EX-99.1 2 wrb123120208-kex991.htm 8-K 4Q EXHIBIT 99.1 Document

NEWS
RELEASE
W. R. Berkley Corporation
475 Steamboat Road
Greenwich, Connecticut 06830
(203) 629-3000
             
FOR IMMEDIATE RELEASE     CONTACT:    Karen A. Horvath
Vice President - External
Financial Communications
(203) 629-3000


W. R. BERKLEY CORPORATION REPORTS FOURTH QUARTER AND FULL YEAR RESULTS
Fourth Quarter Gross Premiums Written Grew 9.3% and Return on Equity of 20.6%
Greenwich, CT, January 26, 2021 - W. R. Berkley Corporation (NYSE: WRB) today reported its fourth quarter and full year 2020 results.


Summary Financial Data
(Amounts in thousands, except per share data)
 Fourth QuarterTwelve Months
 2020201920202019
Gross premiums written$2,221,484$2,033,078$8,847,647$8,262,219
Net premiums written1,797,4571,660,5287,262,4376,863,499
Net income to common stockholders312,150119,306530,670681,944
Net income per diluted share 1.670.622.813.52
Operating income (1)173,043137,530438,253589,057
Operating income per diluted share0.920.712.323.04
Return on equity (2)20.6 %8.8 %8.7 %12.5 %

(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 stockholders’ equity.


W. R. Berkley Corporation        2

Fourth quarter highlights included:
•All-time record net income of $312.2 million.
•Return on equity of 20.6%.
•Gross and net premiums written increased 9.3% and 8.2%, respectively.
•The reported combined ratio was 90.9%. The accident year combined ratio before catastrophe losses was 88.8%.
•Underwriting income increased 44.2% to $165.4 million.
•Catastrophes added 2.3 loss ratio points to the reported combined ratio, including 1.5 loss ratio points for COVID-19 related losses.
•Average rate increases excluding workers' compensation were approximately 15.4%.
•Book value per share grew 6.1%, before share repurchases and dividends.

Full year highlights included:
•Average rate increases excluding workers’ compensation were approximately 13.6%.
•Paid loss ratio of 51.9%.
•Operating cash flow increased 41.3% to more than $1.6 billion.
•Gross and net premiums written increased 7.1% and 5.8%, respectively.
•Book value per share grew 10.5%, before share repurchases and dividends.
•Total capital returned to shareholders was $430 million, including $346 million of share repurchases and $84 million of dividends.

The Company commented:
By every measure, the Company had an outstanding quarter, with earnings of $312 million and more than 9% growth in gross premiums written. We reported a combined ratio of 90.9%, which is the lowest in 13 years, and underwriting income of $165 million, which increased by 44.2%.
Our rate increases continued to accelerate throughout the year in connection with our efforts to stay ahead of current and expected loss trends. The global pandemic, frequent catastrophe losses, social inflation and low interest rates continue to reinforce the industry’s need for disciplined underwriting and additional rate.
Our total return investment strategy delivered strong performance, driven by our alternative investment portfolio. Net investment income grew 32%, despite the defensive position in our fixed-maturity securities, where we maintain a relatively short duration and a high level of liquidity.
The Company again delivered a superior risk-adjusted return, in a challenging environment. We see no signs of rate increases moderating and expect that 2021 will provide opportunities for margin improvement.



W. R. Berkley Corporation        3
Webcast Conference Call
    The Company will hold its quarterly conference call with analysts and investors to discuss its earnings and other information on January 26, 2021, 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/annual-reports/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.




W. R. Berkley Corporation        4
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 2021 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 ongoing COVID-19 pandemic, including the related impact on the U.S. and global economies; the cyclical nature of the property casualty industry; the impact of significant competition, including new alternative 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, epidemics or pandemics, such as COVID-19; the impact of climate change, which may increase the frequency and 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 2021 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.



