Morningstar | W.R. Berkley Delivers a Strong 2Q, Led by Investment Results
W.R. Berkley's second-quarter results were fairly good, and the annualized ROE of 13.3% supports our narrow-moat rating for the company. However, the quarter benefited from strong investment results, which we consider more noise than signal, from a long-term perspective, and we remain attracted to W.R. Berkley primarily because of its specialty line focus and demonstrated track record of underwriting discipline. We will maintain our $71 fair value estimate.Results within primary lines largely held steady. Net written premiums were up 5% year-over-year, suggesting the company remains somewhat cautious, although management noted that it sees the casualty side of the industry, where it focuses, as the most attractive part of the industry at this point. The combined ratio for the quarter came in at 94.4% compared with 94.1% last year. Historically, W.R. Berkley's underwriting results have been very steady compared with peers', which we think speaks to management's discipline.
On the reinsurance side, the company continues to pull back. Net written premiums were down 12% year over year, with the decline concentrated on the property side. We see this move as the most value-creative choice at this point, given a somewhat dismal pricing picture in reinsurance. The combined ratio for reinsurance came in at 100.7%, compared with 104.4% last year. While this level is not attractive on an absolute basis, we think it suggests the company is navigating the current environment responsibly.
W. R. Berkley is an insurance holding company. The company operates in two segments of the property casualty insurance business: Insurance, which includes commercial insurance business, including excess and surplus lines, admitted lines and specialty personal lines throughout the United States, as well as insurance business in the United Kingdom, Continental Europe, South America, Canada, Mexico, Scandinavia, Asia and Australia; and Reinsurance, which provides reinsurance business on a facultative and treaty basis, primarily in the United States, the United Kingdom, Continental Europe, Australia, the Asia-Pacific region and South Africa.
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