W. R. Berkley Corporation Reports Fourth Quarter and Full Year Results

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.

 

Contacts

Karen A. Horvath

Vice President - External

Financial Communications

(203) 629-3000

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