W.R. Berkley Corporation reported robust financial results for the third quarter of 2023, with significant underwriting profits and an increase in net income by 45.7% to $334 million. The company also registered a 19.8% return on equity, while operating income rose by 30.1% to $367 million. The underwriting results were driven by a combined ratio of 90.2%, excluding catastrophe losses, and a 4.5% book yield on fixed maturity securities. The company's net premiums written grew by 10.5% to a record of over $2.8 billion.
According to InvestingPro data, W.R. Berkley has a market capitalization of 16.2 billion USD and a P/E ratio of 13.79, indicating a potentially attractive valuation. The company's revenue for the last twelve months reached 11629.12 million USD, with a growth rate of 11.49%. The firm's gross profit was reported at 4922.36 million USD, reflecting a gross profit margin of 42.33%.
Key takeaways from the earning call:
- The company announced a special dividend of $0.50 per share, bringing the total capital return to investors to approximately $775 million for the year. This aligns with InvestingPro Tips which highlight that W.R. Berkley has maintained dividend payments for 49 consecutive years.
- W.R. Berkley continues to focus on managing social inflation and maintaining rate increases to address rising loss costs.
- The company believes it is well-positioned for the future and expects its earnings power to accelerate. This is in line with the InvestingPro Tip that predicts the company to be profitable this year.
- The speaker emphasized the strength of their incurred but not reported (IBNR) reserves and encouraged investors to review the IBNR relative to the case and relative to total reserves.
- They highlighted the positive impact of their investment portfolio and cash flow, noting a new money rate of around 6%.
- The company's top-line growth is attributed to the end of certain partnerships and their focus on competitive parts of the market.
- The company's CEO, Rob Berkley, expressed optimism about opportunities in the liability lines, especially in the Specialty and Excess and Surplus (E&S) markets.
- The company is trying to pass on the increased reinsurance costs to clients and has modest exposure to recent catastrophe losses.
- The company is cautious and controlled in underwriting fire losses and writes commercial auto lines when they can achieve the required rate and targeted return.
During the earnings call, CEO Rob Berkley discussed the company's strategy and performance. He expressed optimism about opportunities in the liability lines, particularly in the Specialty and Excess and Surplus (E&S) markets. Berkley also mentioned the company's approach to reinsurance exposure, stating that the ceding commissions offered by competitors in the reinsurance space didn't make sense to them, particularly in the professional liability space.
Berkley also addressed the company's growth in property and auto physical damage lines and the efforts to pass on increased reinsurance costs to clients. He acknowledged the challenges in the commercial auto line but stated the company writes it when they can achieve the required rate and targeted return.
In addition, Berkley touched upon the company's Monoline division's performance and the professional liability and cyber insurance lines. He stated that there hadn't been any significant developments or opportunities in those areas yet. He also mentioned that the expense ratio in the reinsurance segment was low, but it is expected to remain below $30.
Berkley also discussed the company's international book, describing it as accretive to their overall franchise. He mentioned that they are monitoring the property book and loss picks and will update as necessary. Overall, Berkley expressed confidence in the company's future, stating that the earnings power of the business would continue to grow.
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