W. R. Berkley(WRB) - 2024 Q1 - Quarterly Results

First Quarter 2024 Earnings Overview W. R. Berkley Corporation achieved strong financial results in the first quarter of 2024, marked by significant growth in net income, operating income, and premiums written, alongside improved returns on equity Headline Results W. R. Berkley Corporation reported significant growth in net income and operating income for the first quarter of 2024, achieving strong returns on equity Key Financial Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :----------------------------- | :--------------------- | :--------------------- | :--------- | | Net income to common stockholders | $442,471 | $294,126 | 50.4% | | Operating income (1) | $423,324 | $275,966 | 53.4% | | Return on equity (2) | 23.7% | 17.4% | 6.3 pts | | Operating return on equity (1)(2)| 22.7% | 16.4% | 6.3 pts | Summary Financial Data The company's summary financial data for Q1 2024 shows robust growth in premiums written and per-share earnings compared to the prior year Summary Financial Data (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | | Gross premiums written | $3,362,755 | $3,049,317 | | Net premiums written | $2,851,291 | $2,574,824 | | Net income per diluted share| $1.64 | $1.06 | | Operating income per diluted share | $1.56 | $1.00 | Management Commentary & Highlights Management highlighted strong Q1 2024 results driven by favorable market conditions, accelerated net premium growth, improved combined ratio, and record net investment income, positioning the company for future growth - The Company achieved a 23.7% annualized return on beginning of year common stockholders' equity, demonstrating very strong results[6] - Growth in first quarter net premiums written accelerated year over year to 10.7%, supported by favorable market conditions[7] - Net investment income increased 43.2% over the prior year first quarter, reaching a record $319.8 million, despite challenges with investment funds[8][10] First Quarter 2024 Key Highlights | Metric | Q1 2024 | YoY Change | | :------------------------------------ | :-------- | :--------- | | Net premiums written | $2.9 billion | +10.7% | | Reported combined ratio | 88.8% | -1.8 pts | | Pre-tax underwriting income | $309.0 million | +31.8% | | Average rate increases (excl. workers' comp) | ~7.8% | N/A | | Operating cash flow | $746.2 million | +67.6% | Company Profile & Disclosures This section provides an overview of W. R. Berkley Corporation's business, webcast details, and important forward-looking information disclosures About W. R. Berkley Corporation W. R. Berkley Corporation is an insurance holding company operating globally in two property casualty business segments: Insurance and Reinsurance & Monoline Excess - W. R. Berkley Corporation, founded in 1967, is an insurance holding company and a major commercial lines writer in the U.S., operating in Insurance and Reinsurance & Monoline Excess segments worldwide[12] Webcast Conference Call The company scheduled a webcast conference call for April 23, 2024, to discuss its first quarter earnings, with a replay available afterward - A quarterly conference call with analysts and investors was scheduled for April 23, 2024, at 9:00 a.m. eastern time, accessible via webcast on the Company's website[11] Forward-Looking Information This section serves as a 'Safe Harbor' statement, outlining that forward-looking statements are based on current expectations and subject to various risks and uncertainties inherent in the property casualty industry and global economic conditions - The document includes a 'Safe Harbor' Statement under the Private Securities Litigation Reform Act of 1995, indicating that forward-looking statements are based on historical performance and current plans, estimates, and expectations[13] - Forward-looking information is subject to various risks and uncertainties, including the cyclical nature of the property casualty industry, competition, claims development, investment risks, catastrophic losses, economic conditions, and regulatory changes[13] Detailed Financial Performance This section provides an in-depth analysis of the company's consolidated financial results and segment-specific operating performance Consolidated Financial Summary The consolidated financial summary details the company's revenues, expenses, and net income, showing significant year-over-year improvements across key financial indicators Revenues Analysis Total revenues increased significantly, driven by strong growth in net premiums earned and net investment income, partially offset by a decrease in revenues from non-insurance businesses Consolidated Revenues (Q1 2024 vs. Q1 