt
2,259,416
1,623,025
Subordinated debentures
1,007,652
1,102,309
Common stockholders' equity (2)
6,653,011
6,310,802
Common stock outstanding (3)
176,781
177,825
Book value per share (4)
37.63
35.49
Tangible book value per share (4)
36.40
34.22
(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 December 31, 2021, reflected in
common stockholders' equity are after-tax unrealized investment
gains of $91 million and unrealized currency translation losses of
$373 million. As of December 31, 2020, after-tax unrealized
investment gains were $290 million and unrealized currency
translation losses were $352 million.
(3)
During the twelve months ended December
31, 2021, the Company repurchased 1,752,619 shares of its common
stock for $122 million. During the three months ended December 31,
2021, 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.
Investment Portfolio December
31, 2021 (Amounts in thousands, except percentages)
Carrying Value
Percent of Total
Fixed maturity securities:
United States government and government
agencies
$
855,343
3.6
%
State and municipal:
Special revenue
2,092,438
8.8
%
State general obligation
455,323
1.9
%
Local general obligation
430,697
1.8
%
Pre-refunded
222,225
1.0
%
Corporate backed
172,602
0.7
%
Total state and municipal
3,373,285
14.2
%
Mortgage-backed securities:
Agency
752,318
3.2
%
Residential - Prime
186,260
0.8
%
Commercial
128,756
0.5
%
Residential - Alt A
5,570
0.0
%
Total mortgage-backed securities
1,072,904
4.5
%
Asset-backed securities
4,490,565
19.0
%
Corporate:
Industrial
3,273,163
13.8
%
Financial
1,763,400
7.4
%
Utilities
406,302
1.7
%
Other
152,810
0.7
%
Total corporate
5,595,675
23.6
%
Foreign government
1,214,901
5.1
%
Total fixed maturity securities (1)
16,602,673
70.0
%
Equity securities available for
sale:
Common stocks
695,403
2.9
%
Preferred stocks
245,840
1.1
%
Total equity securities available for
sale
941,243
4.0
%
Cash and cash equivalents (2)
1,534,486
6.5
%
Real estate
1,852,508
7.8
%
Investment funds (3)
1,479,820
6.2
%
Arbitrage trading account
1,179,606
5.0
%
Loans receivable
115,172
0.5
%
Net invested assets
$
23,705,508
100.0
%
(1)
Total fixed maturity securities had an
average rating of AA- and an average duration of 2.4 years,
including cash and cash equivalents.
(2)
Cash and cash equivalents includes trading
accounts receivable from brokers and clearing organizations,
trading account securities sold but not yet purchased and unsettled
purchases.
(3)
Investment funds are net of related
liabilities of $0.8 million.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220127005855/en/
Karen A. Horvath Vice President - External Financial
Communications (203) 629-3000
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