# # #



W. R. Berkley Corporation        5
Consolidated Financial Summary
(Amounts in thousands, except per share data)
 Fourth QuarterTwelve Months
 2020201920202019
Revenues: 
Net premiums written$1,797,457 $1,660,528 $7,262,437 $6,863,499 
Change in unearned premiums16,133 56,253 (331,594)(230,211)
Net premiums earned1,813,590 1,716,781 6,930,843 6,633,288 
Net investment income180,977 137,334 583,821 645,614 
Net investment gains (losses):
Net realized and unrealized gains (losses) on investments162,918 (22,988)73,514 120,703 
Change in allowance for credit losses on investments (1)393 — 29,486 — 
Net investment gains (losses)163,311 (22,988)103,000 120,703 
Revenues from non-insurance businesses132,923 123,537 389,888 406,541 
Insurance service fees21,521 21,240 88,777 92,680 
Other income149 170 2,596 3,370 
Total revenues2,312,471 1,976,074 8,098,925 7,902,196 
Expenses:
Losses and loss expenses1,111,695 1,072,166 4,468,706 4,131,116 
Other operating costs and expenses637,250 601,121 2,390,392 2,362,082 
Expenses from non-insurance businesses128,457 122,527 384,488 402,669 
Interest expense35,663 33,496 150,537 153,409 
Total expenses1,913,065 1,829,310 7,394,123 7,049,276 
Income before income taxes399,406 146,764 704,802 852,920 
Income tax expense(86,917)(26,970)(171,817)(168,935)
Net income before noncontrolling interests312,489 119,794 532,985 683,985 
Noncontrolling interests(339)(488)(2,315)(2,041)
Net income to common stockholders$312,150 $119,306 $530,670 $681,944 
Net income per share:
Basic$1.68 $0.62 $2.84 $3.58 
Diluted$1.67 $0.62 $2.81 $3.52 
Average shares outstanding (2):
Basic185,693 191,106186,924 190,722
Diluted187,180 193,280188,763 193,521


(1)The inclusion of the allowance for credit losses on investments commenced January 1, 2020 due to the adoption of ASU 2016-13.
(2)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.




W. R. Berkley Corporation        6
Business Segment Operating Results
(Amounts in thousands, except ratios) (1)
 Fourth QuarterTwelve Months
 2020201920202019
Insurance:  
Gross premiums written$1,996,169$1,832,711$7,837,496$7,398,573
Net premiums written1,592,3111,484,9326,347,1016,086,009
Premiums earned1,586,5781,523,7486,067,6695,919,819
Pre-tax income236,548202,085668,012814,862
Loss ratio63.4%62.6%64.9%62.4%
Expense ratio29.4%30.4%30.3%31.1%
GAAP combined ratio92.8%93.0%95.2%93.5%
Reinsurance & Monoline Excess:
Gross premiums written$225,315$200,367$1,010,151$863,646
Net premiums written205,146175,596915,336777,490
Premiums earned227,012193,033863,174713,469
Pre-tax income94,97544,837205,587189,188
Loss ratio46.7%61.1%61.3%61.5%
Expense ratio31.1%34.4%31.8%35.0%
GAAP combined ratio77.8%95.5%93.1%96.5%
Corporate and Eliminations:
  Net investment gains (losses)$163,311$(22,988)$103,000$120,703
  Interest expense(35,663)(33,496)(150,537)(153,409)
  Other revenues and expenses(59,765)(43,674)(121,260)(118,424)
  Pre-tax gain (loss)67,883(100,158)(168,797)(151,130)
Consolidated:
  Gross premiums written$2,221,484$2,033,078$8,847,647$8,262,219
  Net premiums written1,797,4571,660,5287,262,4376,863,499
  Premiums earned1,813,5901,716,7816,930,8436,633,288
  Pre-tax income399,406146,764704,802852,920
  Loss ratio61.3%62.4%64.5%62.3%
  Expense ratio29.6%30.9%30.4%31.5%
  GAAP combined ratio90.9%93.3%94.9%93.8%


(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.