2023) | Revenue Category | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :----------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenues | $3,256,773 | $2,895,004 | 12.5% | | Net premiums earned | $2,764,347 | $2,491,432 | 10.9% | | Net investment income | $319,839 | $223,398 | 43.2% | | Net investment gains | $25,780 | $23,010 | 12.0% | | Revenues from non-insurance businesses | $120,992 | $124,200 | -2.6% | Expenses Analysis Total expenses increased, primarily due to higher loss and loss expenses and other operating costs, while interest expense remained stable Consolidated Expenses (Q1 2024 vs. Q1 2023) | Expense Category | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :----------------------- | :--------------------- | :--------------------- | :--------- | | Total expenses | $2,682,702 | $2,518,933 | 6.5% | | Loss and loss expenses | $1,663,778 | $1,538,755 | 8.1% | | Other operating costs and expenses | $868,589 | $825,575 | 5.2% | | Interest expense | $31,728 | $31,836 | -0.3% | Net Income and EPS The company reported a substantial increase in net income to common stockholders and diluted earnings per share for the first quarter Consolidated Net Income and EPS (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | | Net income to common stockholders | $442,471 | $294,126 | 50.4% | | Net income per diluted share| $1.64 | $1.06 | 54.7% | Business Segment Operating Results Both the Insurance and Reinsurance & Monoline Excess segments demonstrated improved profitability and premium growth, with the Reinsurance segment showing a particularly strong reduction in its combined ratio - The Company reclassified a program management business from the Insurance segment to the Reinsurance & Monoline Excess segment, with 2023 financial information conformed to this new presentation[18] Insurance Segment Performance The Insurance segment experienced solid growth in premiums and pre-tax income, alongside an improvement in its GAAP combined ratio Insurance Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :-------------------- | :--------------------- | :--------------------- | :--------- | | Gross premiums written| $2,921,050 | $2,626,346 | 11.2% | | Net premiums written | $2,445,715 | $2,185,421 | 11.9% | | Pre-tax income | $478,149 | $352,626 | 35.6% | | GAAP Combined ratio | 90.2% | 91.2% | -1.0 pts | Reinsurance & Monoline Excess Segment Performance The Reinsurance & Monoline Excess segment showed growth in premiums and a significant improvement in pre-tax income and combined ratio, reflecting strong underwriting performance Reinsurance & Monoline Excess Segment Performance (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :-------------------- | :--------------------- | :--------------------- | :--------- | | Gross premiums written| $441,705 | $422,971 | 4.4% | | Net premiums written | $405,576 | $389,403 | 4.1% | | Pre-tax income | $127,624 | $101,285 | 26.0% | | GAAP Combined ratio | 79.6% | 86.6% | -7.0 pts | Corporate and Eliminations Impact Corporate and Eliminations recorded a reduced pre-tax loss, primarily due to lower other expenses, while net investment gains and interest expense remained relatively stable Corporate and Eliminations Financials (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Net investment gains | $25,780 | $23,010 | 12.0% | | Interest expense | $(31,728) | $(31,836) | -0.3% | | Other expenses | $(25,754) | $(69,014) | -62.7% | | Pre-tax loss | $(31,702) | $(77,840) | -59.3% | Supplemental Financial Information Supplemental data provides a detailed breakdown of net premiums by line, catastrophe losses, investment income components, operating costs, and a reconciliation of net income to operating income Net Premiums Written by Line Net premiums written showed growth across most lines, with 'Other liability' and 'Short-tail lines' being the largest contributors to the increase Net Premiums Written by Line (Q1 2024 vs. Q1 2023) | Line of Business | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :----------------------- | :--------------------- | :--------------------- | :--------- | | Other liability | $1,015,614 | $901,293 | 12.7% | | Short-tail lines | $532,341 | $426,654 | 24.8% | | Auto | $348,582 | $293,857 | 18.6% | | Workers' compensation | $304,632 | $309,984 | -1.7% | | Professional liability | $244,546 | $253,633 | -3.6% | | Total Insurance | $2,445,715 | $2,185,421 | 11.9% | | Total Reinsurance & Monoline Excess | $405,576 | $389,403 | 4.1% | | Total | $2,851,291 | $2,574,824 | 10.7% | Catastrophe Losses Current accident year catastrophe losses decreased significantly year-over-year, primarily driven by a reduction in the Insurance segment Current Accident