Property and casualty insurer W.R. Berkley Corp. (WRB) reported second-quarter core operating earnings of 70 cents per share, 3 cents ahead of the Zacks Consensus Estimate. The earnings beat came on the back of higher premium written, pricing gains and a lower share count. Earnings inched up by 7.7% year over year.
On a GAAP basis, net income increased 7.9% year over year to 82 cents per share.
Revenue in the quarter came in at $1.57 billion, up 11.0% year over year. The year-over-year increase was attributable to higher premiums earned, insurance fee service, higher income from wholly owned investees and increased net investment income.
W.R. Berkley’s net written premium for the quarter was approximately $1.34 billion, an increase of 12.7% year over year. The company saw broad-based growth with each of its operating segments reporting higher premium.
Net investment income was $143.7 million in the quarter, down 10.9% year over year.
Total expenses also increased 11.4% year over year to $1.41 billion, due to an increase in loss and loss expenses, other operating cost partly offset by lower interest expenses.
Segment Details
Net premiums written in the Domestic Insurance segment increased 11% year over year to $967.7 million. Combined ratio improved 240 basis points to 95.4% in the quarter.
Net premiums written in the International Insurance Regional segment climbed 11.0% year over year to $241.7 million. Combined ratio deteriorated 110 basis points year-over-year to 99.9%.
The Global Reinsurance segment reported a 17% increase in net premiums written to $190.0 million in the quarter. Combined ratio improved 120 basis points year-over-year to 99.0%.
Another player in the same industry RLI Corporation (RLI) reported first-quarter ahead of the Zacks Consensus Estimate.
Other players The Travelers Companies Inc. (TRV), ACE Limited (ACE) are scheduled to report second quarter 2013 soon.
Our Take
W.R. Berkley has been reporting ahead of expectations for the past several quarters. The company has maintained its trend of beating earnings estimates in the reported quarter as well. We expect the trend to continue going forward. The company has positioned itself well to take advantage of hardening in the insurance market by forming several new units over the past few years. Premiums written for its core business have increased and the new units are accruing to earnings. Average renewal rates are on the rise and so is the price trend.
W.R. Berkley’s balance sheet, which is adequately capitalized, is another major company strength. The company has maintained its practice of increasing yearly dividends. In our view, the company is well poised to return value to its shareholders over the long term.
W.R. Berkley currently retains a Zacks Rank #3 (Hold).
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