W. R. Berkley Corporation        7
Supplemental Information
(Amounts in thousands)
 Fourth QuarterTwelve Months
 2020201920202019
Net premiums written:
  Other liability$594,546 $537,674 $2,342,884 $2,145,287 
  Short-tail lines (1)325,809 319,423 1,300,750 1,254,180 
  Workers' compensation241,935 282,840 1,099,886 1,280,573 
  Commercial automobile227,190 188,459 876,031 796,993 
  Professional liability202,831 156,536 727,550 608,976 
    Total Insurance1,592,311 1,484,932 6,347,101 6,086,009 
  Casualty reinsurance141,481 116,698 560,717 460,239 
Property reinsurance41,174 37,673 178,023 154,455 
  Monoline excess22,491 21,225 176,596 162,796 
    Total Reinsurance & Monoline Excess205,146 175,596 915,336 777,490 
          Total$1,797,457 $1,660,528 $7,262,437 $6,863,499 
Losses from catastrophes (including COVID-19 related losses):
  Insurance$62,380 $14,744 $307,037 $68,187 
  Reinsurance & Monoline Excess(19,934)5,736 $32,799 21,914 
    Total$42,446 $20,480 339,836 $90,101 
Net investment income:
  Core portfolio (2)$102,039 $137,022 $451,637 $541,834 
  Investment funds52,992 (8,090)54,253 69,194 
  Arbitrage trading account25,946 8,402 77,931 34,586 
    Total$180,977 $137,334 $583,821 $645,614 
Net realized and unrealized gains (losses) on investments:
  Net realized gains on investments$126,927 $7,442 $99,382 $35,411 
  Change in unrealized gains (losses) on equity securities35,991 (30,430)(25,868)85,292 
    Total$162,918 $(22,988)$73,514 $120,703 
Other operating costs and expenses:
  Policy acquisition and insurance operating expenses$536,507 $529,951 $2,111,013 $2,090,301 
  Insurance service expenses21,694 23,804 85,724 101,317 
  Net foreign currency losses (gains)24,207 (1,631)363 (30,715)
  Debt extinguishment costs8,440 — 8,440 — 
  Other costs and expenses46,402 48,997 184,852 201,179 
    Total$637,250 $601,121 $2,390,392 $2,362,082 
Cash flow from operations$479,740 $348,749 $1,616,686 $1,143,793 
Reconciliation of net income to operating income:
Net income$312,150 $119,306 $530,670 $681,944 
Pre-tax investment (gains) losses, net of related expenses(162,337)23,066 (102,027)(117,730)
Income tax expense (benefit)23,230 (4,842)9,610 24,843 
Operating income after-tax (3)$173,043 $137,530 $438,253 $589,057 

(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.


W. R. Berkley Corporation        8
Selected Balance Sheet Information
(Amounts in thousands, except per share data)
 December 31,
2020		December 31, 2019
Net invested assets (1)$21,370,503 $19,856,776 
Total assets28,606,913 26,662,144 
Reserves for losses and loss expenses13,784,430 12,583,249 
Senior notes and other debt1,623,025 1,427,575 
Subordinated debentures1,102,309 1,198,704 
Common stockholders’ equity (2)6,310,802 6,074,939 
Common stock outstanding (3)177,825 183,412 
Book value per share (4)35.49 33.12 
Tangible book value per share (4)34.22 31.87 


(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, 2020, reflected in common stockholders' equity are after-tax unrealized investment gains of $290 million and unrealized currency translation losses of $352 million. As of December 31, 2019, after-tax unrealized investment gains were $125 million and unrealized currency translation losses were $382 million.
(3)During the three months ended December 31, 2020, the Company repurchased 542,434 shares of its common stock for $34 million. During the twelve months ended December 31, 2020, the Company repurchased 6,363,301 shares of its common stock for $346 million. 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.



W. R. Berkley Corporation        9
Investment Portfolio
December 31, 2020
(Amounts in thousands)
Carrying
Value		Percent
of Total
Fixed maturity securities:  
United States government and government agencies$603,871 2.8 %
State and municipal: 
Special revenue$2,252,067 10.6 %
State general obligation493,147 2.3 %
Local general obligation450,624 2.1 %
Pre-refunded276,672 1.3 %
Corporate backed214,473 1.0 %
Total state and municipal3,686,983 17.3 %
Mortgage-backed securities:  
Agency630,784 3.0 %
Residential - Prime199,481 0.9 %
Commercial187,717 0.9 %
Residential - Alt A8,803 — %
Total mortgage-backed securities1,026,785 4.8 %
Asset-backed securities3,194,586 14.9 %
Corporate: 
Industrial2,564,475 12.0 %
Financial1,575,903 7.4 %
Utilities421,165 2.0 %
Other110,038 0.5 %
Total corporate4,671,581 21.9 %
Foreign government975,563 4.6 %
Total fixed maturity securities (1)14,159,369 66.3 %
Equity securities available for sale: 
Common stocks350,181 1.6 %
Preferred stocks275,486 1.3 %
Total equity securities available for sale625,667 2.9 %
Cash and cash equivalents (2)2,889,630 13.5 %
Real estate1,960,914 9.2 %
Investment funds (3)1,308,537 6.1 %
Arbitrage trading account341,473 1.6 %
Loans receivable84,913 0.4 %
Net invested assets$21,370,503 100.0 %


(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 $0.9 million.