Year Catastrophe Losses (Q1 2024 vs. Q1 2023) | Segment | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | | Insurance | $27,451 | $45,242 | -39.3% | | Reinsurance & Monoline Excess | $3,055 | $2,627 | 16.3% | | Total | $30,506 | $47,869 | -36.2% | Net Investment Income Breakdown Net investment income saw substantial growth, primarily from the core portfolio, despite a negative contribution from investment funds in the current quarter Net Investment Income Breakdown (Q1 2024 vs. Q1 2023) | Source | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :-------------------- | :--------------------- | :--------------------- | :--------- | | Core portfolio | $331,177 | $202,962 | 63.2% | | Investment funds | $(29,349) | $2,180 | -1449.0% | | Arbitrage trading account | $18,011 | $18,256 | -1.3% | | Total | $319,839 | $223,398 | 43.2% | Other Operating Costs and Expenses Other operating costs and expenses increased, mainly driven by higher policy acquisition and insurance operating expenses, while net foreign currency results shifted from losses to gains Other Operating Costs and Expenses (Q1 2024 vs. Q1 2023) | Expense Category | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :------------------------------------ | :--------------------- | :--------------------- | :--------- | | Policy acquisition and insurance operating expenses | $791,532 | $718,276 | 10.2% | | Insurance service expenses | $21,439 | $25,180 | -14.8% | | Net foreign currency (gains) losses | $(13,177) | $9,495 | -238.8% | | Other costs and expenses | $68,795 | $72,624 | -5.2% | | Total | $868,589 | $825,575 | 5.2% | Operating Cash Flow & Reconciliation to Operating Income Operating cash flow significantly increased, and the reconciliation highlights the strong growth in operating income after-tax, a non-GAAP measure Operating Cash Flow & Operating Income Reconciliation (Q1 2024 vs. Q1 2023) | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (%) | | :-------------------------- | :--------------------- | :--------------------- | :--------- | | Cash flow from operations | $746,235 | $445,323 | 67.6% | | Net income | $442,471 | $294,126 | 50.4% | | Operating income after-tax (4)| $423,324 | $275,966 | 53.4% | - Operating income is a non-GAAP financial measure defined as net income excluding after-tax net investment gains (losses), used by management as a useful indicator of underlying operations[20] Balance Sheet & Investment Portfolio This section presents key balance sheet figures and a detailed breakdown of the company's investment portfolio composition Selected Balance Sheet Information The balance sheet at March 31, 2024, shows an increase in total assets, net invested assets, and common stockholders' equity, with a corresponding rise in book value per share Selected Balance Sheet Information (March 31, 2024 vs. December 31, 2023) | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :------------------------------- | :--------- | | Net invested assets (1) | $27,583,673 | $26,973,703 | 2.3% | | Total assets | $37,851,072 | $37,111,830 | 2.0% | | Reserves for losses and loss expenses | $19,099,628 | $18,739,652 | 1.9% | | Common stockholders' equity (2) | $7,784,832 | $7,455,431 | 4.4% | | Book value per share (4) | $30.34 | $29.06 | 4.4% | | Tangible book value per share (4) | $29.38 | $28.08 | 4.6% | - Common stockholders' equity as of March 31, 2024, reflected after-tax unrealized investment losses of $657 million and unrealized currency translation losses of $367 million[22] Investment Portfolio Composition The investment portfolio is predominantly composed of fixed maturity securities, with a diversified allocation across corporate, asset-backed, and government bonds, complemented by equity securities, investment funds, and real estate Investment Portfolio Composition (March 31, 2024) | Investment Category | Carrying Value (in thousands) | Percent of Total | | :------------------------------------ | :---------------------------- | :--------------- | | Total fixed maturity securities (1) | $20,964,854 | 75.9% | | Corporate | $8,162,703 | 29.5% | | Asset-backed securities | $4,239,561 | 15.4% | | United States government and government agencies | $1,829,552 | 6.6% | | Total equity securities available for sale | $1,178,048 | 4.3% | | Investment funds | $1,555,818 | 5.6% | | Real estate | $1,273,063 | 4.6% | | Cash and cash equivalents (2) | $1,237,005 | 4.5% | | Arbitrage trading account | $1,146,119 | 4.2% | | Loans receivable | $228,766 | 0.9% | | Net invested assets | $27,583,673 | 100.0% | - Total fixed maturity securities had an average rating of AA- and an average duration of 2.5 years, including cash and cash equivalents[24]