Morningstar | WR Berkley Delivers Strong 2Q
W.R. Berkley’s second-quarter results were impressive and suggest the company can meaningfully leverage an improving pricing environment. While we believe the company’s pricing discipline positions the insurer to potentially make the most out of a hardening market, we think the rally the shares have seen this year is a bit overdone. We will maintain our $52 fair value estimate and narrow moat rating.In terms of profitability, W.R. Berkley posted its strongest quarter in some time, with an annualized return on equity of 15.9%. This was partially driven by an improvement in investment income that is likely not sustainable, but underwriting results also contributed.
W.R. Berkley appears to be getting a bit more active, as net written premiums in primary lines were up 6%. More importantly, underwriting profitability improved, with the combined ratio falling to 93.8% from 95.3% last year. We’re especially encouraged by the decline in the expense ratio, which fell 200 basis points year over year. We forecast improvement on this score over time, but this quarter suggests the company could be able to leverage its recent investments and a better pricing environment quicker than we expect.
The turnaround in the reinsurance segment was sharper. After shrinking this business for a few years, reinsurance appears to be fully back to growth, with net written premiums up 27% year over year. We’re less sanguine about conditions in reinsurance lines, but the combined ratio of 95.2% in the quarter was a solid result, and the company’s history of underwriting discipline eases any concerns we might have.
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.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.