W.R. Berkley Corporation’s WRB first-quarter 2023 operating income of $1.00 per share missed the Zacks Consensus Estimate by about 16%. The bottom line declined 9.1% year over year and missed our estimate of $1.19.
The insurer benefited from higher premiums, driven by strong rate increases in nearly all lines of business, exposure growth fueling continued strong underwriting performance as well as surge in investment income.
Behind the Headlines
W.R. Berkley’s net premiums written were $2.6 billion, up 6.7% year over year and in line with our estimate, as market conditions remained favorable for most lines of business.
Operating revenues came in at $2.9 billion, up 12.5% year over year, on the back of higher net premiums earned as well as higher net investment income. The top line beat the consensus estimate by 2.4% and our estimate of $2.6 billion.
Net investment income surged 28.8% to a record $223 million, benefiting from higher yields.
Total expenses increased 15.4% to $2.5 billion, primarily due to higher losses and loss expenses, expenses from non-insurance businesses and other operating costs and expenses. Our estimate was $2.3 billion.
The loss ratio deteriorated 230 basis points (bps) to 61.8 versus our estimate of 56.9, while the expense ratio deteriorated 50 bps year over year to 28.8 versus our estimate of 28.9.
Catastrophe losses of $47.9 million in the quarter widened from $28.8 million incurred in the year-ago quarter.
Pre-tax underwriting income was $234.4 million. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 280 basis points to 90.6 versus our estimate of 85.8.
Net premiums written at the Insurance segment increased 6.6% year over year to $2.1 billion in the quarter, primarily due to higher premiums from other liability, short-tail lines, workers’ compensation and commercial automobile. Our estimate was $2.3 billion. The combined ratio deteriorated 390 bps to 91.5 versus our estimate of 85.5.
Net premiums written in the Reinsurance & Monoline Excess segment increased 7.1% year over year to $364 million on higher premiums at casualty reinsurance, property reinsurance and monoline excess. Our estimate was $367.2 million. The combined ratio deteriorated 540 bps to 84 versus our estimate of 88.
W.R. Berkley exited the quarter with total assets worth $34.3 billion, up 1.4% from year-end 2022.
Senior notes and other debt decreased 0.04% from 2022 end to $1.8 billion.
Book value per share increased 3.7% from 2022 end to $26.45 as of Mar 31, 2023.
Cash flow from operations was $2.6 million in the reported quarter, down 6.7% year over year.
Operating return on equity contracted 210 bps to 16.4%.
WRB returned to shareholders was $293.8 million, consisting of $132.3 million of special dividends, $26.3 million of regular dividends and $135.2 million of share repurchases.
W.R. Berkley currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Some Other P&C Insurers
The Travelers Companies TRV reported first-quarter 2022 core income of $4.11 per share, which beat the Zacks Consensus Estimate of $3.64 and our estimate of $3.41. However, the bottom line decreased 2.6% year over year. Travelers’ total revenues increased 10% from the year-ago quarter to $9.7 billion, primarily driven by higher premiums. The top-line figure however missed the Zacks Consensus Estimate of $9.8 billion.
Net written premiums increased 12% year over year to a record $9.4 billion, driven by strong growth across all three segments. The figure was higher than our estimate of $8.9 billion.
Catastrophe losses totaled $422 million, wider than $36 million pre-tax in the prior-year quarter. Catastrophe losses primarily resulted from severe wind and hail storms in multiple states. Travelers witnessed an underwriting gain of $501 million, down 12.9% year over year. The combined ratio deteriorated 410 bps year over year to 95.4
The Progressive Corporation’s PGR first-quarter 2023 earnings per share of 65 cents missed the Zacks Consensus Estimate of $1.44 as well as our estimate of $1.50. The bottom line declined 20.7% year over year.
Operating revenues were about $14.2 billion, up 15.8% year over year. This improvement was driven by a 15% increase in premiums, 18.5% higher fees and other revenues, a 7.1% increase in service revenues and 73.2% higher investment income. The top line exceeded the Zacks Consensus Estimate of $14.1 billion and our estimate of $13.1 billion.
Net premiums earned grew 15% to $13.5 billion and beat our estimate of $12.6 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — deteriorated 450 bps from the prior-year quarter’s level to 99.
RLI Corp. RLI reported first-quarter 2023 operating earnings of $1.63 per share, beating the Zacks Consensus Estimate by 34.7%. The bottom line improved 14% from the prior-year quarter. Operating revenues for the reported quarter were $335 million, up 19.4% year over year, driven by 14.3% higher net premiums earned and 51.5% higher net investment income. The top line however missed the Zacks Consensus Estimate by 2.2%.
Gross premiums written increased 15.6% year over year to $415 million. This uptick can be attributed to the solid performance of the Casualty (up 1%), Property (up 45%) and Surety segments (up 13.6%). Underwriting income of $67.9 million increased 14.1%, primarily due to higher profitability in its Property and Casualty segment. Combined ratio remained flat year over year at 77.9.
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