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W.R. Berkley (WRB) Q4 Earnings Beat Estimates, Revenues Lag

Zacks Equity Research

W.R. Berkley Corporation ’s WRB fourth-quarter 2018 operating income of 91 cents per share beat the Zacks Consensus Estimate of 76 cents by 19.7%. Also, the bottom line improved 19.7% year over year.

The company witnessed improved revenues, attributable to higher premiums, a favorable underwriting performance and an increase in net investment income.

Including net realized and unrealized pre-tax gains, net income declined 14.9% from the year-ago quarter to $1.03 per share.

Full-Year Highlights

For 2018, W.R. Berkley delivered operating income of $4 per share, which outpaced the Zacks Consensus Estimate of $3.84 per share and also soared nearly 70% year over year.

Moreover, total operating revenues of $7.2 billion missed the consensus mark of $7.5 billion but grew 2% year over year.

W.R. Berkley Corporation Price, Consensus and EPS Surprise

W.R. Berkley Corporation Price, Consensus and EPS Surprise | W.R. Berkley Corporation Quote

Behind the Headlines

W.R. Berkley’s net premiums written for the quarter under review were $1.5 billion, up 2.8% year over year. Higher premiums written at both the Insurance and Reinsurance segments contributed to this upside.

Operating revenues came in at $1.81 billion, up 1.8% year over year, mainly owing to higher net premiums earned and better net investment income. However, the top line missed the Zacks Consensus Estimate by 1.3%.

Investment income rose 7.1% year over year to $159.8 million.

Total expenses escalated 3.2% to $1.8 billion, primarily on higher losses plus loss expenses, expenses from non-insurance businesses plus interest expense.

Catastrophe loss totaled $45.5 million in the reported period. Consolidated combined ratio (a measure of underwriting profitability) came in at 95.9%, deteriorating 100 basis points (bps) from the prior-year period.

Segment Details

Net premiums written at the Insurance segment grew 2.9% year over year to $1.4 billion in the quarter under consideration. This increase was attributable to higher premiums written under other liability, short-tail lines, commercial automobile as well as professional liability. Combined ratio in this segment deteriorated 30 bps year over year to 94.7%.

Net premiums written in the Reinsurance segment inched up 0.8% year over year to $128.1 million owing to substantially higher premiums written under casualty reinsurance. Combined ratio improved 910 bps to 109.3%.

Financial Update

W.R. Berkley exited the fourth quarter with total assets worth $24.9 billion, up 2.5% from the year-end 2017.

Book value per share inched up 0.1% to $44.57 as of Dec 31, 2018 from the level as of Dec 31, 2017.

Cash flow from operations for the quarter under discussion totaled $202 million, up 6.9% from the prior-year period.

The company’s return on equity deteriorated 250 bps to 9.8%.

Share Repurchase Update

In the reported quarter, the company bought back 0.3 million shares of its common stock worth $17.9 million.

In the quarter under review, the company returned capital worth $97 million to shareholders, which comprised $79 million as ordinary and special dividends and $18 million of share buyback.

Zacks Rank

W.R. Berkley carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Insurers

Among other players from the insurance industry having reported fourth-quarter earnings so far, the bottom line of MGIC Investment Corporation MTG and The Travelers Companies, Inc. TRV beat the respective Zacks Consensus Estimate while that of The Progressive Corporation PGR missed the same.

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